BOSTON 1784 FUNDS, 497, 1998-03-23

BOSTON 1784 FUNDS
497, 1998-03-23

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Rule 497(c)
File Nos. 33-58004
and 811-7474

Statement of
Additional Information
October 1, 1997, as supplemented
November 5, 1997, December 2, 1997
and February 27, 1998

Boston 1784 Funds(REGISTRATION MARK)

MONEY MARKET FUNDS:

Boston 1784 Tax-Free Money Market Fund
Boston 1784 U.S. Treasury Money Market Fund
Boston 1784 Institutional U.S. Treasury Money Market Fund
Boston 1784 Prime Money Market Fund
Boston 1784 Institutional Prime Money Market Fund

BOND FUNDS:

Boston 1784 Short-Term Income Fund
Boston 1784 Income Fund
Boston 1784 U.S. Government Medium-Term Income Fund

TAX-EXEMPT FUNDS:

Boston 1784 Tax-Exempt Medium-Term Income Fund
Boston 1784 Connecticut Tax-Exempt Income Fund
Boston 1784 Florida Tax-Exempt Income Fund
Boston 1784 Massachusetts Tax-Exempt Income Fund
Boston 1784 Rhode Island Tax-Exempt Income Fund

STOCK FUNDS:

Boston 1784 Asset Allocation Fund
Boston 1784 Growth and Income Fund
Boston 1784 Growth Fund
Boston 1784 Small Cap Equity Fund
Boston 1784 Large Cap Equity Fund
Boston 1784 International Equity Fund
This Statement of Additional Information provides information regarding
the activities and operations of the no-load mutual funds listed above, and
should be read in conjunction with the Funds' Prospectuses dated October 1,
1997, November 5, 1997, December 2, 1997 and February 27, 1998. You may obtain
a Prospectus without charge by calling 1-800-BKB-1784.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
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CONTENTS

PAGE

1. The Trust 3
2. Investment Objectives and Policies 4
3. Permitted Investments and Investment Practices 5
4. Investment Restrictions 20
5. Management 23
6. Fund Transactions; Trading Practices and Brokerage 31
7. Performance Information 34
8. Determination of Net Asset Value 41
9. Purchase and Redemption of Shares 43
10. Systematic Withdrawal Plan 43
11. Taxes 44
12. Servicemarks 48
13. Description of Shares 48
14. Trustee and Shareholder Liability 49
15. Financial Information 49

APPENDIX A -- CERTAIN INFORMATION CONCERNING CONNECTICUT, FLORIDA, MASSACHUSETTS
AND RHODE ISLAND

APPENDIX B -- DESCRIPTION OF SECURITIES RATINGS
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1. THE TRUST

BOSTON 1784 FUNDS(REGISTRATION MARK) (the "Trust") is an open-end
management investment company established under Massachusetts law as a
Massachusetts business trust on February 5, 1993. Prior to May 27, 1997, Boston
1784 Funds was known as 1784 Funds. On that date the Trust and each Fund added
"Boston" to their names. Boston 1784 Funds currently has nineteen active series.
The Trust's Declaration of Trust permits the Trust to offer separate portfolios,
or funds, of shares of beneficial interest and different classes of shares of
each fund. Each share in a fund represents an equal proportionate interest in
that fund. See "Description of Shares."

This Statement of Additional Information relates to the following funds
of the Trust (the "Funds"):
MONEY MARKET FUNDS:

BOND FUNDS:

Boston 1784 Short-Term Income Fund
Boston 1784 Income Fund
Boston 1784 U.S. Government Medium-Term Income Fund

TAX-EXEMPT FUNDS:

STOCK FUNDS:

Boston 1784 Asset Allocation Fund
Boston 1784 Growth and Income Fund
Boston 1784 Growth Fund
Boston 1784 Small Cap Equity Fund
Boston 1784 Large Cap Equity Fund
Boston 1784 International Equity Fund

BankBoston, N.A. ("BankBoston") is the investment adviser of each Fund.
Kleinwort Benson Investment Management Americas, Inc. is the investment adviser
of the International Equity Fund with BankBoston (BankBoston and Kleinwort
Benson are each referred to as an "Adviser"). SEI Investments Distribution Co.
is the distributor of shares of each Fund.
References in this Statement of Additional Information to the
Prospectuses are to the Funds' Prospectuses dated October 1, 1997, November 5,
1997, December 2, 1997 and February 27, 1998.

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As required by law, each of the Trust, BankBoston and the Trust's
administrator and distributor have adopted codes of ethics concerning certain
activities of officers, trustees or directors and employees. Copies of these
codes of ethics have been filed with the Securities and Exchange Commission.

2. INVESTMENT OBJECTIVES AND POLICIES

The investment objective of BOSTON 1784 TAX-FREE MONEY MARKET FUND is
to preserve principal value and maintain a high degree of liquidity while
providing current income exempt from federal income taxes.

The investment objective of BOSTON 1784 U.S. TREASURY MONEY MARKET
FUND, BOSTON 1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND, BOSTON 1784
PRIME MONEY MARKET FUND AND BOSTON 1784 INSTITUTIONAL PRIME MONEY MARKET FUND is
to preserve principal value and maintain a high degree of liquidity while
providing current income.

The investment objective of BOSTON 1784 SHORT-TERM INCOME FUND and
BOSTON 1784 INCOME FUND is to maximize current income. Preservation of capital
is a secondary objective for each of these Funds.

The investment objective of BOSTON 1784 U.S. GOVERNMENT MEDIUM-TERM
INCOME FUND is current income consistent with preservation of capital.

The investment objective of BOSTON 1784 TAX-EXEMPT MEDIUM-TERM INCOME
FUND is current income, exempt from federal income tax, consistent with
preservation of capital.

The investment objective of BOSTON 1784 CONNECTICUT TAX-EXEMPT INCOME
FUND is current income exempt from both federal and Connecticut personal income
tax. Preservation of capital is a secondary objective.

The investment objective of BOSTON 1784 FLORIDA TAX-EXEMPT INCOME FUND
is current income exempt from federal income tax through Fund shares which are
exempt from Florida intangible personal property tax. Preservation of capital is
a secondary objective.

The investment objective of BOSTON 1784 MASSACHUSETTS TAX-EXEMPT INCOME
FUND is current income, exempt from both federal and Massachusetts personal
income tax, consistent with preservation of capital.

The investment objective of BOSTON 1784 RHODE ISLAND TAX-EXEMPT INCOME
FUND is current income exempt from federal income tax, from Rhode Island
personal income tax and the Rhode Island business corporation tax. Preservation
of capital is a secondary objective.

The investment objective of BOSTON 1784 ASSET ALLOCATION FUND is to
achieve a favorable total rate of return through current income and capital
appreciation consistent with preservation of capital, derived from investing in
fixed income and equity securities.
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The investment objective of BOSTON 1784 GROWTH AND INCOME FUND is
long-term growth of capital with a secondary objective of income.

The investment objective of BOSTON 1784 GROWTH FUND and BOSTON 1784
SMALL CAP EQUITY FUND is capital appreciation. Dividend income, if any, is
incidental to this objective for each of these Funds.

The investment objective of BOSTON 1784 LARGE CAP EQUITY FUND is income
and capital appreciation.

The investment objective of BOSTON 1784 INTERNATIONAL EQUITY FUND is
long-term growth of capital. Dividend income, if any, is incidental to this
objective.

There can be no assurance that any Fund will achieve its investment
objective. Each Fund's investment objective may be changed only with the consent
of the holders of a majority of that Fund's outstanding shares.

The investment policies, permitted investments and investment
techniques of each of the Funds are described in the Prospectus by which shares
of that Fund are offered. The information herein supplements the information
contained in the Prospectus.

Each Tax-Exempt Fund has a fundamental policy of investing at least 80%
of its net assets under normal market conditions in obligations issued by or on
behalf of the states, territories and possessions of the United States and the
District of Columbia and their respective political subdivisions, agencies and
instrumentalities, the interest on which, in the opinion of counsel for the
issuer, is exempt from federal income tax and not included as a preference item
under the alternative minimum tax (collectively, "municipal securities"). A
Tax-Exempt Fund may comply with this policy (or with any other policy of such
Fund as to investing in securities the interest on which is exempt from taxation
in a particular state or which are not subject to intangible personal property
taxes of any state) by investing in a partnership, trust, regulated investment
company or other entity which invests in such municipal securities, in which
case the applicable Fund's investment in such entity shall be deemed an
investment in the underlying municipal securities in the same proportion as such
entity's investment in such municipal securities bears to its net assets.

Appendix A contains information concerning Connecticut, Florida,
Massachusetts and Rhode Island. Each of the Connecticut, Florida, Massachusetts
and Rhode Island Tax-Exempt Income Funds is particularly susceptible to events
affecting issuers in its state.

Appendix B describes the ratings assigned to securities by certain
securities rating organizations.

3. PERMITTED INVESTMENTS AND INVESTMENT PRACTICES

VARIABLE AMOUNT MASTER DEMAND NOTES

Each Fund (other than Boston 1784 Institutional U.S. Treasury Money
Market Fund and Boston 1784 U.S. Treasury Money Market Fund) may invest in
variable amount master demand notes which may or may not be backed by bank
letters of credit. These notes permit the investment of fluctuating amounts at
varying market rates of

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interest pursuant to direct arrangements between the Trust, as lender, on behalf
of a Fund and the borrower. Such notes provide that the interest rate on the
amount outstanding varies on a daily, weekly or monthly basis depending upon a
stated short-term interest rate index. Both the lender and the borrower have the
right to reduce the amount of outstanding indebtedness at any time. There is no
secondary market for the notes. It is not generally contemplated that such
instruments will be traded.

GNMA SECURITIES

Each Fund may invest in securities issued by the Government National
Mortgage Association ("GNMA"), a wholly-owned U.S. Government corporation which
guarantees the timely payment of principal and interest. The market value and
interest yield of these instruments can vary due to market interest rate
fluctuations and early prepayments of underlying mortgages. These securities
represent ownership in a pool of federally insured mortgage loans. GNMA
certificates consist of underlying mortgages with a maximum maturity of 30
years. However, due to scheduled and unscheduled principal payments, GNMA
certificates have a shorter average maturity and, therefore, less principal
volatility than a comparable 30-year bond. Since prepayment rates vary widely,
it is not possible to predict accurately the average maturity of a particular
GNMA pool. The scheduled monthly interest and principal payments relating to
mortgages in the pool will be "passed through" to investors. GNMA securities
differ from conventional bonds in that principal is paid back to the certificate
holders over the life of the loan rather than at maturity. As a result, there
will be monthly scheduled payments of principal and interest. In addition, there
may be unscheduled principal payments representing prepayments on the underlying
mortgages. Although GNMA certificates may offer yields higher than those
available from other types of U.S. Government securities, GNMA certificates may
be less effective than other types of securities as a means of "locking in"
attractive long-term rates because of the prepayment feature. For instance, when
interest rates decline, the value of a GNMA certificate likely will not rise as
much as comparable debt securities due to the prepayment feature. In addition,
these prepayments can cause the price of a GNMA certificate originally purchased
at a premium to decline in price to its par value, which may result in a loss.

MORTGAGE-BACKED SECURITIES

Each of the Funds (other than the Money Market Funds) may invest in
mortgage-backed securities which are rated in one of the three top categories by
Standard and Poor's Rating Services ("S&P"), Moody's Investors Service, Inc.
("Moody's") or FITCH IBCA, Inc. ("FITCH IBCA"), or, if not rated by S&P,
Moody's or FITCH IBCA, of comparable quality as determined by the Adviser
or Advisers to the Fund. Two principal types of mortgage-backed securities are
collateralized mortgage obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs"). CMOs are securities collateralized by mortgages, mortgage
pass-through certificates, mortgage pay-through bonds (bonds representing an
interest in a pool of mortgages where the cash flow generated from the mortgage
collateral pool is dedicated to bond repayment), and mortgage-backed bonds
(general obligations of the issuers payable out of the issuers' general funds
and additionally secured by a first lien on a pool of single family detached
properties). Many CMOs are issued with a number of classes or series which have
different maturities and are retired in sequence.
Investors purchasing such CMOs in the shortest maturities receive or
are credited with their pro rata portion of the scheduled payments of interest
and principal
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on the underlying mortgages plus all unscheduled prepayments of principal up to
a predetermined portion of the total CMO obligation. Until that portion of such
CMO obligation is repaid, investors in the longer maturities receive interest
only. Accordingly, the CMOs in the longer maturity series are less likely than
other mortgage pass-through certificates to be prepaid prior to their stated
maturity. Although some of the mortgages underlying CMOs may be supported by
various types of insurance, and some CMOs may be backed by GNMA certificates or
other mortgage pass-through certificates issued or guaranteed by U.S. Government
agencies or instrumentalities, the CMOs themselves are not generally guaranteed.

REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities.

ASSET-BACKED SECURITIES

In addition to mortgage-backed securities, each of the Funds (other
than Boston 1784 Institutional U.S. Treasury Money Market Fund and Boston 1784
U.S. Treasury Money Market Fund) may invest in asset-backed securities including
company receivables, truck and auto loans, leases, and credit card receivables.
These issues may be traded over-the-counter and typically have a short to
intermediate maturity structure depending on the paydown characteristics of the
underlying financial assets which are passed through to the security holder.

MORTGAGE "DOLLAR ROLL" TRANSACTIONS

Boston 1784 Short-Term Income Fund and Boston 1784 Income Fund may
enter into mortgage "dollar roll" transactions pursuant to which a Fund sells
mortgage-backed securities for delivery in the future and simultaneously
contracts to repurchase substantially similar securities on a specified future
date. During the roll period, the Fund forgoes principal and interest paid on
the mortgage-backed securities. The Fund is compensated for the lost interest by
the difference between the current sales price and the lower price for the
future purchase (often referred to as the "drop") as well as by the interest
earned on the cash proceeds of the initial sale. The Fund may also be
compensated by receipt of a commitment fee.

STRIPS

Each of the Funds may invest in Separately Traded Interest and
Principal Securities ("STRIPS"), which are component parts of U.S. Treasury
Securities traded through the Federal Reserve Book-Entry System. The Adviser or
Advisers to a Fund will purchase only those STRIPS that it determines or they
determine are liquid or, if illiquid, do not violate such Fund's investment
policy concerning investments in illiquid securities. Consistent with Rule 2a-7,
BankBoston, as the Adviser to the Money Market Funds, will purchase for Money
Market Funds only those STRIPS that have a remaining maturity of 397 days or
less. No Money Market Fund may invest more than 20% of its total assets in
STRIPS. While there is no limitation on the percentage of any other Fund's
assets that may be comprised of STRIPS, the Adviser or Advisers to each Fund
will monitor the level of such holdings to avoid the risk of impairing
shareholders' redemption rights.
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REPURCHASE AGREEMENTS

Each of the Funds may invest in repurchase agreements collateralized by
securities in which that Fund may otherwise invest. Repurchase agreements are
agreements by which a Fund obtains a security and simultaneously commits to
return the security to the seller (a primary securities dealer recognized by the
Federal Reserve Bank of New York or a national member bank as defined in Section
3(d)(1) of the Federal Deposit Insurance Act, as amended) at an agreed upon
price (including principal and interest) on an agreed upon date within a number
of days (usually not more than seven) from the date of purchase. The resale
price reflects the purchase price plus an agreed upon market rate of interest
which is unrelated to the coupon rate or maturity of the underlying security. A
repurchase agreement involves the obligation of the seller to pay the agreed
upon price, which obligation is in effect secured by the value of the underlying
security.

Repurchase agreements are considered to be loans by a Fund for purposes
of its investment limitations. The repurchase agreements entered into by the
Funds will provide that the underlying security at all times shall have a value
at least equal to 100% of the resale price stated in the agreement; the Adviser
or Advisers to each Fund will monitor compliance with this requirement. Under
all repurchase agreements entered into by any Fund, the Custodian or its agent
must take possession of the underlying collateral. However, if the seller under
a repurchase agreement defaults, the Fund investing in that repurchase agreement
could realize a loss on the sale of the underlying security to the extent that
the proceeds of the sale (including accrued interest) are less than the resale
price provided in the repurchase agreement (including interest). In addition,
even though the Bankruptcy Code provides protection for most repurchase
agreements, if the seller should be involved in bankruptcy or insolvency
proceedings, a Fund may face delays and incur costs in selling the underlying
security or may suffer a loss of principal and interest.

MONEY MARKET FUNDS

A money market fund is an investment company that limits its
investments to high quality money market instruments with a weighted average
maturity of 90 days or less. Each of the Funds (other than Boston 1784 U.S.
Treasury Money Market Fund, Boston 1784 Institutional U.S. Treasury Money Market
Fund and Boston 1784 Institutional Prime Money Market Fund) may invest in money
market funds, but not more than 5% of its assets in any one money market fund or
more than 10% of its assets in other investment companies, including money
market funds. When a Fund invests in a money market fund, a shareholder bears
not only his or her proportionate share of the Fund's expenses, but also
indirectly his or her share of the expenses of the money market fund, including
management fees.

TAX-EXEMPT SECURITIES

MUNICIPAL NOTES AND BONDS

Boston 1784 Prime Money Market Fund, Boston 1784 Institutional Prime
Money Market Fund, Boston 1784 Short-Term Income Fund, Boston 1784 Income Fund
and each of the Tax-Exempt Funds may invest in municipal notes, which include
but are not limited to general obligation notes, tax anticipation notes (notes
sold to finance working capital needs of the issuer in anticipation of receiving
taxes on a future date), revenue anticipation notes (notes sold to provide
needed cash prior to receipt of expected non-tax
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revenues from a specific source), bond anticipation notes, certificates of
indebtedness, demand notes and construction loan notes. A Fund's investment in
any of the notes described above will be limited to those obligations which are
rated (i) MIG-2 or VMIG-2 or better at the time of investment by Moody's, (ii)
SP-2 or better at the time of investment by S&P, or (iii) F-2 or better at the
time of investment by FITCH IBCA, or which, if not rated by Moody's, S&P or
Fitch, are of at least comparable quality, as determined by the Adviser to the
Fund. Municipal bonds, in which these same Funds may invest, must be rated BBB
or better by S&P or FITCH IBCA or Baa or better by Moody's at the time of
investment or, if not rated by Moody's, S&P or FITCH IBCA, must be determined by
the Adviser to the Funds to have essentially the same characteristics and
quality as bonds having the above ratings. Bonds rated BBB by S&P or FITCH IBCA
or Baa by Moody's may have speculative characteristics. The Adviser to these
Funds may purchase industrial development and pollution control bonds for these
Funds if the interest paid thereon is exempt from federal income tax. These
bonds are issued by or on behalf of public authorities to raise money to finance
various privately-operated facilities for business and manufacturing, housing,
sports, and pollution control. These bonds may also be used to finance public
facilities such as airports, mass transit systems, ports, and parking. The
payment of the principal and interest on such bonds is dependent solely on the
ability of the facility's user to meet its financial obligations and the pledge,
if any, of real and personal property so financed as security for such payment.
Municipal securities also include participations in municipal leases.
These are undivided interests in a portion of an obligation in the form of a
lease or installment purchase issued by a state or local government to acquire
equipment or facilities. Municipal leases frequently have special risks not
normally associated with general obligation bonds or revenue bonds. Leases and
installment purchase or conditional sale contracts (which normally provide for
title to the leased asset to pass eventually to the governmental issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. The debt-issuance limitations are deemed to be inapplicable because of
the inclusion in many leases or contracts of "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis. Although the
obligations will be secured by the leased equipment or facilities, the
disposition of the property in the event of non-appropriation or foreclosure
might, in some cases, prove difficult. In light of these concerns, the Trust has
adopted and follows procedures for determining whether municipal lease
securities purchased by a Fund are liquid and for monitoring the liquidity of
municipal lease securities held in the Fund's portfolio. The procedures require
that a number of factors be used in evaluating the liquidity of a municipal
lease security, including the frequency of trades and quotes for the security,
the number of dealers willing to purchase or sell the security and the number of
other potential purchasers, the willingness of dealers to undertake to make a
market in the security, the nature of the marketplace in which the security
trades, the credit quality of the security, and other factors which the Adviser
to the Fund may deem relevant.
TAX-EXEMPT COMMERCIAL PAPER in which a Tax-Exempt Fund, Boston 1784
Prime Money Market Fund and Boston 1784 Institutional Prime Money Market Fund
may invest will be limited to investments in obligations which are rated at
least A-2 by S&P, Prime-2 by Moody's, or F-2 by FITCH IBCA, at the time of
investment or which are of comparable quality as determined by the Adviser to
the Fund.

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Each of the Tax-Exempt Funds, Boston 1784 Prime Money Market Fund and
Boston 1784 Institutional Prime Money Market Fund may invest in FLOATING RATE
NOTES. Investments in such floating rate instruments will normally involve
industrial development or revenue (now known as "private activity") bonds which
provide that the rate of interest is set as a specific percentage of a
designated base rate (such as the prime rate) at a major commercial bank, and
that a Fund can demand payment of the obligation at all times or at stipulated
dates on short notice (not to exceed 30 days) at par plus accrued interest. For
purposes of determining the maturity of these obligations, the Fund may use the
longer of (a) the period required before the Fund is entitled to prepayment
under such obligations or (b) the period remaining until the next interest rate
adjustment date. Such obligations are frequently secured by letters of credit or
other credit support arrangements provided by banks. The quality of the
underlying credit or of the bank, as the case may be, must in the Fund Adviser's
opinion be equivalent to the long-term bond or commercial paper ratings on
securities in which the Fund may invest. The Adviser to the Fund will monitor
the earning power, cash flow and liquidity ratios of the issuers of floating
rate instruments and the ability of an issuer of a demand instrument to pay
principal and interest on demand. The Adviser to the Fund may also purchase
other types of tax-exempt instruments for these Funds as long as they are of a
quality equivalent to the bonds or commercial paper in which these Funds may
invest.

STANDBY COMMITMENTS

Funds investing in municipal securities may acquire such securities
subject to a "standby commitment." The Adviser or, if applicable, each of the
Advisers, to these Funds has the authority to purchase for these Funds
securities at a price which would result in a yield to maturity lower than that
generally offered by the seller at the time of purchase when they can
simultaneously acquire the right to sell the securities back to the seller, the
issuer, or a third party (the "writer") at an agreed-upon price at any time
during a stated period or on a certain date. Such a right is generally denoted
as a "standby commitment" or a "put." The purpose of engaging in transactions
involving puts is to maintain flexibility and liquidity to permit the Fund to
meet redemptions and remain as fully invested as possible in municipal
securities. The Funds reserve their right to engage in put transactions. The
right to put the securities depends on the writer's ability to pay for the
securities at the time the put is exercised. Each Fund would limit its put
transactions to institutions which the Adviser or, if applicable, each Adviser,
to such Fund believes present minimum credit risks. Each Adviser would use its
best efforts initially to determine and to continue to monitor the financial
strength of the sellers of the options by evaluating their financial statements
and such other information as is available in the marketplace. It may, however,
be difficult to monitor the financial strength of the writers because adequate
current financial information may not be available. In the event that any writer
is unable to honor a put for financial reasons, the Fund would be a general
creditor (i.e., on a parity with all other unsecured creditors) of the writer.
Furthermore, particular provisions of the contract between the Fund and the
writer may excuse the writer from repurchasing the securities; for example, a
change in the published rating of the underlying municipal securities or any
similar event that has an adverse effect on the issuer's credit or a provision
in the contract that the put will not be exercised except in certain special
cases, for example, to maintain fund liquidity. The Fund could, however, at any
time sell the underlying security in the open market or wait until the security
matures, at which time it should realize the full par value of the security.
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Municipal securities purchased subject to a put may be sold to third
persons at any time, even though the put is outstanding, but the put itself,
unless it is an integral part of the security as originally issued, may not be
marketable or otherwise assignable. Therefore, the put would have value only to
the Fund. Sale of the securities to third parties or lapse of time with the put
unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, the Fund could seek to negotiate terms for the
extension of such an option. If such a renewal cannot be negotiated on terms
satisfactory to the Fund, the Fund could, of course, sell the security. The
maturity of the underlying security will generally be different from that of the
put. There will be no limit to the percentage of Fund securities that a Fund may
purchase subject to puts but the amount paid directly or indirectly for puts
which are not integral parts of a security as originally issued held in a Fund
will not exceed 1/2 of 1% of the value of the total assets of such Fund
calculated immediately after any such put is acquired.

For the purpose of determining the "maturity" of securities purchased
subject to an option to put, and for the purpose of determining the
dollar-weighted average maturity of a Fund including such securities, "maturity"
will be considered to be the first date on which the Fund has the right to
demand payment from the writer of the put although the final maturity of the
security is later than such date.

OPTIONS

Each of the Stock Funds, Boston 1784 Short-Term Income Fund and Boston
1784 Income Fund may, for hedging purposes and in order to generate additional
income, write call options on a covered basis. Each of the Tax-Exempt Funds and
Boston 1784 U.S. Government Medium-Term Income Fund may, for hedging purposes
only, write call options on a covered basis, and will not engage in option
writing strategies for speculative purposes.

Each of the Stock Funds, Tax-Exempt Funds, Boston 1784 Short-Term
Income Fund, Boston 1784 Income Fund and Boston 1784 U.S. Government Medium-Term
Income Fund may write covered call options from time to time on its assets as
determined by the Adviser or Advisers to such Fund to be appropriate in seeking
to achieve such Fund's investment objective, provided that the aggregate value
of such options may not exceed 10% of such Fund's net assets as of the time such
Fund enters into such options.

The purchaser of a call option has the right to buy, and the writer (in
this case a Fund) of a call option has the obligation to sell, an underlying
security at a specified exercise price during a specified option period. The
advantage to a Fund of writing covered calls is that the Fund receives a premium
for writing the call, which is additional income. However, if the security rises
in value and the call is exercised, the Fund may not participate fully in the
market appreciation of the security.

During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time at which the writer effects a closing purchase
transaction.

A closing purchase transaction is one in which a Fund, when obligated
as a writer of an option, terminates its obligation by purchasing an option of
the same series as the option previously written. A closing purchase transaction
cannot be effected with
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respect to an option once the Fund writing the option has received an exercise
notice for such option. Closing purchase transactions will ordinarily be
effected to realize a profit on an outstanding call option, to prevent an
underlying security from being called, to permit the sale of the underlying
security or to enable a Fund to write another call option on the underlying
security with either a different exercise price or different expiration date or
both. The Fund may realize a net gain or loss from a closing purchase
transaction depending upon whether the net amount of the original premium
received on the call option is more or less than the cost of effecting the
closing purchase transaction. Any loss incurred in a closing purchase
transaction may be partially or entirely offset by the premium received from a
sale of a different call option on the same underlying security. Such a loss may
also be wholly or partially offset by unrealized appreciation in the market
value of the underlying security. Conversely, a gain resulting from a closing
purchase transaction could be offset in whole or in part by a decline in the
market value of the underlying security.

If a call option expires unexercised, a Fund will realize a short-term
capital gain in the amount of the premium on the option, less the commission
paid. Such a gain, however, may be offset by depreciation in the market value of
the underlying security during the option period. If a call option is exercised,
the Fund will realize a gain or loss from the sale of the underlying security
equal to the difference between (a) the cost of the underlying security and (b)
the proceeds of the sale of the security, plus the amount of the premium on the
option, less the commission paid.

The market value of a call option generally reflects the market price
of the underlying security. Other principal factors affecting market value
include supply and demand, interest rates, the price volatility of the
underlying security and the time remaining until the expiration date.

Each of the Stock Funds, Tax-Exempt Funds, Boston 1784 Short-Term
Income Fund, Boston 1784 Income Fund and Boston 1784 U.S. Government Medium-Term
Income Fund will write call options only on a covered basis, which means that
the Fund will own the underlying security subject to a call option at all times
during the option period. Unless a closing purchase transaction is effected, the
Fund would be required to continue to hold a security which it might otherwise
wish to sell, or deliver a security it would want to hold. Options written by a
Fund will normally have expiration dates between one and nine months from the
date written. The exercise price of a call option may be below, equal to or
above the current market value of the underlying security at the time the option
is written.

A Fund may also purchase put and call options. Put options are
purchased to hedge against a decline in the value of securities held in the
Fund's portfolio. If such a decline occurs, the put options will permit the Fund
to sell the securities underlying such options at the exercise price, or to
close out the options at a profit. The premium paid for a put or a call option
plus any transaction costs will reduce the benefit, if any, realized by the Fund
upon exercise of the option, and, unless the price of the underlying security
rises or declines sufficiently, the option may expire worthless to the Fund. In
addition, in the event that the price of the security in connection with which
an option was purchased moves in a direction favorable to the Fund, the benefits
realized by the Fund as a result of such favorable movement will be reduced by
the amount of the premium paid for the option and related transaction costs.
<PAGE>
-13-

OPTIONS ON STOCK INDICES

The Stock Funds may engage in transactions involving options on stock
indices. A stock index assigns relative values to the common stocks included in
the index, and the index fluctuates with changes in the market values of the
underlying common stocks. The Funds will not engage in transactions in options
on stock indices for speculative purposes but only to protect appreciation
attained, to offset capital losses and to take advantage of the liquidity
available in the option markets. The aggregate premium paid on all options on
stock indices will not exceed 5% of a Fund's total assets.

Options on stock indices are similar to options on stocks but have
different delivery requirements. Stock options provide the right to take or make
delivery of the underlying stock at a specified price. A stock index option
gives the holder the right to receive a cash "exercise settlement amount" equal
to (i) the amount by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (ii) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for the
option premium received, to make delivery of this amount. Gain or loss to a Fund
on transactions in stock index options will depend on price movements in the
stock market generally (or in a particular industry or segment of the market)
rather than price movements of individual securities.

As with stock options, a Fund may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
exchange or it may let the option expire unexercised.

A stock index fluctuates with changes in the market values of the
stock included in the index. Some stock index options are based on a broad
market index such as the Standard & Poor's 500 or the New York Stock Exchange
Composite Index, or a narrower market index such as the Standard & Poor's 100.
Indices are also based on an industry or market segment such as the AMEX Oil and
Gas Index or the Computer and Business Equipment Index. Options on stock indices
are currently traded on the following exchanges, among others: The Chicago Board
Options Exchange, New York Stock Exchange and American Stock Exchange.

A Fund's ability to hedge effectively all or a portion of its
securities through transactions in options on stock indices depends on the
degree to which price movements in the underlying index correlate with price
movements in the securities held by the Fund. Since the Fund will not duplicate
all of the components of an index, the correlation will not be exact.
Consequently, the Fund bears the risk that the prices of the securities being
hedged will not move in the same amount as the hedging instrument. It is also
possible that there may be a negative correlation between the index or other
securities underlying the hedging instrument and the hedged securities which
would result in a loss on both such securities and the hedging instrument.

Positions in stock index options may be closed out only on an
exchange which provides a secondary market. There can be no assurance that a
liquid secondary
<PAGE>
-14-

market will exist for any particular stock index option. Thus, it may not be
possible to close such an option. The inability to close options positions could
have an adverse impact on a Fund's ability to effectively hedge its securities.
The Fund will enter into an option position only if there appears to the Adviser
or the Advisers of such Fund, at the time of investment, to be a liquid
secondary market for such options.

FUTURES CONTRACTS

Subject to applicable laws, each of the Funds may enter into bond and
interest rate futures contracts. The Funds intend to use futures contracts only
for bona fide hedging purposes. Futures contracts provide for the future sale by
one party and purchase by another party of a specified amount of a specified
security at a specified future time and at a specified price. A "sale" of a
futures contract entails a contractual obligation to deliver the underlying
securities called for by the contract, and a "purchase" of a futures contract
entails a contractual obligation to acquire such securities, in each case in
accordance with the terms of the contract. Futures contracts must be executed
through a futures commission merchant, or brokerage firm, which is a member of
an appropriate exchange designated as a "contract market" by the Commodity
Futures Trading Commission ("CFTC").

When a Fund purchases or sells a futures contract, the Trust must
allocate assets of that Fund as an initial deposit on the contract. The initial
deposit may be as low as approximately 5% or less of the value of the contract.
The futures contract is marked to market daily thereafter and the Fund may be
required to pay or entitled to receive additional "variation margin", based on
decrease or increase in the value of the futures contract.

Futures contracts call for the actual delivery or acquisition of
securities, or in the case of futures contracts based on indices, the making or
acceptance of a cash settlement at a specified future time; however, the
contractual obligation is usually fulfilled before the date specified in the
contract by closing out the futures contract position through the purchase or
sale, on a commodities exchange, of an identical futures contract. Positions in
futures contracts may be closed out only if a liquid secondary market for such
contract is available, and there can be no assurance that such a liquid
secondary market will exist for any particular futures contract.

A Fund's ability to hedge effectively through transactions in futures
contracts depends on, among other factors, its Adviser's or Advisers', as
applicable, judgment as to the expected price movements in the securities
underlying the futures contracts. In addition, it is possible in some
circumstances that a Fund would have to sell securities from its portfolio to
meet "variation margin" requirements at a time when it may be disadvantageous to
do so.

OPTIONS ON FUTURES CONTRACTS

The Funds may also, subject to any applicable laws, purchase and write
options on futures contracts for hedging purposes only. The holder of a call
option on a futures contract has the right to purchase the futures contract, and
the holder of a put option on a futures contract has the right to sell the
futures contract, in either case at a fixed exercise price up to a stated
expiration date or, in the case of certain options, on a stated date. Options on
futures contracts, like futures contracts, are traded on contract markets.
<PAGE>
-15-

The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the securities deliverable on exercise
of the futures contract. A Fund will receive an option premium when it writes
the call, and, if the price of the futures contract at expiration of the option
is below the option exercise price, the Fund will retain the full amount of this
option premium, which provides a partial hedge against any decline that may have
occurred in the Fund's portfolio holdings. Similarly, the writing of a put
option on a futures contract constitutes a partial hedge against increasing
prices of the securities deliverable upon exercise of the futures contract. If a
Fund writes an option on a futures contract and that option is exercised, the
Fund may incur a loss, which loss will be reduced by the amount of the option
premium received, less related transaction costs. A Fund's ability to hedge
effectively through transactions in options on futures contracts depends on,
among other factors, the degree of correlation between changes in the value of
securities held by the Fund and changes in the value of its futures positions.
This correlation cannot be expected to be exact, and the Fund bears a risk that
the value of the futures contract being hedged will not move in the same amount,
or even in the same direction, as the hedging instrument. Thus it may be
possible for a Fund to incur a loss on both the hedging instrument and the
futures contract being hedged.

The ability of a Fund to engage in options and futures strategies
depends also upon the availability of a liquid market for such instruments;
there can be no assurance that such a liquid market will exist for such
instruments.

FOREIGN SECURITIES

As provided in the Prospectuses, each of the Funds (other than Boston
1784 Institutional U.S. Treasury Money Market Fund and Boston 1784 U.S. Treasury
Money Market Fund) may invest in certain obligations or securities of foreign
issuers. Boston 1784 International Equity Fund intends to invest a substantial
portion of its assets in securities and obligations of foreign issuers.
Permissible investments include obligations of foreign branches of U.S. banks
and of foreign banks, including certificates of deposit and time deposits
(including Eurodollar time deposits).

Investing in securities issued by companies whose principal business
activities are outside the United States may involve significant risks not
present in domestic investments. For example, the value of securities
denominated in foreign currencies and of dividends and interest paid with
respect to such securities, will fluctuate based on the relative strength of the
U.S. dollar. In addition, there is generally less publicly available information
about foreign companies, particularly those not subject to the disclosure and
reporting requirements of the U.S. securities laws. Foreign issuers are
generally not bound by uniform accounting, auditing and financial reporting
requirements comparable to those applicable to domestic issuers. Investments in
foreign securities also involve the risk of possible adverse changes in
investment or exchange control regulations, expropriation or confiscatory
taxation, limitation on the removal of funds or other assets of a Fund,
political or financial instability or diplomatic and other developments which
would affect such investments. Further, economies of particular countries or
areas of the world may differ favorably or unfavorably from the economy of the
U.S.

It is anticipated that in most cases the best available market for
foreign securities would be on exchanges or in over-the-counter markets located
outside the U.S. Foreign stock markets, while growing in volume and
sophistication, are generally not as developed as those in the U.S., and
securities of some foreign issuers (particularly those located in developing
countries) may be less liquid and more volatile than securities of
<PAGE>
-16-

comparable U.S. companies. Foreign security trading practices, including those
involving securities settlement where a Fund's assets may be released prior to
receipt of payment, may expose a Fund to increased risk in the event of a failed
trade or the insolvency of a foreign broker-dealer. In addition, foreign
brokerage commissions are generally higher than commissions on securities traded
in the U.S. and may be non-negotiable. In general, there is less overall
governmental supervision and regulation of foreign securities exchanges, brokers
and listed companies than in the U.S.

The current policy of Boston 1784 International Equity Fund is not to
invest more than 10% of its assets in investment companies and investment trusts
which primarily hold foreign securities except that the Fund may invest all of
its investable assets in a Qualifying Portfolio (as defined below). Investments
in such entities may entail the risk that the market value of such investments
may be substantially less than their net asset value and that there would be
duplication of investment management and other fees and expenses.

American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs") and other forms of depositary
receipts for securities of foreign issuers provide an alternative method for a
Fund to make foreign investments. These securities are not denominated in the
same currency as the securities into which they may be converted. Generally,
ADRs, in registered form, are designed for use in U.S. securities markets and
EDRs and GDRs, in bearer form, are designed for use in European and global
securities markets. ADRs are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying securities. EDRs and GDRs are
European and global receipts evidencing a similar arrangement.

A Fund may invest in foreign securities that impose restrictions on
transfer within the United States or to United States persons. Although
securities subject to such transfer restrictions may be marketable abroad, they
may be less liquid than foreign securities of the same class that are not
subject to such restrictions.

Foreign issuers of securities or obligations are often subject to
accounting treatment and engage in business practices different from those
respecting domestic issuers of similar securities or obligations. Foreign
branches of U.S. banks and foreign banks may be subject to less stringent
reserve requirements than those applicable to domestic branches of U.S. banks.

The Stock Funds, Boston 1784 Income Fund and Boston 1784 Short-Term
Income Fund may invest in securities issued by entities based in developing
countries throughout the world. All of the risks of investing in securities of
foreign issuers are heightened for securities of issuers in developing
countries. Such investments may also entail higher custodial fees and sales
commissions than domestic investments.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS

Since investments in foreign companies usually involve currencies of
foreign countries, the value of the assets of a Fund with investments in foreign
companies as measured in U.S. dollars may be affected favorably or unfavorably
by changes in foreign currency exchange rates and exchange control regulations.
Although such Fund's assets are valued daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. A Fund may conduct its foreign currency exchange transactions
on a spot basis or for settlement on a future date (i.e., a "forward foreign
currency" contract or "forward" contract). A Fund may convert
<PAGE>
-17-

currency on a spot basis from time to time, and investors should be aware of the
costs of currency conversion. Although foreign exchange dealers do not charge a
fee for conversion, they do realize a profit based on the difference (the
"spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer. The Funds do not currently intend to
speculate in foreign currency exchange rates or forward contracts.

A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract, agreed upon by the parties at a price set at the time
of the contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no fees
or commissions are charged at any stage for trades.

When a Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may desire to "lock in" the U.S.
dollar price of the security. By entering into a forward contract for the
purchase or sale, for a fixed amount of U.S. dollars, of the amount of foreign
currency involved in the underlying security transaction, a Fund will be able to
protect itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the subject foreign currency during the
period between the date the security is purchased or sold and the date on which
payment is made or received.

When the Adviser or each of the Advisers to a Fund believes that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. dollar, the Fund may enter into a forward contract to sell, for
a fixed amount of U.S. dollars, the amount of foreign currency approximating the
value of some or all of the Fund's securities denominated in such foreign
currency. The precise matching of the forward contract amounts and the value of
the securities involved is not generally possible since the future value of such
securities in foreign currencies changes as a consequence of market movements in
the value of those securities between the date the forward contract is entered
into and the date it matures. The projection of a short-term hedging strategy is
highly uncertain. A Fund does not enter into such forward contracts or maintain
a net exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of the
value of the Fund's securities or other assets denominated in the applicable
currency. Under normal circumstances, consideration of the prospect for currency
parities is incorporated in the longer term investment decisions made with
regard to overall diversification strategies. However, each Adviser to such
Funds believes that it is important to have the flexibility to enter into such
forward contracts when it determines that the best interests of such Funds will
be served.

A Fund generally does not enter into a forward contract with a term
greater than one year. At the maturity of a forward contract, the Fund either
sells the security and makes delivery of the foreign currency, or it retains the
security and terminates its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency.

If a Fund retains the security and engages in an offsetting
transaction, the Fund incurs a gain or loss (as described below) to the extent
that there has been movement in forward contract prices. If the Fund engages in
an offsetting transaction, it may
<PAGE>
-18-

subsequently enter into a new forward contract to sell the foreign currency.
Should forward prices decline during the period between the date the Fund enters
into a forward contract for the sale of the foreign currency and the date it
enters into an offsetting contract for the purchase of foreign currency, the
Fund will realize a gain to the extent the price of the currency it has agreed
to sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Fund will suffer a loss to the extent that the
price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell.

It is impossible to forecast with precision the market value of Fund
securities at the expiration of the contract. Accordingly, it may be necessary
for the Fund to purchase additional foreign currency for the Fund on the spot
market (and cause the Fund to bear the expense of such purchase) if the market
value of the security is less than the amount of foreign currency the Fund is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency received upon the sale of the security
if its market value exceeds the amount of foreign currency the Fund is obligated
to deliver.

The Funds' dealings in foreign currency contracts are limited to the
transactions described above. Of course, no Fund is required to enter into such
transactions with regard to the Fund's foreign currency-denominated securities
and will not do so unless deemed appropriate by the Adviser or Advisers to such
Fund. It should also be realized that this method of protecting the value of a
Fund's securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. Additionally,
although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, they also tend to limit any potential gain
which might result should the value of such currency increase.

WHEN-ISSUED SECURITIES

Each Fund may invest in securities on a when-issued basis, in which
case delivery and payment normally take place beyond conventional settlement
time after the date of commitment to purchase. The Funds will make commitments
to purchase obligations on a when-issued basis only with the intention of
actually acquiring the securities, but may sell them before the settlement date.
The when-issued securities are subject to market fluctuation, and no interest
accrues on the security to the purchaser during this period. The payment
obligation and the interest rate that will be received on the securities are
each fixed at the time the purchaser enters into the commitment. Purchasing
obligations on a when-issued basis is a form of leveraging and can involve a
risk that the yields available in the market when the delivery takes place may
actually be higher than those obtained in the transaction itself. In that case,
there could be an unrealized loss at the time of delivery.

While awaiting delivery of securities purchased on a when-issued basis,
a Fund will establish a segregated account consisting of cash, short-term money
market instruments or high quality debt securities (for Boston 1784
Institutional U.S. Treasury Money Market Fund and Boston 1784 U.S. Treasury
Money Market Fund, cash and U.S. Government securities) equal to the amount of
the commitments to purchase securities on such basis. If the value of these
assets declines, the Fund will place additional assets of the type described in
the preceding sentence in the account on a daily basis so that the value of the
assets in the account is equal to the amount of such commitments.
<PAGE>
-19-

RESTRICTED SECURITIES

Restricted securities are securities that may not be sold to the public
without registration under the Securities Act of 1933 (the "1933 Act") absent an
exemption from registration. Boston 1784 Prime Money Market Fund, Boston 1784
Institutional Prime Money Market Fund, each Stock Fund and each Bond Fund may
invest up to 20% of its total assets in restricted securities provided it is
determined by the Adviser or Advisers to that Fund that at the time of
investment such securities are not illiquid (generally, an illiquid security is
one that cannot be disposed of within seven days in the ordinary course of
business at its full value), based on guidelines which are the responsibility of
and are periodically reviewed by the Board of Trustees. Under these guidelines,
the Adviser or Advisers will consider the frequency of trades and quotes for the
security, the number of dealers in, and potential purchasers for, the
securities, dealer undertakings to make a market in the security, and the nature
of the security and of the marketplace trades. In purchasing such restricted
securities, the intention of the Adviser or Advisers is to rely upon the
exemption from registration provided by Rule 144A promulgated under the 1933
Act. Restricted securities not determined to be liquid may be purchased subject
to each Fund's limitation on all illiquid securities (15% of net assets for each
Stock, Bond and Tax-Exempt Fund and 10% for each Money Market Fund).

SECURITIES LENDING

Each Fund may lend securities pursuant to agreements requiring that the
loans be continuously secured by cash, securities of the U.S. government or its
agencies, or any combination of cash and such securities, as collateral equal to
100% of the market value at all times of the securities lent. Such loans will
not be made if, as a result, the aggregate amount of all outstanding securities
loans for the Fund exceed one-third of a Fund's total assets. A Fund will
continue to receive interest on the securities lent while simultaneously earning
interest on the investment of the cash collateral in U.S. government securities.
However, a Fund will normally pay lending fees to such broker-dealers and
related expenses from the interest earned on invested collateral. There may be
risks of delay in receiving additional collateral or 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 are made only to borrowers
deemed by the Adviser or Advisers to a Fund to be of good standing and when, in
the judgment of the Adviser or Advisers, the consideration which can be earned
currently from such securities loans justifies the attendant risk. Any loan may
be terminated by either party upon reasonable notice to the other party. A Fund
may use the Distributor or a broker/dealer affiliate of an Adviser as a broker
in these transactions.

OTHER INVESTMENTS

The Funds (other than Boston 1784 Institutional U.S. Treasury Money
Market Fund and Boston 1784 U.S. Treasury Money Market Fund) are not prohibited
from investing in obligations of banks which are clients of SEI Investments
Company ("SEI"). However, the purchase of shares of the Funds by such banks or
by their customers will not be a consideration in determining which bank
obligations the Funds will purchase.
<PAGE>
-20-

4. INVESTMENT RESTRICTIONS

FUNDAMENTAL POLICIES

The following are fundamental policies of each of the Funds and may not
be changed with respect to any Fund without approval by holders of a majority of
the outstanding voting securities of that Fund, which as used in this Statement
of Additional Information means the vote of the lesser of (i) 67% or more of the
outstanding voting securities of the Fund present at a meeting at which the
holders of more than 50% of the outstanding voting securities of the Fund are
present or represented by proxy, or (ii) more than 50% of the outstanding voting
securities of the Fund. The term "voting securities" as used in this paragraph
has the same meaning as in the Investment Company Act of 1940, as amended (the
"1940 Act").

1. A Fund may not 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. This limitation does not apply to investments in obligations
issued or guaranteed by the U.S. Government or its agencies and
instrumentalities and repurchase agreements involving such securities and,
for each of the Money Market Funds, to investments in obligations issued by
domestic banks, foreign branches of domestic banks and U.S. branches of
foreign banks, to the extent that a Fund may under the 1940 Act, reserve
freedom of action to concentrate its investments in such securities, and in
the case of Boston 1784 Tax-Free Money Market Fund, tax-exempt securities
issued by governments or political subdivisions of governments. Each of the
Money Market Funds has reserved its freedom of action to concentrate its
investments in government securities and bank instruments described in the
foregoing sentence. This limitation also does not apply to an investment of
all of the investable assets of each of Boston 1784 Prime Money Market
Fund, Boston 1784 Institutional Prime Money Market Fund, Boston 1784
Florida Tax-Exempt Income Fund, Boston 1784 Growth Fund, Boston 1784 Small
Cap Equity Fund, Boston 1784 Large Cap Equity Fund and Boston 1784
International Equity Fund in a diversified, open-end management investment
company having the same investment objective and policies and substantially
the same investment restrictions as those applicable to such Fund (in each
case, a "Qualifying Portfolio"). For purposes of this limitation, (i)
utility companies will be divided according to their services; for example,
gas, gas transmission, electric and telephone will each be considered a
separate industry; (ii) financial service companies will be classified
according to the end users of their services; for example, automobile
finance, bank finance and diversified finance will each be considered a
separate industry; (iii) supranational entities will be considered to be a
separate industry; and (iv) loan participations are considered to be issued
by both the issuing bank and the underlying corporate borrower.

2. A Fund may not make loans, except that a 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 the Prospectuses and in this Statement of Additional
Information.

3. A Fund may not acquire more than 10% of the voting securities of any one
issuer (except securities issued or guaranteed by the United States, its
agencies or instrumentalities and repurchase agreements involving such
securities) or invest
<PAGE>
-21-

more than 5% of the total assets of the Fund in the securities of an issuer
(except securities issued or guaranteed by the United States, its agencies
or instrumentalities and repurchase agreements involving such securities);
provided, that (a) the foregoing limitation shall not apply to Boston 1784
Massachusetts Tax-Exempt Income Fund, Boston 1784 Connecticut Tax-Exempt
Income Fund, Boston 1784 Rhode Island Tax-Exempt Income Fund or Boston 1784
Florida Tax-Exempt Income Fund; (b) the foregoing limitation shall not
apply to 25% of the total assets of each of the Stock Funds, Bond Funds,
Boston 1784 Tax-Exempt Medium-Term Income Fund, Boston 1784 Tax-Free Money
Market Fund, Boston 1784 Prime Money Market Fund or Boston 1784
Institutional Prime Money Market Fund; and (c) the foregoing limitation
does not apply to an investment of all of the investable assets of Boston
1784 Prime Money Market Fund, Boston 1784 Institutional Prime Money Market
Fund, Boston 1784 Florida Tax-Exempt Income Fund, Boston 1784 Growth Fund,
Boston 1784 Small Cap Equity Fund, Boston 1784 Large Cap Equity Fund, or
Boston 1784 International Equity Fund in a Qualifying Portfolio.

4. A Fund may not invest in companies for the purpose of exercising control.

5. A Fund may not borrow, except that a 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 that Fund's total assets and then only as a
temporary measure for extraordinary or emergency purposes (which may
include the need to meet shareholder redemption requests). This borrowing
provision is included solely to facilitate the orderly sale of Fund
securities to accommodate heavy redemption requests if they should occur
and is not for investment purposes. A 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), and any interest paid on such
borrowings will reduce income.

6. In the case of Boston 1784 Asset Allocation Fund, Boston 1784 Growth and
Income Fund, Money Market Funds (other than Boston 1784 Prime Money Market
Fund and Boston 1784 Institutional Prime Money Market Fund), Boston 1784
U.S. Government Medium-Term Income Fund, Boston 1784 Tax-Exempt Medium-Term
Income Fund and Boston 1784 Massachusetts Tax-Exempt Income Fund, such a
Fund may not pledge, mortgage or hypothecate assets except to secure
temporary borrowings permitted by (5) above in aggregate amounts not to
exceed 10% of total assets taken at current value at the time of the
incurrence of such loan, except as permitted with respect to securities
lending.

7. A Fund may not purchase or sell real estate, including real estate limited
partnership interests, commodities and commodities contracts, but excluding
interests in a pool of securities that are secured by interests in real
estate. However, subject to its permitted investments, any Fund may invest
in companies which invest in real estate commodities or commodities
contracts. Each of the Funds may invest in futures contracts and options
thereon to the extent described in the Prospectuses and elsewhere in this
Statement of Additional Information.

8. A Fund may not make short sales of securities, maintain a short position or
purchase securities on margin, except that the Trust may obtain short-term
credits as necessary for the clearance of security transactions.
<PAGE>
-22

9. A Fund may not act as an underwriter of securities of other issuers, except
as it may be deemed an underwriter under federal securities laws in selling
a security held by the Fund.

10. A Fund may not purchase securities of other investment companies except as
permitted by the 1940 Act and the rules and regulations thereunder. Under
these rules and regulations, each of the Funds is prohibited from acquiring
the securities of other investment companies if, as a result of such
acquisition, (a) such Fund owns more than 3% of the total voting stock of
the company; (b) securities issued by any one investment company represent
more than 5% of the total assets of such Fund; or (c) securities (other
than treasury stock) issued by all investment companies represent more than
10% of the total assets of such Fund, provided, that with respect to Boston
1784 Prime Money Market Fund, Boston 1784 Institutional Prime Money Market
Fund, Boston 1784 Florida Tax-Exempt Income Fund, Boston 1784 Growth Fund,
Boston 1784 Small Cap Equity Fund, Boston 1784 Large Cap Equity Fund and
Boston 1784 International Equity Fund, the limitations do not apply to an
investment of all of the investable assets of such Fund in a Qualifying
Portfolio. These investment companies typically incur fees that are
separate from those fees incurred directly by a Fund. A Fund's purchase of
such investment company securities results in the layering of expenses,
such that shareholders would indirectly bear a proportionate share of the
operating expenses of such investment companies, including advisory fees.

It is the position of the Securities and Exchange Commission's Staff
that certain non-governmental issuers of CMOs and REMICs constitute
investment companies pursuant to the 1940 Act and either (a)
investments in such instruments are subject to the limitations set
forth above or (b) the issuers of such instruments have received orders
from the Securities and Exchange Commission exempting such instruments
from the definition of investment company.

11. A Fund may not issue senior securities (as defined in the 1940 Act) except
in connection with permitted borrowings as described above or as permitted
by rule, regulation or order of the Securities and Exchange Commission.

12. A Fund may not write or purchase puts, calls, or other options or
combinations thereof, except that each Fund may write covered call options
with respect to any or all of the securities it holds, subject to any
limitations described in the Prospectuses or elsewhere in this Statement of
Additional Information and each Fund may purchase and sell other options as
described in the Prospectuses.

NON-FUNDAMENTAL POLICIES

The following policies are not fundamental and may be changed with
respect to any Fund without approval by the shareholders of that Fund:

No Fund may invest in warrants, except that (i) each of the Stock Funds
may invest in warrants in an amount not exceeding 5% of the Fund's net assets as
valued at the lower of cost or market value; included in these amounts, but not
to exceed 2% of the Fund's net assets, may be warrants not listed on the New
York Stock Exchange or American Stock Exchange; and (ii) Boston 1784 Short-Term
Income Fund and Boston 1784 Income Fund may each invest in warrants in an amount
not exceeding 2% of its net assets; this limitation does not apply to warrants
acquired in units or attached to
<PAGE>
-23-

securities. Such warrants may not be listed on the New York Stock Exchange or
American Stock Exchange.

No Fund may invest in illiquid securities in an amount exceeding, in
the aggregate, 15% of that Fund's net assets (10% for Money Market Funds),
provided that this limitation does not apply to an investment of all of the
investable assets of Boston 1784 Prime Money Market Fund, Boston 1784
Institutional Prime Money Market Fund, Boston 1784 Florida Tax-Exempt Income
Fund, Boston 1784 Growth Fund, Boston 1784 Small Cap Equity Fund, Boston 1784
Large Cap Equity Fund or Boston 1784 International Equity Fund in a Qualifying
Portfolio. The foregoing limitation does not apply to restricted securities,
including those issued pursuant to Rule 144A under the 1933 Act, if it is
determined by or under procedures established by the Board of Trustees of the
Trust that, based on trading markets for the specific restricted security in
question, such security is not illiquid.

No Fund may purchase or retain securities of an issuer if, to the
knowledge of the Trust, an officer, trustee, partner or director of the Trust or
any investment adviser of the Trust owns beneficially more than 1/2 of 1% of the
shares or securities of such issuer and all such officers, trustees, partners
and directors owning more than 1/2 of 1% of such shares or securities together
own more than 5% of such shares or securities.

No Fund may invest in interests in oil, gas or other mineral
exploration or development programs. No Fund may invest in oil, gas or mineral
leases.

No Fund may purchase securities of any company which has (with
predecessors) a record of less than 3 years continuing operations if as a result
more than 5% of total assets (taken at fair market value) of the Fund would be
invested in such securities, except that the foregoing limitation shall not
apply to (a) obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; (b) municipal securities which are rated by at
least one nationally-recognized bond rating service; or (c) an investment of all
of the investable assets of Boston 1784 Prime Money Market Fund, Boston 1784
Institutional Prime Money Market Fund, Boston 1784 Florida Tax-Exempt Income
Fund, Boston 1784 Growth Fund, Boston 1784 Small Cap Equity Fund, Boston 1784
Large Cap Equity Fund or Boston 1784 International Equity Fund in a Qualifying
Portfolio.

The foregoing percentages will apply at the time of the purchase of a
security and shall not be considered violated unless an excess occurs or exists
immediately after and as a result of a purchase of such security.

5. MANAGEMENT

TRUSTEES AND OFFICERS OF THE TRUST

The management and affairs of the Trust are supervised by the Trustees
under the laws of the Commonwealth of Massachusetts. The Trustees and executive
officers of the Trust and their principal occupations for the last five years
are set forth below. Their titles may have varied during the period. An asterisk
indicates a Trustee who may be deemed to be an "interested person" (as defined
in the 1940 Act) of the Trust.

DAVID H. CARTER - Trustee - 224 Polpis Road, Nantucket, Massachusetts 02554
(date of birth March 21, 1933). Main Board Director, Touche Remnant & Co.
(investment
<PAGE>
-24-

advisor), 1982-1988; Managing Director, Bearbull (UK) Ltd., London (investment
advisor), 1988-January 1993.

TARRANT CUTLER - Trustee - 5 Masconomo Street, Manchester, Massachusetts 01944
(date of birth June 12, 1926). Senior Executive Vice President, Massachusetts
Financial Services Company, retired in 1991.

KENNETH A. FROOT - Trustee - Harvard University Graduate School of Business,
Boston, Massachusetts 02163 (date of birth July 5, 1957). The Industrial Bank of
Japan Professor of Finance and Director of Research, Harvard University Graduate
School of Business, since 1993; Thomas Henry Carroll-Ford Visiting Professor of
Business Administration, Harvard University Graduate School of Business,
1991-1993; Associate Professor of Management with Tenure, Sloan School of
Management, Massachusetts Institute of Technology, 1991-May 1992; Ford
International Development Chair, Sloan School, 1987-1990; Research Associate,
National Bureau of Economic Research, 1990-present.

SARA L. JOHNSON - Trustee - 30 Eaton Court, Wellesley Hills, Massachusetts (date
of birth November 16, 1951). Chief Regional Economist (since 1995) and principal
(since 1992), Director of Regional Forecasting, Managing Economist for Regional
Information Group's Eastern Regions (1988-1991) and Senior Economist, U.S.
Economic Service (1983-1988), DRI/McGraw Hill; formerly, Trustee of BayFunds.

KATHRYN F. MUNCIL - Trustee - c/o Fort William Henry Corporation, Canada Street,
Lake George, New York 12845 (date of birth November 30, 1958). Chief Financial
Officer, Fort William Henry Corporation, since 1993; Treasurer, Spaulding
Investment Company (property management), 1985-1993.

*ROBERT A. NESHER - Trustee, President & Chief Executive Officer- 1 Freedom
Valley Drive, Oaks, Pennsylvania 19456 (date of birth August 17, 1946). Mr.
Nesher currently performs various services on behalf of SEI for which he is
compensated. Retired since 1994. Director and Executive Vice President of SEI
1986 to July 1994. Director and Executive Vice President of the Administrator
and Distributor 1981 to July 1994.

ALVIN J. SILK - Trustee - Graduate School of Business Administration, Harvard
University, Soldiers Field Road, Boston, Massachusetts (date of birth December
31, 1935). Co-Chairman, Marketing Area and Lincoln Filene Professor of Business
Administration, Graduate School of Business Administration, Harvard University
(1988-present); formerly, Trustee of BayFunds; formerly, Erwin H. Schell
Professor of Management, Sloan School of Management, Massachusetts Institute of
Technology; formerly, Director, BayBank Systems, Inc.; Trustee, Marketing
Science Institute; Director, Reed and Barton, Inc.

TODD CIPPERMAN - Vice President and Assistant Secretary - 1 Freedom Valley
Drive, Oaks, Pennsylvania 19456 (date of birth February 14, 1966). Vice
President and Assistant Secretary of SEI, the Administrator and the Distributor
since 1995. Associate,
<PAGE>
-25-

Dewey Ballantine (law firm)(1994-1995). Associate, Winston & Strawn (law firm)
(1991-1994).

ROGER P. JOSEPH - Secretary - 150 Federal Street, Boston, Massachusetts 02110
(date of birth October 3, 1951). Partner, Bingham Dana LLP, counsel to the
Trust, since 1983.

DAVID G. LEE - Senior Vice President & Assistant Secretary - 1 Freedom Valley
Drive, Oaks, Pennsylvania 19456 (date of birth April 16, 1952). Senior Vice
President of the Administrator and the Distributor since 1993. Vice President of
the Administrator and the Distributor from 1991 to 1993. President of GW Sierra
Trust Funds before 1991.

STEPHEN G. MEYER - Controller - 1 Freedom Valley Drive, Oaks, Pennsylvania
19456. Vice President and Controller, Chief Accounting Officer of SEI since 1992
(date of birth July 12, 1965). Senior Associate, Coopers & Lybrand L.L.P. from
1990 to 1992. Internal Audit, Vanguard Group of Investments prior to 1990.

SANDRA K. ORLOW - Vice President, Assistant Secretary - 1 Freedom Valley Drive,
Oaks, Pennsylvania 19456 (date of birth October 18, 1953). Vice President and
Assistant Secretary of the Administrator and Distributor since 1983.

KEVIN P. ROBINS - Vice President & Assistant Secretary - 1 Freedom Valley Drive,
Oaks, Pennsylvania 19456 (date of birth April 15, 1961). Senior Vice President
of SEI, the Administrator and the Distributor, since 1994. Vice President of
SEI, the Administrator and the Distributor, from 1991 to 1994. Vice President of
SEI, the Administrator and the Distributor, from 1992 to 1994. Associate,
Morgan, Lewis & Bockius (law firm) prior to 1992.

KATHRYN L. STANTON - Vice President, Assistant Secretary - 1 Freedom Valley
Drive, Oaks, Pennsylvania 19456 (date of birth November 18, 1958). Vice
President and Assistant Secretary of SEI, the Administrator and the Distributor,
since 1994. Associate, Morgan, Lewis & Bockius (law firm) 1989-1994.
<PAGE>
-26-

The following table sets forth certain information regarding the compensation of
the Trust's Trustees for the fiscal year ended May 31, 1997. The Officers of the
Trust receive no compensation from the Trust for serving in such capacity.

<TABLE>
<CAPTION>
Compensation Table
Pension or Total Compensation
Retirement Benefits Estimated Annual from the Trust and
Aggregate Accrued as Part of Benefits Upon the Funds Paid to
Compensation from Fund Expenses Retirement Trustee
Name of Trustee the Trust

<S> <C> <C> <C> <C>
David H. Carter $29,000 $0 $0 $29,000
Tarrant Cutler 29,000 0 0 29,000
Kenneth A. Froot 29,000 0 0 29,000
Sara L. Johnson 14,500 (1) 0 0 14,500 (1)
Kathryn F. Muncil 29,000 0 0 29,000
Robert A. Nesher 0 0 0 0
Alvin J. Silk 14,500 (1) 0 0 14,500 (1)
<FN>
(1) The aggregate and total compensation figures for Sara L. Johnson and Alvin
J. Silk reflect payments made from the Trust for the period from December 1,
1996 to May 31, 1997.
</FN>
</TABLE>

The Trustees and officers of the Trust own, in the aggregate, less than
1% of the outstanding shares of the Trust. The Trust pays the fees for
unaffiliated Trustees. Compensation of officers and Trustees of the Trust who
are employed by the Administrator is paid by the Administrator.

As of January 30, 1998, Totes Isotoner Corp., 10078 E. Kemper Rd.,
Loveland, OH 45140-8606, owned of record 19.84% of the outstanding shares of
Boston 1784 Institutional Prime Money Market Fund.

As of January 30, 1998, Back Bay Partners V LP, One Financial Center
44th Floor, Boston, MA 02111-2621, owned of record 11.34% of the outstanding
shares of Boston 1784 Institutional Prime Money Market Fund.

As of January 30, 1998, Corelink Financial Inc., 1855 Gateway Blvd.,
Suite 750, Concord, CA 94520-3290, owned of record 5.24% of the outstanding
shares of Boston 1784 Growth Fund.

As of January 30, 1998, National Financial Services Corp., P.O. Box
3908, Church Street Station, New York, NY 10008-3908, owned of record the
following percentages of the outstanding shares of the following Funds:

Boston 1784 U.S. Treasury Money Market Fund -- 17.08%
Boston 1784 Prime Money Market Fund -- 10.36%
Boston 1784 Short-Term Income Fund -- 7.41%
Boston 1784 Massachusetts Tax-Exempt Income Fund -- 15.71%
Boston 1784 Rhode Island Tax-Exempt Income Fund -- 8.81%
Boston 1784 Asset Allocation Fund -- 31.24%
Boston 1784 Growth and Income Fund -- 10.40%
Boston 1784 Connecticut Tax-Exempt Income Fund -- 9.26%
<PAGE>
-27-

As of January 30, 1998, BankBoston, N.A., 100 Federal Street, Boston,
Massachusetts 02110, and its affiliates, owned of record the following
percentages of the outstanding shares of the following Funds:

Boston 1784 Tax-Free Money Market Fund -- 83.48%
Boston 1784 Prime Money Market Fund -- 28.04%
Boston 1784 Institutional U.S. Treasury Money Market Fund -- 58.77%
Boston 1784 Institutional Prime Money Market Fund -- 25.07%
Boston 1784 Tax-Exempt Medium-Term Income Fund -- 91.03%
Boston 1784 Massachusetts Tax-Exempt Income Fund -- 66.16%
Boston 1784 Rhode Island Tax-Exempt Income Fund -- 80.86%
Boston 1784 Connecticut Tax-Exempt Income Fund -- 78.58%
Boston 1784 Florida Tax-Exempt Income Fund -- 96.52%
Boston 1784 U.S. Government Medium-Term Income Fund -- 88.24%
Boston 1784 Short-Term Income Fund -- 73.98%
Boston 1784 Income Fund -- 86.22%
Boston 1784 Asset Allocation Fund -- 31.70%
Boston 1784 Growth and Income Fund -- 72.51%
Boston 1784 Growth Fund -- 75.39%
Boston 1784 International Equity Fund -- 91.31%

THE ADVISERS

The Trust has entered into separate advisory agreements (each, an
"Advisory Agreement") with BankBoston and, for Boston 1784 International Equity
Fund, with Kleinwort Benson Investment Management Americas Inc. ("Kleinwort
Benson"). The Advisory Agreement with BankBoston for the Funds other than Boston
1784 International Equity Fund is dated as of June 1, 1993 and the Advisory
Agreement with BankBoston for Boston 1784 International Equity Fund is dated as
of November 28, 1994. The Advisory Agreement with Kleinwort Benson for Boston
1784 International Equity Fund is dated as of October 27, 1995. BankBoston and
Kleinwort Benson are referred to in this Statement of Additional Information,
collectively, as the "Advisers" and each, individually, as an "Adviser." The
Prospectuses contain a description of the fees payable to the Advisers for
services rendered to the Funds under the applicable Advisory Agreements.

For the fiscal years ended May 31, 1995, 1996 and 1997, the Trust paid the
following fees (after fee waivers) on behalf of the Funds:
<PAGE>
-28-
<TABLE>
<CAPTION>
- --------------------------------------------- ---------------------- ------------------------- ----------------------
BankBoston BankBoston BankBoston
Investment Investment Investment
Fund Advisory Fees 1995 Advisory Fees Advisory Fees 1997
1996
- --------------------------------------------- ---------------------- ------------------------- ----------------------
<S> <C> <C> <C>
Boston 1784 Tax-Free Money Market Fund $ 1,471,000 $1,996,000 $2,663,000
Boston 1784 U.S. Treasury Money Market Fund 69,000 276,000 879,000
Boston 1784 Institutional U.S. Treasury 85,000 651,000 3,052,000
Money Market Fund
Boston 1784 Institutional Prime Money N/A N/A N/A
Market Fund (1)
Boston 1784 Prime Money Market Fund N/A(2) 6,700(2) 142,000(3)
Boston 1784 Short-Term Income Fund 86,000 348,000 708,000
Boston 1784 Income Fund 521,000 1,257,000 1,829,000
Boston 1784 U.S. Government Medium-Term 679,000 906,000 1,199,000
Income Fund
Boston 1784 Tax-Exempt Medium-Term Income 602,000 1,116,000 1,387,000
Fund
Boston 1784 Connecticut Tax-Exempt Income 138,000 418,000 573,000
Fund
Boston 1784 Florida Tax-Exempt Income Fund N/A N/A N/A
(1)
Boston 1784 Massachusetts Tax-Exempt Fund 363,000 548,000 768,000
Boston 1784 Rhode Island Tax-Exempt Income 77,000 208,000 280,000
Fund
Boston 1784 Asset Allocation Fund 23,000 90,000 177,000
Boston 1784 Growth and Income Fund 1,393,000 1,997,000 2,650,000
Boston 1784 Growth Fund N/A 0 1,050,000
Boston 1784 Small Cap Equity Fund (1) N/A N/A N/A
Boston 1784 Large Cap Equity Fund (1) N/A N/A N/A
Boston 1784 International Equity Fund 0 636,000 2,111,000
- --------------------------------------------- ---------------------- ------------------------- ----------------------
Total $ 5,707,000 $10,453,700 $19,468,000
- --------------------------------------------- ---------------------- ------------------------- ----------------------
</TABLE>

(1) The Boston 1784 Institutional Prime Money Market Fund, Boston 1784 Florida
Tax-Exempt Income Fund, Boston 1784 Small Cap Equity Fund and Boston 1784
Large Cap Equity Fund are newly organized and had no operations during the
periods indicated.

(2) The Prime Money Market Fund is the successor through a reorganization with
the BayFunds Money Market Portfolio. The BayFunds Money Market Portfolio
was a portfolio of BayFunds, an open-end investment company registered
under the 1940 Act and reorganized with the Prime Money Market Fund on
December 9, 1996. Prior to the reorganization, BayBank, N.A. was the
investment adviser of the BayFunds Money Market Portfolio. For its fiscal
years ended December 31, 1994, 1995 and 1996, respectively, the Fund paid
investment advisory fees of $732,016, $869,240 and $837,000 (of which
$6,700 was paid to BankBoston following the reorganization with the
BayFunds Money Market Portfolio).

(3) The Prime Money Market Fund changed its fiscal year from December 31 to May
31. The investment advisory fee of $142,000 reflects payments made by the
Fund for the period from January 1, 1997 to May 31, 1997.

The foregoing table does not reflect contributions to the Funds made by
BankBoston in order to assist the Funds in maintaining competitive expense
ratios.
<PAGE>
-29-

For the fiscal year ended May 31, 1995, the Trust paid $199,000 to
Kleinwort Benson under the Advisory Agreement to which Kleinwort Benson is a
party, with respect to Boston 1784 International Equity Fund. For the fiscal
years ended May 31, 1996 and 1997, respectively, the Trust paid $1,222,419 and
$2,111,000 to Kleinwort Benson under the same Advisory Agreement.

The continuance of each Advisory Agreement, after the first two years,
must be specifically approved at least annually (i) by the vote of the Trustees,
and (ii) by the vote of a majority of the Trustees who are neither parties to
the Advisory Agreement nor "interested persons" of any party thereto, cast in
person at a meeting called for the purpose of voting on such approval. Each
Advisory Agreement will terminate automatically in the event of its assignment,
and is terminable at any time without penalty by the Trustees of the Trust or
with respect to any Fund, by a majority of the outstanding shares of that Fund,
on not less than 30 nor more than 60 days' written notice to the applicable
Adviser, or by the applicable Adviser on 90 days' written notice to the Trust.

Each Advisory Agreement provides that neither the Adviser nor its
personnel shall be liable (1) for any error of judgment or mistake of law; (2)
for any loss arising out of any investment; or (3) for any act or omission in
the execution of security transactions for the Trust or any Fund, except that
the Adviser and its personnel shall not be protected against any liability to
the Trust, any Fund or its Shareholders by reason of willful misfeasance, bad
faith or gross negligence on its or their part in the performance of its or
their duties or from reckless disregard of its or their obligations or duties
thereunder.

THE ADMINISTRATOR

The Trust and SEI Fund Resources (the "Administrator") are parties to
an administration agreement (the "Administration Agreement"). The Administration
Agreement provides that the Administrator shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the matters to which the Administration Agreement relates, except a loss
that results from willful misfeasance, bad faith or gross negligence on the part
of the Administrator in the performance of its duties or from reckless disregard
by it of its duties and obligations under the Administration Agreement. The
Administration Agreement continues until November 22, 1998 and indefinitely
thereafter unless terminated.

For the fiscal year ended May 31, 1995, the Trust paid $1,090,000 to
the Administrator under the Administration Agreement. For the fiscal years ended
May 31, 1996 and 1997, respectively, the Trust paid $2,440,000 and $3,912,000 to
the Administrator under the existing Administration Agreement.

SEI Fund Resources is a Delaware business trust whose sole beneficiary
is SEI Investments Management Corporation (formerly known as SEI Financial
Management Corporation). SEI Investments Management Corporation, a wholly owned
subsidiary of SEI Investments Company ("SEI"), was organized as a Delaware
corporation in 1969 and has its principal business offices at 1 Freedom Valley
Drive, Oaks, Pennsylvania 19456. Alfred P. West, Jr., Carmen V. Romeo, and Henry
H. Greer constitute the Board of Directors of the Administrator. Mr. West is the
Chairman of the Board and Chief Executive Officer of the Administrator. Mr. West
serves as the Chairman of the Board of Directors, and Chief Executive Officer of
SEI. SEI and its subsidiaries are leading providers of funds evaluation
services, trust accounting systems, and brokerage and
<PAGE>
-30-

information services to financial institutions, institutional investors and
money managers. The Administrator and its affiliates also serve as administrator
to the following other institutional mutual funds: SEI Daily Income Trust, SEI
Liquid Asset Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI International
Trust, SEI Institutional Managed Trust, The Advisors' Inner Circle Fund, The
Pillar Funds, CUFund, STI Classic Funds, CoreFunds, Inc., First American Funds,
Inc., First American Investment Funds, Inc., The Arbor Fund, Marquis Funds(R),
Morgan Grenfell Investment Trust, The PBHG Funds, Inc., PBHG Insurance Series
Fund, Inc., The Achievement Funds Trust, Bishop Street Funds, CrestFunds, Inc.,
STI Classic Variable Trust, Monitor Funds, FMB Funds, Inc., TIP Funds, TIP
Institutional Funds, ARK Funds, SEI Asset Allocation Trust, SEI Institutional
Investments Trust, Profit Funds Investment Trust, Santa Barbara Group of Mutual
Funds, Inc., First American Strategy Funds, Inc., HighMark Funds, and Expedition
Funds.

THE DISTRIBUTOR

SEI Investments Distribution Co. (formerly known as SEI Financial
Services Company) (the "Distributor"), a wholly-owned subsidiary of SEI, and the
Trust are parties to a distribution agreement ("Distribution Agreement"), dated
as of June 1, 1993 and amended and restated as of October 27, 1995. The Trust
has adopted a distribution plan dated as of June 1, 1993, with respect to each
of the Stock Funds, the Bond Funds and the Tax-Exempt Funds and separate
distribution plans dated as of September 14, 1995 with respect to Class C and
Class D shares of Boston 1784 U.S. Treasury Money Market Fund. Each of these
plans ("Plans") has been adopted pursuant to Rule 12b-1 under the 1940 Act. The
Distributor receives no compensation for distribution of shares of Boston 1784
Tax-Free Money Market Fund, Boston 1784 Prime Money Market Fund, Boston 1784
Institutional Prime Money Market Fund or Boston 1784 Institutional U.S. Treasury
Money Market Fund, or for the distribution of Class A Shares of Boston 1784 U.S.
Treasury Money Market Fund.

The Distribution Agreement and the Plans provide that the Trust will
pay the Distributor a fee, calculated daily and paid monthly, at an annual rate
of (i) 0.25% of the average daily net assets of each of the Stock Funds, the
Bond Funds and the Tax-Exempt Funds; (ii) 0.25% of the average daily net assets
of the Class C shares of Boston 1784 U.S. Treasury Money Market Fund; and (iii)
0.75% of the average daily net assets of the Class D shares of Boston 1784 U.S.
Treasury Money Market Fund. The Distributor can use these fees to compensate
broker/dealers and service providers (including each Adviser and its affiliates)
which provide administrative and/or distribution services to holders of these
shares or their customers who beneficially own these shares. No fees have been
paid to the Distributor under the Plans or the Distribution Agreement since the
Funds' inception.

The Distribution Agreement is renewable annually and may be terminated
by the Distributor, by the Trustees of the Trust who are not interested persons
and have no financial interest in the Plans or any related agreement ("Qualified
Trustees"), or, with respect to any particular Fund or class of shares, by a
majority vote of the outstanding shares of such Fund or such class of shares, as
applicable, for which the Distribution Agreement is in effect upon not more than
60 days' written notice by either party.

The Trust has adopted each of the Plans in accordance with the
provisions of Rule 12b-1 under the 1940 Act, which regulates circumstances under
which an investment company may, directly or indirectly, bear expenses relating
to the distribution of its shares. Continuance of each of the Plans must be
approved annually by a majority of the Trustees of the Trust and by a majority
of the Qualified Trustees.
<PAGE>
-31-

Continuance of the Plan with respect to each of the Stock Funds, the Bond Funds,
and the Tax-Exempt Funds was approved by the Trustees in March, 1997. Each of
the Plans requires that quarterly written reports of money spent under such Plan
and of the purposes of such expenditures be furnished to and reviewed by the
Trustees. Expenditures may include (1) the cost of prospectuses, reports to
Shareholders, sales literature and other materials for potential investors; (2)
advertising; (3) expenses incurred in connection with the promotion and sale of
the Trust's shares, including the Distributor's expenses for travel,
communication, and compensation and benefits for sales personnel; and (4) any
other expenses reasonably incurred in connection with the distribution and
marketing of the shares subject to approval of a majority of the Qualified
Trustees. No Plan may be amended to materially increase the amount which may be
spent under the Plan without approval by a majority of the outstanding shares of
the Funds or the class of shares which are subject to such Plan. All material
amendments of the Plans require approval by a majority of the Trustees of the
Trust and of the Qualified Trustees.

6. FUND TRANSACTIONS; TRADING PRACTICES AND BROKERAGE

FUND TRANSACTIONS

Subject to policies established by the Trustees, each Adviser to a Fund
is responsible for placing the orders to execute transactions for such Fund. In
placing orders, it is the policy of the Trust for each Adviser to seek to obtain
the best net results taking into account such factors as price (including the
applicable dealer spread), the size, type and difficulty of the transaction
involved, the firm's general execution and operational facilities, and the
firm's risk in positioning the securities involved. While each Adviser seeks
reasonably competitive spreads or commissions, the Trust will not necessarily be
paying the lowest spread or commission available.

The money market securities in which the Funds invest are traded
primarily in the over-the-counter market. Bonds and debentures are usually
traded over-the-counter, but may be traded on an exchange. Where possible, each
Adviser will deal directly with the dealers who make a market in the securities
involved except in those circumstances where better prices and execution are
available elsewhere. Such dealers usually are acting as principal for their own
account. On occasion, securities may be purchased directly from the issuer.
Money market securities are generally traded on a net basis and do not normally
involve either brokerage commissions or transfer taxes. The cost of executing
transactions for the Funds will primarily consist of dealer spreads and
underwriting commissions.

TRADING PRACTICES AND BROKERAGE

Specific decisions to purchase or sell securities for a Fund are made
by a portfolio manager who is an employee of BankBoston, and who is appointed
and supervised by the senior officers of BankBoston, or in the case of Boston
1784 International Equity Fund, by portfolio managers who are employees of
BankBoston or of Kleinwort Benson, and who are appointed and supervised by the
senior officers of BankBoston or by senior officers of Kleinwort Benson. A
portfolio manager may serve other clients of either of the Advisers or of an
affiliate of either of the Advisers in a similar capacity.

Each Adviser selects brokers or dealers to execute transactions for the
purchase or sale of securities for the Funds on the basis of the Adviser's
judgment of their professional capability to provide the service. The primary
consideration is to have
<PAGE>
-32-

brokers or dealers execute transactions at the best price and execution. Best
price and execution refers to many factors, including the price paid or received
for a security, the commission charged, the promptness and reliability of
execution, the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on the
transaction. Each Adviser's determination of what are reasonably competitive
rates is based upon the professional knowledge of the Adviser's portfolio
managers as to rates paid and charged for similar transactions throughout the
securities industry. In some instances, a Fund pays a minimal share transaction
cost when the transaction presents no difficulty. Some trades are made on a net
basis where a Fund either buys securities directly from the dealer or sells them
to the dealer. In these instances, there is no direct commission charged but
there is a spread (the difference between the buy and sell price) which is the
equivalent of a commission.

Each Adviser may allocate, out of all commission business generated by
the funds and accounts under its management, brokerage business to brokers or
dealers who provide brokerage and research services. These research services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software used in security
analyses; and providing fund performance evaluation and technical market
analyses. Such services are used by each Adviser in connection with its
investment decision-making process with respect to one or more portfolios under
its management and may not be used exclusively with respect to the fund or
account generating the brokerage. Not all brokerage and research services are
useful or of value in advising any particular Fund.

As provided in the Securities Exchange Act of 1934 (the "1934 Act"),
higher commissions may be paid to broker/dealers who provide brokerage and
research services than to broker/dealers who do not provide such services if
such higher commissions are deemed reasonable in relation to the value of the
brokerage and research services provided. Although transactions are directed to
broker/dealers who provide such brokerage and research services, the commissions
paid to such broker/dealers are not, in general, expected to be higher than
commissions that would be paid to broker/dealers not providing such services.
Further, in general, any such commissions are reasonable in relation to the
value of the brokerage and research services provided. Unless otherwise directed
by the Trust, a commission higher than one charged elsewhere will not be paid to
a broker/dealer solely because it provided research services to an Adviser.

BankBoston may place a combined order for two or more Funds (or for a
Fund and another account under BankBoston's management) engaged in the purchase
or sale of the same security if, in BankBoston's judgment, joint execution is in
the best interest of each participant and will result in best price and
execution. Transactions involving commingled orders are allocated in a manner
deemed equitable to each Fund or account. It is believed that the ability of the
Funds to participate in volume transactions is generally beneficial. Although it
is recognized that the joint execution of orders could adversely affect the
price or volume of the security that a particular Fund may obtain, it is the
opinion of BankBoston and the Board of Trustees of the Trust that the advantages
of combined orders outweigh the possible disadvantages of separate transactions.

Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to seeking best price and execution, an
Adviser may
<PAGE>
-33-

place orders for a Fund with broker/dealers who have agreed to defray certain
Trust expenses such as custodian fees, and may, at the request of the
Distributor, give consideration to sales of shares of the Trust as a factor in
the selection of brokers and dealers to execute Fund transactions.

It is expected that an Adviser may execute brokerage or other agency
transactions through the Distributor or such Adviser or an affiliate of such
Adviser, for a commission in conformity with the 1940 Act, the 1934 Act, rules
promulgated by the Securities and Exchange Commission and such policies as the
Board of Trustees of the Trust may determine. Under these provisions, the
Distributor or such Adviser or an affiliate of such Adviser is permitted to
receive and retain compensation for effecting transactions for a Fund on an
exchange if a written contract is in effect between the Distributor and the
Trust expressly permitting the Distributor or such Adviser or an affiliate of
such Adviser to receive and retain such compensation. These rules further
require that commissions paid to the Distributor, such Adviser, or any such
affiliate by the Trust for such exchange transactions not exceed "usual and
customary" brokerage commissions. The rules define "usual and customary"
commissions to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time." In addition, an Adviser may direct commission business to one or more
designated broker/dealers in connection with such broker/dealer's provision of
services to the Trust or the Funds or payment of certain Trust expenses, such as
custody, pricing and professional fees. The Trustees, including those who are
not "interested persons" of the Trust, have adopted procedures for evaluating
the reasonableness of commissions paid to the Distributor and will review these
procedures periodically.

For the fiscal years ended May 31, 1995, 1996 and 1997, the Trust paid
the following aggregate amount of brokerage commissions on behalf of the Funds:

<TABLE>
<CAPTION>
- --------------------------------------------- -------------------- ------------------ --------------------
Brokerage Brokerage Brokerage
Fund Commissions 1995 Commissions 1996 Commissions 1997
- --------------------------------------------- -------------------- ------------------ --------------------
<S> <C> <C> <C>
Boston 1784 Asset Allocation Fund $ 8,530.40 $ 12,818.55 $ 17,370.50
- --------------------------------------------- -------------------- ------------------ --------------------
Boston 1784 Growth and Income Fund 93,140.79 165,071.38 152,899.49
- --------------------------------------------- -------------------- ------------------ --------------------
Boston 1784 Growth Fund N/A 12,951.00 163,410.76
- --------------------------------------------- -------------------- ------------------ --------------------
Boston 1784 International Equity Fund 178,263.21 659,011.71 823,922.21
- --------------------------------------------- -------------------- ------------------ --------------------
Total $279,934.40 $849,852.64 $1,157,602.96
- --------------------------------------------- -------------------- ------------------ --------------------
</TABLE>
-34-

7. PERFORMANCE INFORMATION

CALCULATION OF YIELD

From time to time, the Trust advertises the "current yield" and
"effective yield" (also referred to as "effective compound yield") of the Money
Market Funds. Both yield figures are based on historical earnings and are not
intended to indicate future performance. The "current yield" of a Fund refers to
the income generated by an investment in that 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 "yield" because of the compounding effect of this assumed reinvestment.

The current yield of these Funds will be calculated daily based upon the
seven days ending on the date of calculation ("base period"). The yield is
computed by determining the net change (exclusive of capital changes) in the
value of a hypothetical pre-existing shareholder account having a balance of one
share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing such net change by
the value of the account at the beginning of the same period to obtain the base
period return and multiplying the result by (365/7). Realized and unrealized
gains and losses are not included in the calculation of the yield.

The effective compound yield of these Funds is determined by computing
the net change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula:

Effective Yield = (Base Period Return + 1) (365/7) - 1.

The current and the effective yields reflect the reinvestment of net
income earned daily on fund assets.

The yield of the Money Market Funds fluctuates, and the annualization of
a week's dividend is not a representation by the Trust as to what an investment
in a Fund will actually yield in the future. Actual yields will depend on such
variables as asset quality, average asset maturity, the type of instruments the
Fund invests in, changes in interest rates on money market instruments, changes
in the expenses of the Fund and other factors.

Yields are one basis upon which investors may compare these Funds with
other money market funds. However, yields of other money market funds and other
investment vehicles may not be comparable because of the factors set forth above
and differences in the methods used in valuing fund instruments.
<PAGE>
-35-

From time to time the Trust may advertise a 30-day yield for each of the
Stock and Bond Funds. These figures will be based on historical earnings and are
not intended to indicate future performance. The yield of these Funds refers to
the annualized net investment income per share generated by an investment in the
Funds over a specified 30-day period. The yield is calculated by assuming that
the income generated by the investment during that 30-day period is generated
over one year and is shown as a percentage of the investment. In particular,
yield will be calculated according to the following formula:

Yield = 2 [((a-b)/cd + 1)6 - 1], where

a = dividends and interest earned during the period;

b = expenses accrued for the period (net of reimbursement);

c = the current daily number of shares outstanding during the period
that was entitled to receive dividends;

d = the maximum offering price per share on the last day of the period.

The Trust may also advertise a "tax-equivalent yield" for each of the
Tax-Exempt Funds. The "tax-equivalent yield" is determined by calculating the
rate of return that would have to be achieved on a fully-taxable investment to
produce the after-tax equivalent of a Fund's yield, assuming certain tax
brackets for a shareholder. Any tax-equivalent yield quotation of a Fund will be
calculated by adding (a) the portion of that Fund's current yield which is not
tax-exempt and (b) the result obtained by dividing the portion of the Fund's
current yield which is tax-exempt by the difference of one minus a stated income
tax rate.

CALCULATION OF TOTAL RETURN

From time to time the Trust may advertise total return for a Fund. The
total return of a Fund refers to the average compounded rate of return on a
hypothetical investment for designated time periods (including, but not limited
to, the period from which the Fund commenced operations through the specified
date), and assumes that the entire investment is redeemed at the end of each
period. In particular, total return will be calculated according to the
following formula: P (1 + T)n = ERV, where

P = a hypothetical initial payment of $1,000;

T = average annual total return;

n = number of years; and

ERV = ending redeemable value (as of the end of the designated time
period) of a hypothetical $1,000 payment made at the beginning of the designated
time period.

Total returns calculated for the Florida Tax-Exempt Income Fund, the
Large Cap Equity Fund and the Small Cap Equity Fund for any period which
includes periods prior to the commencement of that Fund's operations reflect the
performance of the corresponding common trust fund managed by BankBoston that
contributed all of its assets to the Fund at the Fund's commencement of
operations. The performance of each common trust fund was calculated in
accordance with recommended standards of the
<PAGE>
-36-

Association for Investment Management and Research. Each common trust fund had
investment objectives, policies and practices materially equivalent to its
corresponding Fund. All total return percentages for periods prior to the
commencement of operations of the Florida Tax-Exempt Income Fund, Large Cap
Equity Fund and Small Cap Equity Fund reflect historical rates of return of the
corresponding common trust fund for those periods adjusted to assume that all
current Fund charges, expenses and fees were then deducted. The common trust
funds were neither registered under the 1940 Act (and therefore were not subject
to certain investment restrictions imposed by the 1940 Act) nor subject to the
requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended, as to the nature of gross income, the amount of distributions and the
composition and holding period of portfolio assets. If the common trust funds
had been registered under the 1940 Act, their investment performance might have
been adversely affected. The prior performance of the common trust funds
represent historical performance for similarly managed accounts and is not
indicative of the corresponding Fund's future performance.

Set forth below is total rate of return information, assuming that
dividends and capital gains distributions, if any, were reinvested, for the
Tax-Exempt, Bond and Stock Funds for the periods indicated. The Large Cap Equity
Fund, Small Cap Equity Fund and Florida Tax-Exempt Income Fund are newly
organized and had no operations at May 31, 1997.

<TABLE>
<CAPTION>
REDEEMABLE VALUE OF A
HYPOTHETICAL $1,000
ANNUALIZED TOTAL INVESTMENT AT THE
FUND AND PERIOD RATE OF RETURN END OF THE PERIOD
--------------- ---------------- -----------------------

BOSTON 1784 TAX-EXEMPT MEDIUM-TERM
INCOME FUND

<S> <C> <C>
June 14, 1993 (commencement of 5.91% $1,233.60
operations) to May 31, 1997

One year ended May 31, 1997 7.74% $1,077.40

BOSTON 1784 CONNECTICUT TAX-EXEMPT
INCOME FUND

August 1, 1994 (commencement of 6.66% $1,190.90
operations) to May 31, 1997

One year ended May 31, 1997 7.26% $1,072.60
<PAGE>
-37-

BOSTON 1784 FLORIDA TAX-EXEMPT INCOME
FUND (1)

January 1, 1991 (date of initial public
investment in the common trust fund) to 6.67% $1,513.32
May 31, 1997

Five years ended May 31, 1997 6.08% $1,343.28

Three years ended May 31, 1997 5.77% $1,183.28

One year ended May 31, 1997 6.72% $1,067.20

BOSTON 1784 MASSACHUSETTS TAX-EXEMPT
INCOME FUND

June 14, 1993 (commencement of 5.01% $1,192.80
operations) to May 31, 1997

One year ended May 31, 1997 7.30% $1,073.00

BOSTON 1784 RHODE ISLAND TAX-EXEMPT
INCOME FUND

August 1, 1994 (commencement of 6.46% $1,187.20
operations) to May 31, 1997

One year ended May 31, 1997 7.61% $1,076.10

BOSTON 1784 U.S. GOVERNMENT MEDIUM-TERM
INCOME FUND

June 7, 1993 (commencement of 4.66% $1,181.30
operations) to May 31, 1997

One year ended May 31, 1997 7.16% $1,071.60

BOSTON 1784 SHORT-TERM INCOME FUND

July 1, 1994 (commencement of
operations) to May 31, 1997 6.17% $1,182.60

One year ended May 31, 1997
6.47% $1,064.70
BOSTON 1784 INCOME FUND

July 1, 1994 (commencement of 7.33% $1,214.40
operations) to May 31, 1997

One year ended May 31, 1997 8.32% $1,083.20
<PAGE>
-38-

BOSTON 1784 ASSET ALLOCATION FUND

June 14, 1993 (commencement of
operations) to May 31, 1997 11.74% $1,557.20

One year ended May 31, 1997
14.89% $1,148.90

BOSTON 1784 GROWTH AND INCOME FUND

June 7, 1993 (commencement of
operations) to May 31, 1997 17.02% $1,899.70

One year ended May 31, 1997
18.33% $1,183.30
BOSTON 1784 GROWTH FUND

March 28, 1996 (commencement of
operations) to May 31, 1997 18.92% $1,225.80

One year ended May 31, 1997
8.77% $1,087.70
BOSTON 1784 SMALL CAP EQUITY FUND (1)

Ten years ended May 31, 1997
13.88% $3,668.38
Five years ended May 31, 1997
19.54% $2,440.99
Three years ended May 31, 1997
24.91% $1,948.91
One year ended May 31, 1997
12.36% $1,123.60
BOSTON 1784 LARGE CAP EQUITY FUND (1)

Ten years ended May 31, 1997
14.34% $3,819.28
Five years ended May 31, 1997
17.80% $2,268.44
Three years ended May 31, 1997
25.46% $1,974.77
One year ended May 31, 1997
27.35% $1,273.50
<PAGE>
-39-

BOSTON 1784 INTERNATIONAL EQUITY FUND

January 3, 1995 (commencement of
operations) to May 31, 1997 14.14% $1,458.30

One year ended May 31, 1997 10.93% $1,109.30
</TABLE>

(1) Without giving effect to fee waivers and reimbursements currently in
effect (a) the annualized total rate of return for Boston 1784 Florida
Tax-Exempt Income Fund for the one, three and five year periods ended May
31, 1997 and for the period from January 1, 1991 (date of initial public
investment in common trust fund) to May 31, 1997, would have been 6.31%,
5.36%, 5.67% and 6.26%, respectively, (b) the annualized total rate of
return for Boston 1784 Small Cap Equity Fund for the one, three five and
ten years ended May 31, 1997 would have been 12.02%, 24.53%, 19.18% and
13.53%, respectively, and (c) the annualized total rate of return for
Boston 1784 Large Cap Equity Fund for the one, three, five and ten years
ended May 31, 1997 would have been 26.98%, 25.10%, 17.45% and 14.01%,
respectively.

The annualized yield of each of the Tax-Exempt, Bond and Stock Funds
for the 30-day period ended on May 31, 1997 was as follows: Boston 1784
Short-Term Income Fund 5.93%; Boston 1784 Income Fund 6.58%; Boston 1784 U.S.
Government Medium-Term Income Fund 5.94%; Boston 1784 Tax-Exempt Medium-Term
Income Fund 4.78%; Boston 1784 Connecticut Tax-Exempt Income Fund 4.71%; Boston
1784 Massachusetts Tax-Exempt Income Fund 4.79%; Boston 1784 Rhode Island
Tax-Exempt Income Fund 4.70%; Boston 1784 Asset Allocation Fund 2.87%; Boston
1784 Growth and Income Fund 0.65%; and Boston 1784 Growth Fund 0.07%.

The annualized tax-equivalent yield of each of the Tax-Exempt Funds for
the 30-day period ended on May 31, 1997 was as follows: Boston 1784 Tax-Exempt
Medium-Term Income Fund 7.91%; Boston 1784 Connecticut Tax-Exempt Income Fund
8.17%, Boston 1784 Massachusetts Tax-Exempt Income Fund 8.96%; and Boston 1784
Rhode Island Tax-Exempt Income Fund 8.73%.

Set forth below is total rate of return information, assuming that
dividends and capital gains distributions, if any, were reinvested, for the
Money Market Funds for the periods indicated. The Boston 1784 Institutional
Prime Money Market Fund is newly organized and had no operations at May 31,
1997.
<PAGE>
-40-
<TABLE>
<CAPTION>
REDEEMABLE VALUE OF A
HYPOTHETICAL $1,000
ANNUALIZED TOTAL INVESTMENT AT THE
FUND AND PERIOD RATE OF RETURN END OF THE PERIOD
--------------- ---------------- ----------------------

BOSTON 1784 TAX-FREE MONEY MARKET FUND

<S> <C> <C>
June 14, 1993 (commencement of
operations) to May 31, 1997 3.12% $1,128.40

One year ended May 31, 1997
3.22% $1,032.20
BOSTON 1784 U.S. TREASURY MONEY
MARKET FUND

June 7, 1993 (commencement of 4.38%
operations) to May 31, 1997 $1,184.40

One year ended May 31, 1997 4.86%
$1,048.60
BOSTON 1784 INSTITUTIONAL U.S.
TREASURY MONEY MARKET FUND

June 30, 1993 (commencement of
operations) to May 31, 1997 4.71% $1,198.20

One year ended May 31, 1997

5.16% $1,051.60
BOSTON 1784 PRIME MONEY MARKET FUND

August 1, 1991 (date of initial
public investment) to May 31, 1997

For the year ended December 31, 4.28% $1,280.30
1996

For the period from January 1, 5.02% $1,050.20
1997 to May 31, 1997

2.07% $1,020.70
</TABLE>
<PAGE>
-41-

The annualized yield and tax-equivalent yield of Boston 1784 Tax-Free
Money Market Fund for the seven-day period ended May 31, 1997 were 3.33% and
5.51%, respectively, and the effective compound annualized yield of Boston 1784
Tax-Free Money Market Fund for such period was 3.37%.

The annualized yield of Boston 1784 U.S. Treasury Money Market Fund for
the seven-day period ended May 31, 1997 was 4.98% and the effective compound
annualized yield of Boston 1784 U.S. Treasury Money Market Fund for such period
was 5.10%.

The annualized yield of Boston 1784 Institutional U.S. Treasury Money
Market Fund for the seven-day period ended May 31, 1997 was 5.20% and the
effective compound annualized yield of Boston 1784 Institutional U.S. Treasury
Money Market Fund for such period was 5.34%.

The annualized yield of Boston 1784 Prime Money Market Fund for the
seven-day period ended May 31, 1997 was 5.04% and the effective compound
annualized yield of Boston 1784 Prime Money Market Fund for such period was
5.17%.

8. DETERMINATION OF NET ASSET VALUE

The net asset value of the shares of each Fund (including shares of
each class of Boston 1784 U.S. Treasury Money Market Fund) is determined on each
day on which both the New York Stock Exchange and the Federal Reserve Bank of
Boston are open ("Business Days"). This determination is made once during each
such day, as of 12:00 noon Eastern Time ("ET") with respect to shares of Boston
1784 Prime Money Market Fund and Boston 1784 Tax-Free Money Market Fund, as
of 3:00 p.m. ET with respect to the Boston 1784 U.S. Treasury Money Market
Fund, Boston 1784 Institutional U.S. Treasury Money Market Fund and Boston 1784
Institutional Prime Money Market Fund (noon when the New York Stock Exchange
closes early), and as of 4:00 p.m. ET with respect to each other Fund. The New
York Stock Exchange is normally closed on the following national holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving, and Christmas. Net asset value per share of each Fund is
calculated by adding the value of securities and other assets of that Fund,
subtracting liabilities and dividing by the number of its outstanding shares.
Net asset value per share of each class of Boston 1784 U.S. Treasury Money
Market Fund is calculated by adding the value of securities and other assets
attributable to that class, subtracting liabilities attributable to that class
and dividing by the number of outstanding shares of that class.

Securities of the Money Market Funds will be valued by the amortized
cost method, which involves valuing a security at its cost on the date of
purchase and thereafter (absent unusual circumstances) assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuations in general market rates of interest on the value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which a security's value, as determined by this method, is higher or
lower than the price a Fund would receive if it sold the instrument. During
periods of declining interest rates, the daily yield of these Funds may tend to
be higher than a like computation made by a company with identical investments
utilizing a method of valuation based upon market prices and estimates of market
prices for all of its fund securities. Thus, if the use of amortized cost by a
Fund resulted in a lower aggregate fund value on a particular day, a prospective
investor in that Fund would be able to obtain a somewhat higher yield than would
result from investment in a company utilizing solely market values, and
<PAGE>
-42-

existing investors in the Fund would experience a lower yield. The converse
would apply in a period of rising interest rates.

The use by the Money Market Funds of amortized cost and the maintenance
by these Funds of a net asset value at $1.00 are permitted by regulations
promulgated by Rule 2a-7 under the 1940 Act, provided that certain conditions
are met. The regulations also require the Trustees to establish procedures which
are reasonably designed to stabilize the net asset value per share at $1.00 for
these Funds. Such procedures include the determination of the extent of
deviation, if any, of these Funds' current net asset value per share calculated
using available market quotations from these Funds' amortized cost price per
share at such intervals as the Trustees deem appropriate and reasonable in light
of market conditions and periodic reviews of the amount of the deviation and the
methods used to calculate such deviation. In the event that such deviation
exceeds 1/2 of 1%, the Trustees are required to consider promptly what action,
if any, should be initiated, and, if the Trustees believe that the extent of any
deviation may result in material dilution or other unfair results to
shareholders of these Funds, the Trustees are required to take such corrective
action as they deem appropriate to eliminate or reduce such dilution or unfair
results to the extent reasonably practicable. Such actions may include the sale
of fund instruments prior to maturity to realize capital gains or losses or to
shorten average fund maturity; withholding dividends; redeeming shares in kind;
or establishing a net asset value per share by using available market
quotations. In addition, if any of these Funds incurs a significant loss or
liability, the Trustees have the authority to reduce pro rata the number of
shares of that Fund in the account of each shareholder of such Fund and to
offset each such shareholder's pro rata portion of such loss or liability from
that shareholder's accrued but unpaid dividends or from future dividends of the
affected Fund while each other Fund must annually distribute at least 90% of its
investment company taxable income.

In valuing each of the Stock, Bond and Tax-Exempt Funds' assets, bonds
and other fixed income securities are valued on the basis of valuations
furnished by a pricing service, use of which has been approved by the Board of
Trustees of the Trust. In making such valuations, the pricing services may
employ methodologies that utilize actual market transactions, broker-dealer
supplied valuations or other electronic data processing techniques. Equity
securities listed on a domestic securities exchange for which quotations are
readily available, including securities traded over the counter, are valued,
by a pricing service, at the last quoted sale price on the principal exchange
on which they are traded on the valuation date, or, if there is no such reported
sale on the valuation date, at the most recent quoted bid price. Equity
securities which are primarily traded on a foreign exchange are generally
valued, by a pricing service, at the preceding closing value on the exchange.
Securities for which market quotations are not readily available are valued at
their fair value as determined in good faith by the Board of Trustees of the
Trust, or pursuant to procedures adopted by the Board subject to review
by the Board of the resulting valuations.

9. PURCHASE AND REDEMPTION OF SHARES

It is currently the Trust's policy to pay for the redemptions of shares
of the Funds in cash. The Trust retains the right, however, to alter this policy
to provide for

<PAGE>

-43-

redemptions in whole or in part by a distribution in kind of securities held by
the Funds, in lieu of cash. Shareholders may incur brokerage charges and tax
liabilities on the sale of any such securities so received in payment of
redemptions.

The Trust reserves the right to suspend the right of redemption and/or
to postpone the date of payment upon redemption for any period on which trading
on the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the Securities and Exchange Commission by rule or
regulation) as a result of which disposal or valuation of a Fund's securities is
not reasonably practicable, or for such other periods as the Securities and
Exchange Commission has permitted by order. The Trust also reserves the right to
suspend sales of shares of any Fund for any period during which the New York
Stock Exchange, an Adviser, the Administrator or the Custodian is not open for
business.

Purchase and redemption of shares of Boston 1784 U.S. Treasury Money
Market Fund by Connecticut municipalities and other Connecticut municipal
corporations and authorities, pursuant to the provisions of Section 7-400 of the
Connecticut General Statutes, as from time-to-time amended ("CON. GEN. STAT.
SS. 7-400"), may be made only through the use of (i) a bank, savings bank or
savings and loan association incorporated under the laws of the State of
Connecticut, (ii) a federally chartered bank, savings bank or savings and loan
association having its principal place of business in the State of Connecticut,
or (iii) such other agent as may be permitted by Conn. Gen. Stat. ss. 7-400.

10. SYSTEMATIC WITHDRAWAL PLAN

A shareholder (other than a shareholder of Boston 1784 Institutional
U.S. Treasury Money Market Fund or Boston 1784 Institutional Prime Money Market
Fund and holders of Class C or Class D shares of Boston 1784 U.S. Treasury Money
Market Fund) may direct the shareholder servicing agent to send him or her
regular monthly, quarterly, semi-annual or annual payments, as designated on the
Account Application and based upon the value of his or her account. Each payment
under a Systematic Withdrawal Plan ("SWP") must be at least $100, except in
certain limited circumstances. Such payments are drawn from the proceeds of the
redemption of shares held in the shareholder's account (which would be a return
of principal and, if reflecting a gain, would be taxable). To the extent that
redemptions for such periodic withdrawals exceed dividend income reinvested in
the account, such redemptions will reduce, and may eventually exhaust, the
number of shares in the shareholder's account. All dividend and capital gain
distributions for an account with a SWP will be reinvested in additional full
and fractional shares of the applicable Fund at the net asset value in effect at
the close of business on the record date for such distributions.
<PAGE>
-44-

To initiate a SWP, shares having an aggregate value of at least $10,000
must be held on deposit by the shareholder servicing agent. The shareholder, by
written instruction to the shareholder servicing agent, may deposit into the
account additional shares of the applicable Fund, change the payee, or change
the dollar amount of each payment. The shareholder servicing agent may charge
the account for services rendered and expenses incurred beyond those normally
assumed by the applicable Fund with respect to the liquidation of shares.

No charge is currently assessed against the account, but one could be
instituted by the shareholder servicing agent on 60 days' notice in writing to
the shareholder in the event that the applicable Fund ceases to assume the cost
of these services. Any Fund may terminate any SWP for an account if the value of
the account falls below $5,000 as a result of share redemptions (other than as a
result of a SWP) or an exchange of shares of the Fund for shares of another
Fund. Any such plan may be terminated at any time by either the shareholder or
the applicable Fund.

11. TAXES

TAX STATUS OF THE FUNDS

Each of the Funds is organized as a series of a Massachusetts business
trust and is treated as a separate entity for federal income tax purposes under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). Each
Fund has elected to be treated, and intends to qualify each year, as a
"regulated investment company" under Subchapter M by meeting all applicable
requirements of Subchapter M, including requirements as to the nature of the
Fund's gross income, the amount of Fund distributions (as a percentage of both
the Fund's overall income and, in the case of the Tax-Exempt Funds, its
tax-exempt income), and the composition of the Fund's portfolio assets. Because
each Fund intends to distribute all of its net investment income and net
realized capital gains to shareholders in accordance with the timing
requirements imposed by the Code, it is not expected that the Funds will be
required to pay any federal income or excise taxes, although a Fund's
foreign-source income may be subject to foreign taxes. If a Fund should fail to
qualify as a "regulated investment company" in any year, the Fund would incur a
regular corporate federal income tax upon its taxable income and the Fund's
distributions would generally be taxable as ordinary dividend income to its
shareholders.

No Fund will be subject to any Massachusetts income or excise taxes as
long as it qualifies as a separate regulated investment company under the Code.

TAXATION OF FUND DISTRIBUTIONS

DISTRIBUTIONS -- GENERAL. Shareholders of Funds other than the
Tax-Exempt Funds and the Tax-Free Money Market Fund will have to pay federal
income taxes and may be subject to state or local income taxes on the dividends
and capital gain distributions they receive from those Funds. Dividends from
ordinary income and any distributions from net short-term capital gains are
taxable to shareholders as ordinary income for federal income tax purposes,
whether paid in cash or in additional shares. Distributions of net capital gains
(the excess of net long-term capital gains over net short-term capital losses),
whether paid in cash or in additional shares, are taxable to shareholders as
long-term capital gains for federal income tax purposes without regard to
the length of time the shareholders have held their shares.
<PAGE>
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Such capital gains will generally be taxable to shareholders as if the
shareholders had directly realized gains from the same sources from which they
were realized by the Fund. The Money Market Funds are not expected to make any
capital gain distributions.

Because the Funds other than the Stock Funds do not expect to earn any
dividend income, it is expected that none of their distributions will qualify
for the dividends received deduction for corporations. A portion of the Stock
Funds' ordinary income dividends (but none of their capital gain distributions)
is normally eligible for the dividends received deduction for corporations if
the recipient otherwise qualifies for that deduction with respect to its holding
of Fund shares. Availability of the deduction for particular shareholders is
subject to certain limitations, and deducted amounts may be subject to the
alternative minimum tax or result in certain basis adjustments.

Any Fund dividend that is declared in October, November, or December of
a calendar year, that is 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. Each
Fund will notify shareholders regarding the federal tax status of distributions
after the end of each calendar year.

Distributions of net capital gains and net short-term capital gains
from any Bond Fund or Tax-Exempt Fund, and any distributions from a Stock Fund,
will reduce the distributing Fund's net asset value per share. Shareholders who
buy shares just before a Fund makes such a distribution may pay the full price
for the shares and then effectively receive a portion of the purchase price back
as a taxable distribution.

Distributions of a 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. Each Fund intends to
advise shareholders of the extent, if any, to which their respective
distributions consist of such interest. Shareholders are urged to consult their
tax advisers regarding the possible exclusion of such portion of their dividends
for state and local income tax purposes.

DISTRIBUTIONS BY THE TAX-EXEMPT FUNDS, INCLUDING THE TAX-FREE MONEY
MARKET FUND. The portion of each Tax-Exempt Fund's and the Tax-Free Money Market
Fund's distributions of net investment income that is attributable to interest
from tax-exempt securities will be designated by that Fund as an
"exempt-interest dividend" under the Code and will generally be exempt from
federal income tax in the hands of shareholders so long as at least 50% of the
total value of the Fund's assets consists of tax-exempt securities at the close
of each quarter of the Fund's taxable year. However, distributions of tax-exempt
interest earned from certain securities may be treated as an item of tax
preference for shareholders under the federal alternative minimum tax, and all
exempt-interest dividends may increase a corporate shareholder's alternative
minimum tax. The percentage of income designated as tax-exempt will be applied
uniformly to all distributions by the Fund of net investment income made during
each fiscal year of the Fund and may differ from the percentage of distributions
consisting of tax-exempt interest in any particular month. Shareholders are
required to report exempt-interest dividends received from the Fund on their
federal income tax returns.

Shareholders of the Tax-Exempt Funds and the Tax-Free Money Market Fund
will have to pay federal income taxes and may be subject to state or local
income taxes on the non exempt-interest dividends (including dividends from
earnings from taxable securities and repurchase transactions) and capital gain
distributions they receive from the Funds under rules corresponding to those set
forth in the preceding section. The

<PAGE>
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exemption of exempt-interest dividends for federal income tax purposes does not
necessarily result in exemption under the tax laws of any state or local taxing
authority.

DISPOSITION OF SHARES

In general, any gain or loss realized upon a taxable disposition of
shares of a Fund by a shareholder that holds such shares as a capital asset will
be treated as long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise as short-term capital gain or loss; a
long-term capital gain realized by an individual, estate, or trust may be
eligible for reduced tax rates if the shares were held for more than 18 months.
In the case of the Tax-Exempt Funds and the Tax-Free Money Market Fund, any loss
realized upon a disposition of shares in a Fund held for six months or less will
be disallowed to the extent of any exempt-interest dividends received with
respect to those shares. In the case of all the Funds, any loss realized upon
the disposition of shares in the Fund held for six months or less will (if not
disallowed as described in the preceding sentence) be treated as a long-term
capital loss to the extent of any distributions of net capital gain made with
respect to those shares. Any loss realized upon a disposition of shares may
also be disallowed under rules relating to wash sales.

ADDITIONAL INFORMATION FOR SHAREHOLDERS OF THE TAX-EXEMPT FUNDS

Interest on indebtedness incurred by shareholders to purchase or carry
shares of a Tax-Exempt Fund (or of the Tax-Free Money Market Fund) will not be
deductible for federal income tax purposes. Exempt-interest dividends are taken
into account in calculating the amount of social security and railroad
retirement benefits that may be subject to federal income tax. Entities or
persons who are "substantial users" (or persons related to "substantial users")
of facilities financed by certain private activity bonds should consult their
tax advisers before purchasing shares of a Tax-Exempt Fund or the Tax-Free Money
Market Fund.

ADDITIONAL INFORMATION RELATING TO FUND INVESTMENTS

Except in the case of the Money Market Funds, the Funds' current
dividend and accounting policies will affect the amount, timing, and character
of distributions to shareholders, and may make an economic return of capital
taxable to shareholders. Any investment by a Fund in zero-coupon bonds, certain
stripped securities including STRIPS, and certain securities purchased at a
market discount will cause the Fund to recognize income prior to the receipt of
cash payments with respect to those securities. In order to distribute this
income and avoid a tax on the Fund, a Fund may be required to liquidate
portfolio securities that it might otherwise have continued to hold, potentially
resulting in additional taxable gain or loss to the Fund.

An investment by a Fund in residual interests of a CMO that has elected
to be treated as a REMIC can create complex tax problems, especially if the Fund
has state or local governments or other tax-exempt organizations as
shareholders.

Fund transactions in options, futures contracts, forward contracts,
short sales "against the box," and swaps and related transactions will be
subject to special tax rules that may affect the amount, timing, and character
of Fund income and distributions to shareholders. For example, certain positions
held by a Fund on the last business day of each taxable year will be marked to
market (treated as if closed out) on that day, and any gain or loss associated
with the positions will be treated as 60% long-term and 40% short-term capital
gain or loss. Certain positions held by a Fund that substantially
<PAGE>
-47-

diminish its risk of loss with respect to other positions in its portfolio may
constitute "straddles," and may be subject to special tax rules that would cause
deferral of Fund losses, adjustments in the holding periods of Fund securities,
and conversion of short-term into long-term capital losses. Certain tax
elections exist for straddles that may alter the effects of these rules. The
Funds will limit their activities in options, futures contracts, forward
contracts, and swaps and related transactions to the extent necessary to meet
the requirements of Subchapter M of the Code.

ADDITIONAL INFORMATION RELATING TO FOREIGN INVESTMENTS

Special tax considerations apply with respect to a Fund's foreign
investments. Investment income received by a Fund from sources within foreign
countries may be subject to foreign taxes. The Funds (other than the
International Equity Fund) do not expect to be able to pass through to
shareholders foreign tax credits or deductions with respect to such foreign
taxes. The United States has entered into tax treaties with many foreign
countries that may entitle the Funds to a reduced rate of tax or an exemption
from tax on such income. The Funds intend to qualify for treaty reduced rates
where available. It is not possible, however, to determine a Fund's effective
rate of foreign tax in advance since the amount of the Fund's assets to be
invested within various countries is not known.

If the International Equity Fund holds more than 50% of its assets in
foreign stock and securities at the close of its taxable year, it may elect to
pass through to its shareholders foreign income taxes paid. If it so elects,
shareholders will be required to treat their pro rata portion of the foreign
income taxes paid by the Fund as part of the amounts distributed to them by the
Fund and thus their portion must be included in their gross income for
federal income tax purposes. Shareholders who itemize deductions would be
allowed to claim a deduction or credit (but not both) on their federal income
tax returns for such amounts, subject to certain limitations. Shareholders who
do not itemize deductions would (subject to such limitations) be able to claim a
credit, but not a deduction. No deduction will be permitted to individuals in
computing their alternative minimum tax liability. If the Fund does not qualify
or elect to pass through to the Fund's shareholders foreign income taxes paid by
it, its shareholders will not be able to claim any deduction or credit for any
part of the foreign taxes paid by the Fund.

Foreign exchange gains and losses realized by a Fund will generally be
treated as ordinary income and losses. Use of foreign currencies for non-hedging
purposes may be limited in order to avoid a tax on the applicable Fund.
Occasionally, a Fund may invest in stock of foreign issuers deemed to be
"passive foreign investment companies" for U.S. tax purposes. Any Fund making
such an investment may be liable for U.S. income taxes on certain distributions
and realized capital gains from stock of such issuers. Any Fund making such an
investment also may elect to mark to market its investments in "passive foreign
investment companies" on the last day of each taxable year, which may cause the
Fund to recognize ordinary income prior to the receipt of cash payments with
respect to those investments. In order to distribute that income and avoid a tax
on the Fund, such a Fund may be required to liquidate portfolio securities that
it might otherwise have continued to hold.

FOREIGN SHAREHOLDERS

Taxable dividends and certain other payments to persons who are not
citizens or residents of the United States or U.S. entities ("Non-U.S. Persons")
are generally subject
<PAGE>
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to U.S. tax withholding at a rate of 30%, although the 30% rate may be reduced
to the extent provided by an applicable tax treaty. The Funds intend to withhold
tax payments at the rate of 30% (or the lower treaty rate) on taxable dividends
and other payments to Non-U.S. Persons that are subject to such withholding. Any
amounts over withheld may be recovered by such persons by filing a claim for
refund with the U.S. Internal Revenue Service within the time period appropriate
to such claims. Distributions received from the Funds by Non-U.S. Persons also
may be subject to tax under the laws of their own jurisdictions.

BACKUP WITHHOLDING

Each of the Funds is required in certain circumstances to apply backup
withholding at the rate of 31% on taxable dividends and (except in the case of
the Money Market Funds) redemption proceeds paid to any shareholder (including
a Non-U.S. Person) who does not furnish to the Fund certain information and
certifications or who is otherwise subject to backup withholding.

12. SERVICEMARKS

The servicemark BOSTON 1784 FUNDS(R) is a registered servicemark of,
and this servicemark and the "eagle" logo are used by permission of, BankBoston.
In the event that the Advisory Agreements with BankBoston are terminated, the
Trust has agreed to discontinue use of the servicemark and logo.

13. DESCRIPTION OF SHARES

The Declaration of Trust authorizes the issuance of an unlimited number
of shares of each series and authorizes the division of shares of each series
into classes. Each share of each series represents an equal proportionate
interest in that series, except that due to varying expenses borne by different
classes distributions may be different for different classes. Shareholders of
each series are entitled, upon liquidation or dissolution, to a pro rata share
in the net assets of that series that are available for distribution to
shareholders, except to the extent of different expenses borne by different
classes as noted above. Shareholders have no preemptive rights. Currently, the
Trust has nineteen active series of shares, each of which is a Fund. Boston 1784
U.S. Treasury Money Market Fund offers three classes of shares: Class A, Class C
and Class D. Each class is described in a Prospectus. Call 1-800-BKB-1784 for
information on the other classes of this Fund. The Declaration of Trust provides
that the Trustees of the Trust may create additional series of shares, and may
create additional classes of any one or more series. All consideration received
by the Trust for shares of any series and all assets in which such consideration
is invested belong to that series and are subject to the liabilities related
thereto. Share certificates will not be issued.

Shares of each series of the Trust are entitled to vote separately to
approve advisory agreements or changes in investment policies, but shares of all
series of the Trust vote together in the election or selection of Trustees and
accountants.

The Declaration of Trust may be amended as authorized by vote of
shareholders of the Trust. Matters not affecting all series or classes of shares
shall be voted on only by the shares of the series or classes affected. Shares
of the Trust may be voted in person or by proxy, and any action taken by
shareholders may be taken without a meeting by written consent of a majority of
shareholders entitled to vote on the matter.
<PAGE>
-49-

14. TRUSTEE AND SHAREHOLDER LIABILITY

LIMITATION OF TRUSTEES' LIABILITY

The Declaration of Trust provides that the Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing of any officer,
agent, employee, investment adviser or administrator, principal underwriter or
custodian, nor shall any Trustee be responsible for the act or omission of any
other Trustee, and no Trustee shall be liable to the Trust or any Shareholder.
The Declaration of Trust also provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with actual or threatened litigation in which they may be involved because of
their offices with the Trust unless it is determined, in the manner provided in
the Declaration of Trust, that they have not acted in good faith in the
reasonable belief that their actions were in the best interests of the Trust.
However, nothing in the Declaration of Trust shall protect or indemnify a
Trustee against any liability for his or her willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties.

SHAREHOLDER LIABILITY

The Trust is a Massachusetts business trust. Under Massachusetts law,
shareholders of such a trust could be held personally liable as partners for the
obligations of the trust. However, even if the Trust were held to be a
partnership, the possibility of the shareholders incurring financial loss for
that reason appears remote because the Trust's Declaration of Trust contains an
express disclaimer of shareholder liability for obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation,
or instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because the Declaration of Trust provides for indemnification out
of the Trust property for any shareholder held personally liable for the
obligations of the Trust.

15. FINANCIAL INFORMATION

FOR THE INSTITUTIONAL PRIME MONEY MARKET FUND, FLORIDA TAX-EXEMPT INCOME FUND,
SMALL CAP EQUITY FUND AND LARGE CAP EQUITY FUND

Boston 1784 Institutional Prime Money Market Fund, Boston 1784 Small
Cap Equity Fund and Boston 1784 Large Cap Equity Fund are newly organized and
have not yet issued financial statements.

FOR THE PRIME MONEY MARKET FUND

The Statement of Net Assets at May 31, 1997 and December 31, 1996, the
Statement of Operations for the periods ended May 31, 1997 and December 31,
1996, the Statements of Changes in Net Assets for the periods ended December 31,
1995, December 31, 1996 and May 31, 1997, the Financial Highlights for the
periods ended December 31, 1996 and May 31, 1997, the Notes to the Financial
Statements and the Report of Independent Accountants, each of which is included
in two Annual Reports to Shareholders of the Trust (Accession Numbers
0000935069-97-000021 and 0000935069-97-000119) are incorporated by reference
into this Statement of Additional Information and have been so incorporated in
reliance upon the reports of Coopers & Lybrand L.L.P., independent accountants,
as experts in accounting and auditing. The Statement of Changes in Net Assets
for the year ended December 31, 1995 and the financial
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highlights for the periods ended April 30, 1992, December 31, 1992, December 31,
1993, December 31, 1994 and December 31, 1995 are included in the Annual Reports
to Shareholders of the Trust and are incorporated by reference into this
Statement of Additional Information and have been so incorporated in reliance
upon the report of Ernst & Young, LLP, independent auditors, given upon the
authority of said firm as experts in accounting and auditing. A copy of the
Annual Report accompanies this Statement of Additional Information.

FOR THE FLORIDA TAX-EXEMPT INCOME FUND

The Statement of Net Assets at November 30, 1997, the Statements of
Operations for the period ended November 30, 1997, the Statements of Changes in
Net Assets for the period ended November 30,1997, the Financial Highlights for
the period ended November 30, 1997 and the Notes to the Financial Statements,
each of which is included in the Semi-Annual Report to Shareholders of the Trust
(Accession Number 0000935069-98), are incorporated by reference into this
Statement of Additional Information. A copy of the Semi-Annual Report
accompanies this Statement of Additional Information.

FOR THE REMAINDER OF THE FUNDS

The Statement of Net Assets at May 31, 1997, the Statements of
Operations for the period ended May 31, 1997, the Statements of Changes in Net
Assets for the periods ended May 31, 1996 and May 31, 1997, the Financial
Highlights for the periods ended May 31, 1994, May 31, 1995, May 31, 1996 and
May 31, 1997, the Notes to the Financial Statements and the Report of
Independent Accountants, each of which is included in the Annual Report to
Shareholders of the Trust (Accession Number 0000935069-97-000119), are
incorporated by reference into this Statement of Additional Information. The
Annual Report has been so incorporated in reliance upon the report of Coopers
& Lybrand L.L.P., independent accountants, as experts in accounting and
auditing. A copy of the Annual Report accompanies this Statement of
Additional Information.
<PAGE>
APPENDIX A

CERTAIN INFORMATION CONCERNING CONNECTICUT, FLORIDA,
MASSACHUSETTS AND RHODE ISLAND

1. CONNECTICUT

SPECIAL CONSIDERATIONS REGARDING INVESTMENTS IN
CONNECTICUT MUNICIPAL SECURITIES

The following is a summary of certain information contained in the
Annual Information Statement of the State of Connecticut dated May 7, 1997. The
summary does not purport to be a complete description and is current as of the
date of the corresponding information statement. The Funds are not responsible
for the accuracy or timeliness of this information.

Connecticut municipal securities may fluctuate in value in response to
a variety of factors, including the economic strength of State and local
governments and the availability of federal funding.

ECONOMIC OVERVIEW

Connecticut's economy is diverse. Manufacturing employment has been on
a downward trend since the mid-1980s, while non-manufacturing employment has
risen significantly. Manufacturing is diversified, with transportation equipment
(primarily aircraft engines, helicopters, and submarines) the dominant industry.
Connecticut is a leading producer of aircraft engines, along with related
components, and submarines. The largest employers in these industries are United
Technologies Corporation, including its Pratt and Whitney Aircraft Division,
with headquarters in East Hartford, and Sikorsky Aircraft Division in Stratford,
as well as General Dynamics Corporation's Electric Boat Division in Groton. The
State is also a leading producer of military and civilian helicopters.

Connecticut's manufacturing employment peaked in 1985 at over 408,000
workers. Since that year, employment in manufacturing has been on a downward
trend, declining 30.1% or a loss of 127,330 jobs by 1995 from 1985 levels. A
number of factors, such as the overvalued dollar of the mid-1980s, heightened
foreign competition, a sharp decrease in defense spending, and improved
productivity played a significant role in affecting the overall level of
manufacturing employment. In Connecticut, the rate of job loss in the
manufacturing sector resulted in a decline of 1.5% or 4,410 jobs from 1994 to
1995.

Over the past several decades the non-manufacturing sector of the
State's economy has risen in economic importance, from just over 50% of total
State employment in 1950 to approximately 82.0% by 1995. This trend has
decreased the State's dependence on manufacturing. The State's non-manufacturing
sector expanded by 2.0% in 1995 as compared to 1994, 1.7% in 1994 as compared to
1993, and 1.4% in 1993 as compared to 1992, following three years of decline
starting in 1990. During the 1990's, Connecticut's growth in non-manufacturing
employment has lagged that of the New England region and the nation as a whole.

The non-manufacturing sector is comprised of industries that typically
provide a service. The four major industries in terms of employment are: trade;
finance,

<PAGE>
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insurance and real estate; business and personal services; and government, which
collectively comprise about 90% of employment in the non-manufacturing sector.

After enjoying an extraordinary boom during the mid-1980s, Connecticut,
as well as the rest of the Northeast, experienced an economic slowdown before
the onset of the national recession in the latter half of 1990. Reflecting the
downturn, the unemployment rate in the State rose from a low of 3% in 1988 to
just above the national average of 7.4% during 1992. Since 1992, the
unemployment rate has declined annually to a rate of 5.5% for 1995 and 5.0% for
the first half of 1996.

FISCAL CONDITION IN RECENT YEARS

The State finances most of its operation through its General Fund. The
major components of General Fund revenues are state taxes, including the
personal income tax, the sales and use tax, and the corporation business tax.
Miscellaneous fees, receipts, transfers, and unrestricted federal grants account
for most of the other General Fund revenue. A cumulative budgetary-bases deficit
in the General Fund as of June 30, 1991 in the amount of $965,711,525 was funded
by the issuance of General Obligation Economic Recovery Notes. For the fiscal
years ended June 30, 1992, 1993, 1994, 1995, and 1996, the operating surpluses
of the General Fund were $110.2, $113.5, $19.7, $80.5, and $250.0 million,
respectively. $89.5 half million dollars of the operating surplus was reserved
for payment of principal and interest on the Economic Recovery Notes for the
1996-97 fiscal year, while the remaining $160.5 million of the surplus has been
reserved for transfer to the Budget Reserve Fund, pursuant to the Connecticut
General Statutes.

GENERAL FUND BUDGETS 1996-97, 1997-98, AND 1998-99

The adopted budget for fiscal year 1996-97 anticipated General Fund
revenues of $9,049.7 million and General Fund expenditures of $9,049.4 million,
resulting in a projected surplus of $0.3 million. For fiscal 1997-98 and
1998-99, the proposed budget anticipates General Fund revenues of $9,181.9
million and $9,353.3 million, respectively. General Fund appropriations total
$9,181.5 million and $9,351.2 million in fiscal years 1997-98 and fiscal
1998-99, respectively. For fiscal year 1997-98, General Fund appropriations
would decrease by 0.6% over estimated expenditures for fiscal year 1996-97 and
would increase by 1.8% in fiscal year 1998-99, below the anticipated increase in
inflation. Based upon these levels of appropriations, the proposed budget would
remain within the limits set by the State's Constitutional expending cap: $384.1
million below the fiscal 1997-98 expenditure cap and $307.6 million below the
fiscal 1998-99 expenditure cap.

The proposed budget anticipates significant income tax changes aimed at
increasing overall disposable income and encouraging economic expansion in the
State. The proposed budget enhances the income tax relief enacted during the
1995 legislative session by expanding the taxable income amounts subject to the
lower 3% income tax rate. For income years commencing on and after January 1,
1997, the application of the 3% rate is expanded from the first $9,000 of
taxable income to the first $12,000 of taxable income for joint filers. For
income years commencing on and after January 1, 1998, the application of the 3%
rate is further expanded from the first $12,000 of taxable income to the first
$48,000 of taxable income for joint filers. In addition, for income years
commencing on and after January 1, 1998, all Social Security income would be
exempt from the state's personal income tax.
<PAGE>
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The proposed budget anticipates increased education expenditures of $26
million in fiscal year 1997-98 and $37 million in fiscal year 1998-99 to
implement recommendations of the Education Improvement Panel, convened in 1996
for the purpose of making recommendations to improve education in the State
following the State Supreme Court ruling in SHEFF V. O'NEILL that the State's
educational system failed to provide students in the State with equal
educational opportunities. The proposed budget also anticipates increased
expenditures in fiscal year 1998-99 as a result of the transfer of certain
Highway Patrol functions from the Special Transportation Fund to the General
Fund in connection with the implementation of the proposed gasoline tax
reduction.

The proposed budget also anticipates significant reductions in
expenditures from current service levels. Some of the changes, which are
expected to result in significant long term savings to the State, include
restructuring the General Assistance program to eliminate all cash and medical
benefits for employable adults, acceleration of the move to managed care for
those individuals remaining on General Assistance, restructuring the Medicaid
program under a waiver, reducing by 10% the State's block grants to constituent
units of higher education, a comprehensive overhaul of the State's information
technology functions in conjunction with a reorganization of state agencies
across functional lines, implementation of actuarial changes resulting in
decreased expenditures to fund the State Employees' Retirement System unfunded
past service liability, and implementing an early retirement incentive for State
employees and limited co-pays for certain more expensive health care plans. The
proposed budget reflects the Governor's goals to improve the ways in which State
government delivers services, reduces the tax burden, and encourages economic
growth in the State. It was anticipated that the General Assembly would adopt a
biennial budget no later than June 1997.

The Connecticut General Statutes require the Comptroller to report the
State's fiscal position monthly. This required report compares revenues already
received and expenditures already made to estimated revenues to be collected and
estimated expenditures to be made during the balance of the year.

The Comptroller's November 1, 1996, letter indicated a projected
General Fund surplus of $41.2 million for fiscal year 1996-97. No assurances can
be given that subsequent projections will not indicate changes in the 1996-97
General Fund result. To the extent there is a deficit at the end of the fiscal
year, it may be funded by a transfer from the $241 million Budget Reserve Fund.

In November 1992, Connecticut voters approved a constitutional
amendment requiring a balanced budget for each year. The amendment provides that
the amount of general budget expenditures authorized for any fiscal year shall
not exceed the estimated amount of revenue for such fiscal year. It also
provides for a limit on budget expenditures. The General Assembly is precluded
from authorizing an increase in general budget expenditures for any fiscal year
above the amount of general budget expenditures for the previous fiscal year by
a percentage which exceeds the greater of the percentage increase in personal
income or the percentage increase in inflation, unless the Governor declares an
emergency or the existence of extraordinary circumstances and at least
three-fifths of the members of each house of the General Assembly vote to exceed
such limit for the purposes of such emergency or extraordinary circumstances.
The limitation on general budget expenditures does not include expenditures for
the payment of bonds, notes or other evidences of indebtedness. There
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is no statutory or constitutional prohibition against bonding for general budget
expenditures.

LITIGATION

The State of Connecticut, its officers and employees, are defendants in
numerous lawsuits. The ultimate disposition of and final consequences of these
lawsuits are not determinable at present. The Attorney General's Office has
reviewed the status of pending lawsuits and reports that in its opinion such
pending litigation will not be determined in the end so as to result,
individually or in the aggregate, in a final judgment against the State which
would materially adversely affect its financial position, except that in the
cases described below the fiscal impact of an adverse decision might be
significant but is not determinable at this time.

The cases described in this section generally do not include any
individual case where the fiscal impact of an adverse judgment is expected to be
less than $15 million, but adverse judgments in a number of such cases could, in
the aggregate and in certain circumstances, have a significant impact.

CONNECTICUT CRIMINAL DEFENSE LAWYERS ASSOCIATION V. FORST is an action
brought in 1989 in Federal District Court alleging a pervasive campaign by the
State and various State Police officials of illegal electronic surveillance,
wiretapping and bugging for a number of years at Connecticut State Police
facilities. The plaintiffs seek compensatory damages, punitive damages, as well
as other damages and costs and attorneys' fees, and temporary and permanent
injunctive relief. In November 1991, the court issued an order which will allow
the plaintiffs to represent a class of all persons who participated in wire or
oral communications to, from, or within State Police facilities between January
1, 1974 and November 9, 1989 and whose communications were intercepted, recorded
and/or used by the defendants in violation of the law. This class includes a
sub-class of the Connecticut State Police Union, current and former Connecticut
State Police officers who are not defendants in this or any consolidated case,
and other persons acting on behalf of the State Police who participated in oral
or wire communications to, from or within State Police facilities between such
dates.

SHEFF V. O'NEILL is a Superior Court action brought in 1989 on behalf
of black and Hispanic school children in the Hartford school district. The
plaintiffs sought a declaratory judgment that the public schools in the greater
Hartford metropolitan area are segregated de facto by race and ethnicity and are
inherently unequal to their detriment. They also sought injunctive relief
against state officials to provide them with an "integrated education." On April
12, 1995, the Superior Court entered judgment for the State. On July 9, 1996,
the State Supreme Court reversed the Superior Court judgment and remanded the
case with direction to render a declaratory judgment in favor of the plaintiffs.
The Court directed the legislature to develop appropriate measures to remedy the
racial and ethnic segregation in the Hartford public schools. The Supreme Court
also directed the Superior Court to retain jurisdiction of this matter.

THE CONNECTICUT TRAUMATIC BRAIN INJURY ASSOCIATION, INC. V. HOGAN is a
Federal District Court civil rights action brought in 1990 on behalf of all
persons with retardation or traumatic brain injury who have been, or may be,
placed in Norwich, Fairfield Hills or Connecticut Valley Hospitals. The
plaintiffs claim that the treatment and training they need is unavailable in
state hospitals for the mentally ill and that placement in those hospitals
violates their constitutional rights. The plaintiffs seek relief which would
require that the plaintiff classmembers be transferred to community

<PAGE>
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residential settings with appropriate support services. This case has been
settled as to all persons with mental retardation by their eventual discharge
from Norwich and Fairfield Hills Hospital. The case is still proceeding as to
those persons with traumatic brain injury.

CONNECTICUT HOSPITAL ASSOCIATION V. ROWLAND is an action brought in
1996 in Superior Court challenging the statute which requires payment by a
hospital to the State of the amount which exceeds the net revenue limit of a
hospital authorized by the Office of Health Care Access for the fiscal year 1995
and relevant future years, subject to certain adjustments. The plaintiffs claim
that the statute is unconstitutional and seek to enjoin its enforcement and the
collection of the excess amounts by the State.

Several suits have been filed since 1977 in the Federal District Court
and the Connecticut Superior Court on behalf of alleged INDIAN TRIBES in various
parts of the State, claiming monetary recovery as well as ownership to land in
issue. The land involved is located generally in rural and residential areas.
However, a suit was brought in 1992 involving land within the City of
Bridgeport. The same plaintiff group in that suit subsequently also sued
concerning land in Trumbull and Southbury and has threatened to sue regarding
additional land in other towns in the State.

2. FLORIDA

SPECIAL CONSIDERATIONS REGARDING INVESTMENTS IN
FLORIDA MUNICIPAL SECURITIES

The following is a summary of certain information contained in the
Preliminary Official Statement Relating to $200,000,000 State of Florida
Department of Transportation, Right-of-Way Acquisition and Bridge Construction
Bonds, Series 1997A, dated June 30, 1997. The summary does not purport to be a
complete description and is current as of the date of the statement. The Funds
are not responsible for the accuracy or timeliness of this information.

Personal income in Florida has been growing the last several years and
generally has outperformed both the nation as a whole and the Southeast in
particular. From 1985 through 1995, Florida's per capita income rose an average
of 5.0% per year, while the national per capita income increased an average of
4.9%. Real personal income is estimated to increase 4.2% in 1996-97 and 4.2% in
1997-98 while real personal income per capita in Florida is projected to grow at
2.3% in 1996-97 and 2.4% in 1997-98.

Florida's population growth is one reason why its economy has typically
performed better than the nation as a whole. Since 1987, the United States has
had an average population increase of about 1.0% annually, while Florida's
average annual rate of increase is around 2.2%. Florida has been and continues
to be the fastest growing of the 11 largest states. While annual growth in the
State's population is projected to slow somewhat, it is still expected to grow
by close to 230,000 new residents per year throughout this decade.

Throughout the 1980s, the unemployment rate in Florida had, generally,
tracked below that of the nation. In the 1990s, the trend reversed until 1995
and 1996, when the State's unemployment rate again tracked below the national
average. Since 1987, the average rate of unemployment for Florida is 6.2%, while
the national average is also 6.2%.
<PAGE>
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Florida's dependency on the highly cyclical construction and
construction-related manufacturing sectors has declined. This trend is expected
to continue as Florida's economy continues to diversify. Florida, nevertheless,
has a dynamic construction industry, with single and multi-family housing starts
accounting for approximately 8.1% of total U.S. housing starts in 1996, while
the State's population is 5.5% of the nation's population. Total housing starts
were 118,400 in 1996. One driving force behind Florida's construction industry
is of course its rapid growth in population.

Financial operations in Florida are maintained through the use of four
funds types -- the General Revenue Fund, Trust Funds, the Working Capital Fund,
and the Budget Stabilization Fund. In fiscal year 1995-96, an estimated 66% of
total direct revenues to these Funds were derived from State taxes and fees.
Federal funds and other special revenues accounted for the remaining revenues.
Major sources of tax revenues to the General Revenue Fund are the sales and use
tax, corporate income tax, intangible personal property tax, and beverage tax,
which amounted to 69%, 7%, 4%, and 4%, respectively, of total General Revenue
funds available. State expenditures are categorized for budget and appropriation
purposes by type of fund and spending unit, which are further subdivided by line
item. In fiscal year 1995-96, appropriations from the General Revenue Fund for
education, health and welfare, and public safety amounted to approximately 51%,
31%, and 14%, respectively, of the total General Revenue funds available.

For fiscal year 1996-97, the estimated General Revenue plus Working
Capital and Budget Stabilization funds available to Florida are $16,617.4
million, a 6.7% increase over 1995-96. With combined General Revenue Fund,
Working Capital Fund, and Budget Stabilization Fund appropriations at $15,537.2
million, unencumbered reserves at the end of 1996-97 are estimated at $1,080.0
million. For fiscal year 1997-98, the estimated General Revenue plus Working
Capital and Budget Stabilization funds available total $17,553.9 million, a 5.6%
increase over fiscal year 1996-97.

The sales and use tax is the greatest single source of tax receipts in
Florida. For the fiscal year ended June 30, 1996, receipts from this source were
$11,461.0 million, an increase of 7.4% from fiscal year 1994-95. The second
largest source of tax receipts is the motor fuel tax. The estimated collections
from this source during the fiscal year ended June 30, 1996 were $1,923.0
million. However, these revenues are almost entirely dedicated trust funds for
specific purposes and are not included in the State General Revenue Fund.
Alcoholic beverage tax revenues totaled $441.5 million for the fiscal year
ending June 30, 1996. The receipts of the corporate income tax for the fiscal
year ended June 30, 1996 were $1,162.7 million, an increase of 9.3% from fiscal
year 1994-1995. Gross receipt tax collections for fiscal year 1995-96 totaled
$543.3 million, an increase of 6.9% over the previous fiscal year. Documentary
stamp tax collections totaled $775.2 million during fiscal year 1995-96,
increasing 11.5% from the previous fiscal year. The intangible personal property
tax is a tax on stocks, bonds, notes, governmental leaseholds, certain limited
partnership interests, and other intangible personal property. Total collections
from intangible personal property taxes were $895.9 million during fiscal year
1995-96, a 9.5% increase from the previous fiscal year. Severance taxes totaled
$77.2 million during fiscal year 1995-96, up 26.1% from the previous fiscal
year. In November, 1986, Florida voters approved a constitutional amendment to
allow Florida to operate a lottery. Fiscal year 1995-96 produced gross revenues
of $2.07 billion of which education received approximately $788.1 million.
<PAGE>
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Pursuant to a constitutional amendment which was ratified by the voters
of Florida on November 8, 1994, the rate of growth in State revenues in a given
fiscal year is limited to no more than the average annual growth rate in Florida
personal income over the previous five years. Revenues collected in excess of
the limitation are to be deposited into the Budget Stabilization Fund unless
two-thirds of the members of both houses of the Florida Legislature vote to
raise the limit. The revenue limit is determined by multiplying the average
annual growth rate in Florida personal income over the previous five years by
the maximum amount of revenue permitted under the cap for the previous year. For
the first year, which was fiscal year 1995-96, the limit was based on actual
revenues from fiscal year 1994-95. State revenues are defined as taxes,
licenses, fees, and charges for services imposed by the Florida Legislature on
individuals, businesses or agencies outside of State government. The definition
of State revenues also includes the revenue from the sale of lottery tickets.
Included among the categories of State revenues which are exempt from the
revenue limitation, however, are funds used for debt service on State bonds and
other payments related to debt.

The Florida State Constitution does not permit a state or local
personal income tax. An amendment to the Florida State Constitution by the
electors of Florida is required to impose a personal income tax in Florida.

As of January 1, 1994, property valuations for homestead property are
subject to a growth cap. Growth in the assessed value of property qualifying for
the homestead exemption will be limited to 3% or the change in the Consumer
Price Index, whichever is less. If the property changes ownership or homestead
status, it is to be re-valued at full value on the next tax roll.

3. MASSACHUSETTS

SPECIAL CONSIDERATIONS REGARDING INVESTMENTS
IN MASSACHUSETTS MUNICIPAL SECURITIES

The following is a summary of certain information contained in the
Information Statement of the Commonwealth of Massachusetts dated February 13,
1997 and the Commonwealth's Information Statement Supplement dated June 24,
1997. The summary does not purport to be a complete description and is current
as of the date of the corresponding information statement. The Funds are not
responsible for the accuracy or timeliness of this information.

Massachusetts municipal securities may fluctuate in value in response
to a variety of factors, including the economic strength of Massachusetts.

FISCAL YEARS 1992 THROUGH 1997

1992 FISCAL YEAR. Budgeted revenues and other sources for fiscal 1992
were $13.728 billion, including tax revenues of $9.484 billion. Budgeted
revenues and other sources increased by approximately 0.7% from fiscal 1991 to
fiscal 1992, while tax revenues increased by 5.4% for the same period.

Budgeted expenditures were approximately $13.416 billion in fiscal
1992. Final fiscal 1992 budgeted expenditures were approximately $300 million
higher than the initial July 1991 estimates of budgeted expenditures.
<PAGE>
-8-

Overall, the budgeted operating funds ended fiscal 1992 with an excess
of revenues and other sources over expenditures and other uses of $312.3 million
and with positive fund balances of $549.4 million. Total fiscal 1992 spending
authority continued into fiscal 1993 amounted to $231.0 million.

1993 FISCAL YEAR. The budgeted operating funds of the Commonwealth
ended fiscal 1993 with a surplus of revenues and other sources over expenditures
and other uses of $13.1 million and aggregate ending fund balances in the
budgeted operating funds of the Commonwealth of approximately $562.5 million.
Budgeted revenues and other sources for fiscal 1993 totaled approximately
$14.710 billion, including tax revenues of $9.930 billion. Total revenues and
other sources increased by approximately 6.9% from fiscal 1992 to fiscal 1993,
while tax revenues increased by 4.7% for the same period.

Commonwealth budgeted expenditures and other uses in fiscal 1993
totaled approximately $14.696 billion, which is $1.280 billion or approximately
9.6% higher than fiscal 1992 expenditures and other uses.

1994 FISCAL YEAR. The budgeted operating funds of the Commonwealth
ended fiscal 1994 with a surplus of revenues and other sources over expenditures
and other uses of $26.8 million and aggregate ending fund balances in the
budgeted operating funds of the Commonwealth of approximately $589.3 million.
Budgeted revenues and other sources for fiscal 1994 totaled approximately
$l5.550 billion, including tax revenues of $10.607 billion, $87 million below
the Department of Revenue's fiscal 1994 tax revenue estimate of $10.694 billion.
Total revenues and other sources increased by approximately 5.7% from fiscal
1993 to fiscal 1994 while tax revenues increased by 6.8% for the same period.

Commonwealth budgeted expenditures and other uses in fiscal 1994
totaled $15.523 billion, which was $826.5 million or approximately 5.6% higher
than fiscal 1993 budgeted expenditures and other uses.

In June 1993, the Legislature adopted and the Governor signed into law
comprehensive education reform legislation, requiring substantial annual
increases in state appropriations for education purposes from fiscal 1993 base
expenditures of approximately $1.288 billion.

1995 FISCAL YEAR. Fiscal 1995 tax revenue collections totaled $11.163
billion, approximately $12 million above the Department of Revenue's revised
fiscal year 1995 tax revenue estimate of $11.151 billion, and approximately $556
million or 5.2% above fiscal 1994 tax revenues of $10.607 billion. Budgeted
revenues and other sources, including non-tax revenues, collected in fiscal 1995
totaled $16.387 billion, approximately $837 million, or 5.4%, above fiscal 1994
budgeted revenues of $15.550 billion. Budgeted expenditures and other uses of
funds in fiscal 1995 were approximately $16.251 billion, approximately $728
million or 4.7% above fiscal 1994 budgeted expenditures and uses of $15.523
billion. The Commonwealth ended fiscal 1995 with an operating gain of $137
million and an ending fund balance of $726 million.

The final fiscal 1995 supplemental budget modified, with respect to the
fiscal 1995 year-end surplus, the provisions of state law governing deposits to
the Stabilization Fund. As calculated by the Comptroller, the amount of surplus
funds (the sum of the undesignated fund balances at year-end in the three
principle operating funds) for fiscal 1995 was approximately $94.9 million, of
which $55.9 million was available to be carried

<PAGE>
-9-

forward as a beginning balance for fiscal year 1996. Of the balance,
approximately $27.9 million was deposited in the Stabilization Fund, and
approximately $11.1 million was deposited in the Cost Relief Fund.

1996 FISCAL YEAR. The budgeted operating funds of the Commonwealth
ended fiscal 1996 with a surplus of revenues and other sources over expenditures
and other uses of $446.4 million, resulting in aggregate ending fund balances in
the budgeted operating funds of the Commonwealth of approximately $1.172
billion. Budgeted revenues and other sources for fiscal 1996 totaled
approximately $17.328 billion, including tax revenues of approximately $12.049
billion. Budgeted revenues and other sources increased by approximately 5.7%
from fiscal 1995 to fiscal 1996, while tax revenues increased by approximately
7.9% for the same period. Budgeted expenditures and other uses in fiscal 1996
totaled approximately $16.881 billion, an increase of approximately $630.6
million, or 3.9%, over fiscal 1995.

Legislation approved by the Governor on July 30, 1996 appropriated $150
million from the Tax Reduction Fund for personal income tax reductions in fiscal
1997, to be implemented by a temporary increase in the amount of the personal
exemptions allowable for the 1996 taxable year. On January 23, 1997, the
Governor filed legislation to appropriate the remaining balance of approximately
$85 million (including interest earnings) in the Tax Reduction Fund for an
additional temporary increase in the amount of personal exemptions during the
1997 taxable year.

The final fiscal 1996 appropriation bills approved by the Governor on
July 30, 1996 and August 10, 1996 contained approximately $246.9 million in
fiscal 1996 appropriations, approximately $38.2 million in fiscal 1997
appropriations and approximately $221.7 million in fiscal 1996 appropriations
continued for use in fiscal 1997. Amounts carried forward from fiscal 1995 and
deposited in the Cost Relief Fund were appropriated in these bills for further
subsidies to local units of government for costs of water pollution abatement
projects.

1997 FISCAL YEAR. The fiscal 1997 budget is based on numerous spending
and revenue estimates, the achievement of which cannot be assured. The
Legislature enacted the fiscal 1997 budget on June 20, 1996, and the Governor
approved it on June 30, 1996. The budget provides for approximately $17.452
billion in fiscal 1997 expenditures. The Executive Office for Administration and
Finance estimates total spending in fiscal 1997 to be approximately $17.704
billion, including $263.2 million in continuing appropriations and reserved
balances from fiscal 1996. The Executive Office for Administration and Finance
estimates fiscal 1997 total budgeted revenues to be approximately $17.394
billion, including approximately $12.307 billion in tax revenues. The tax
revenue estimate amounts to an increase of approximately $257 million, or 2.1%,
over fiscal 1996 tax collections. The current fiscal year 1997 tax revenue
estimate of $12.307 billion was released by the Executive Office for
Administration and Finance with the filing of the Governor's fiscal 1998 budget
proposal. This revised estimate was $184 million higher than the previous
estimate of $12.123 billion released in October 1996. The higher projection is
the result of stronger than anticipated collections through December 1996 and
the assumption that $85 million in tax cuts initially proposed by the Governor
for fiscal 1997 will now occur in fiscal 1998.

Results through May 1997 indicate that fiscal 1997 year-to-date tax
collections have totaled approximately $11.420 billion, an increase of
approximately $791 million, or 7.4%, over the same period in fiscal 1996. On May
20, 1997 the Secretary of Administration and Finance revised the fiscal 1997 tax
revenue estimate included in the
<PAGE>
-10-

Governor's budget recommendations filed in January upward by $200 million,
bringing the estimated total for the year to $12.507 billion. The results
through May place fiscal 1997 tax collections approximately $427 million above
the midpoint of the Department of Revenue's benchmark range and approximately
$397 million above the top of that range. Total fiscal 1997 revenues are
projected to total approximately $17.386 billion. Supplemental fiscal 1997
appropriations to date total approximately $135.8 million. Projected total
fiscal 1997 expenditures are approximately $17.702 billion, including
approximately $110 million reserved for contingencies.

CASH FLOWS. On June 11, 1997, the State Treasurer and the Secretary of
Administration and Finance released revised cash flow projections for fiscal
1997 and fiscal 1998.

Fiscal 1997 is projected to end with a cash balance of $162.6 million.
The report states that this projection is based on conservative assumptions and
that, given recent economic performance, actual results may be better. The
projected year-end balance does not include any fiscal 1997 activity that may
occur after June 30, 1997, nor does it include $95.4 million to be transferred
to the Stabilization Fund on account of fiscal 1996. The report notes that
Commonwealth transit notes are not being issued in June 1997, as previously
projected and that the $240 million of transit notes due in June 1997 are being
paid with cash. The projection assumes that $240 million of Commonwealth transit
notes will be issued in August 1997. The projection also assumes that the
Commonwealth will issue $400 million of bond anticipation notes during fiscal
1998 in anticipation of payments to be received from the Massachusetts Turnpike
Authority and the Massachusetts Port Authority in connection with the Central
Artery/Ted Williams Tunnel project, as contemplated by the Metropolitan Highway
system legislation approved by the Governor on March 20, 1997 and the
transportation bond legislation approved by the Governor on May 16, 1997. In
addition, the projection contemplates the issuance of $175 million of grant
anticipation notes during fiscal 1998, in anticipation of future federal funding
for the project. The fiscal 1998 ending cash balance is estimated to be $349.0
million. The cash flow statement for fiscal 1998 projects no need to borrow for
operating needs under the Commonwealth's commercial paper program and notes that
no short-term borrowings have been required during fiscal 1997.

The ending balances projected in the cash flow forecasts for fiscal
1997 and fiscal 1998 are likely to differ from the estimated ending balances for
the Commonwealth's operating budget for those years because of timing
differences and the effect of non-budget items.

THE GOVERNMENT

On March 11, 1997, the Legislature's Committee on Counties approved
legislation that would abolish Middlesex County government and transfer its
functions to the Commonwealth immediately upon final approval of the
legislation. The county's debts and liabilities which are in force on July 1,
1997 would be assumed by the Commonwealth and amortized over a period of up to
25 years from assessments on the cities and towns within the county. The
legislation would also bar the sale of public property to satisfy judgments
against the county. On June 11, 1997, the legislation was approved by the House
Committee on Ways and Means, with an effective date of June 30, 1997. As
approved by the Ways and Means Committee, assessments on cities and towns would
be capped at the level of the county tax paid by such city or town in fiscal
1997. The Ways and Means Committee bill contains an appropriation of
approximately $24.6 million (from unexpended balances of maintenance
appropriations that would

<PAGE>
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otherwise revert on June 30, 1997) to provide for payments to vendors of
Middlesex County Hospital and for debt service on bonds and notes issued by
Middlesex County that are overdue or about to be due. The bill would also
establish a task force on the valuation of county assets and liabilities that
would be charged with compiling an inventory and providing for the valuation of
all property of all counties in the Commonwealth for the purposes of considering
the abolition of county government and the transfer of its functions, assets and
liabilities to the Commonwealth. The seven-member task force, which would
consist of four members of the Legislature, the Secretary of Administration and
Finance, the Inspector General and the State Auditor, would be required to file
a report by January 1, 1998.

On May 21, 1997, the Senate approved legislation as part of its fiscal
1998 budget that would abolish the system of county government in all counties
in the Commonwealth as of July 1, 1998. Until that date, the Secretary of
Administration and Finance would be empowered to declare a fiscal emergency in
any county that exhibits fiscal distress, as described in the legislation, and
the Governor would be empowered to appoint a receiver for any such county. All
valid liabilities and debts of the counties in force on June 30, 1998 would
become obligations of the Commonwealth, as would all valid leases and contracts
of the counties in force on June 30, 1997. According to the Senate Committee on
Ways and Means, the counties have an accumulated debt of approximately $45
million and unfunded pension liabilities of $287.9 million.

COMMONWEALTH REVENUES

In order to fund its programs and services, the Commonwealth collects a
variety of taxes and receives revenues from other non-tax sources, including the
federal government and various fees, fines, court revenues, assessments,
reimbursements, interest earnings and transfers from its non-budgeted funds. In
fiscal 1996, approximately 70.3% of the Commonwealth's annual budgeted revenues
were derived from state taxes. In addition, the federal government provided
approximately 16.9% of such revenues, with the remaining 12.8% provided from
departmental revenues and transfers from non-budgeted funds.

The major components of State taxes are the income tax, which accounted
for approximately 55.7% of total tax revenues in fiscal 1996, the sales and use
tax, which accounted for approximately 21.7%, and the business corporations tax,
which accounted for approximately 7.3%. Other tax and excise sources accounted
for the remaining 15.3% of total fiscal 1996 tax revenues.

INCOME TAX. The Commonwealth assesses personal income taxes at flat
rates, according to classes of income, after specified deductions and
exemptions. A rate of 5.95% is applied to income from employment, professions,
trades, businesses, rents, royalties, taxable pensions and annuities and
interest from Massachusetts banks; a rate of 12% is applied to other interest
(although interest on obligations of the United States and of the Commonwealth
and its political subdivisions is exempt) and dividends; and, as of January 1,
1996, a rate ranging from 12% on capital gains from the sale of assets held for
one year and less to 0% on capital gains from the sale of certain assets held
more than six years.

Under Chapter 151 of the Acts of 1990 up to 15% of state income tax
receipts are pledged to the payment of debt service on approximately $383.0
million of outstanding Fiscal Recovery Bonds issued pursuant to Chapter 151.
<PAGE>
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Partially as a result of income tax rate increases, state income tax
revenues increased by 5.8% from fiscal 1991 to fiscal 1992. Compared to the
prior fiscal year, state income tax revenues increased by 0.7% in fiscal 1993,
5.9% in fiscal 1994, 5.0% in fiscal 1995 and 7.9% in fiscal 1996 and are
projected to decrease by 0.3% in fiscal 1997.

SALES AND USE TAX. The Commonwealth imposes a 5% sales tax on retail
sales of certain tangible properties (including retail sales of meals)
transacted in the Commonwealth and a corresponding 5% use tax on the storage,
use or other consumption of like tangible properties brought into the
Commonwealth. However, food, clothing, prescribed medicine, materials and
produce used in food production, machinery, materials, tools and fuel used in
certain industries, and property subject to other excises (except for
cigarettes) are exempt from sales taxation. The sales and use tax is also
applied to sales of electricity, gas and steam for certain nonresidential use
and to nonresidential and most residential use of telecommunications services.

BUSINESS CORPORATIONS TAX. Business corporations doing business in the
Commonwealth, other than banks, trust companies, insurance companies, railroads,
public utilities and safe deposit companies, are subject to an excise that has a
property measure and an income measure. The value of Massachusetts tangible
property (not taxed locally) or net worth allocated to the Commonwealth is taxed
at $2.60 per $1,000 of value. The net income allocated to Massachusetts, which
is based on gross income for federal taxes, is taxed at 9.5%. The minimum tax is
$456. Both rates and the minimum tax include a 14% surtax. Compared to the prior
fiscal year, business corporation tax revenues increased by 5.1% in fiscal 1992,
14.5% in fiscal 1993, 6.1% in fiscal 1994 and 16.4% in fiscal 1995. Fiscal 1996
tax revenues from business corporations were 3.8% lower than fiscal 1995, due
primarily to an estimated $49 million reduction in the business corporations tax
resulting from the application of the "single sales factor" apportionment
formula for the business corporations tax. The new formula, when fully
implemented, will calculate a firm's taxable income as its net income times the
percentage of its total sales that are in Massachusetts, as opposed to the
current formula that takes other factors, such as payroll and property, into
account.

BANK TAX. Commercial and savings banks are subject to an excise tax of
12.54%. On July 27, 1995, the Governor approved legislation that will reduce the
rate over several years to 10.5%, the same effective rate charged to other
corporations. The Department of Revenue estimates that the tax cut, when fully
implemented in fiscal year 1999, will result in an annual $32.3 million revenue
loss, including the effect of provisions in the proposed legislation that would
apply the tax to out-of-state banks and other financial institutions that are
not currently taxed and that would lead to an estimated $18 million annual gain.

For fiscal 1992, the excise tax on commercial and savings banks yielded
$60.2 million, representing an increase of approximately 25.2% over fiscal 1991.
Due to the settlement by the Department of Revenue of a case pending before the
Appellate Tax Board, the Commonwealth paid a taxpayer commercial bank $37.0
million, thus reducing revenues from the commercial and savings bank excise tax
in fiscal 1992 from $97.1 million to $60.2 million. For fiscal 1993, tax
revenues from banks increased to approximately $152.9 million, or approximately
154.5% above fiscal 1992. Fiscal 1994 tax revenues from banks were approximately
$199.9 million, or approximately 30.7% above fiscal 1993. Fiscal 1995 tax
revenues from banks were $206 million, or approximately 3.0% above fiscal 1994.
Fiscal 1996 tax revenues from banks were approximately $218.6 million, or
approximately 6.2% higher than fiscal 1995. Fiscal

<PAGE>
-13-

1997 bank tax revenues are projected to total approximately $215 million, or
approximately 1.7%, below fiscal 1996.

OTHER TAXES. Other tax revenues of the Commonwealth totaled
approximately $1.637 billion in fiscal 1996, an increase of approximately 2.9%
from fiscal 1995. Other tax revenues are derived by the Commonwealth from motor
fuels excise taxes, cigarette and alcoholic beverage excise taxes, estate and
deed excises and other tax sources. Fiscal 1997 revenues from other tax revenues
are projected to total approximately $1.713 billion, an increase of
approximately 4.6% from fiscal 1996. Most of this increase is due to the
imposition of an additional 25 cent tax on tobacco products, which is expected
to result in approximately $74 million in additional tax receipts in fiscal
1997.

ESTATE TAX REVISIONS. The fiscal 1993 budget included legislation which
gradually phases down the current Massachusetts estate tax until it becomes a
"sponge tax" in 1997. The "sponge tax" is based on the maximum amount of the
credit for the State taxes allowed for federal estate tax purposes.

FEDERAL AND OTHER NON-TAX REVENUES

Federal revenue is collected through reimbursements for the federal
share of entitlement programs such as Medicaid and beginning in Federal Fiscal
Year 1997, through block grants for programs such as Transitional Assistance to
Needy Families ("TANF"), formerly Aid to Families with Dependent Children
("AFDC"). The amount of federal revenue to be received is determined by state
expenditures for these programs. Federal reimbursements in fiscal 1992 decreased
by $383 million from $2.777 billion in fiscal 1991 to $2.394 billion, reflecting
a decrease of $349 million in uncompensated care payments. In fiscal 1993,
federal reimbursements increased to $2.674 billion as a result of increased
spending for certain entitlement programs. Federal reimbursement for fiscal 1994
increased to $2.901 billion and increased further to $2.970 billion in fiscal
1995. Federal reimbursements for fiscal 1996 increased to $3.039 billion but are
expected to decline to $2.903 billion in fiscal 1997 due to one-time federal
reimbursements for fiscal 1996 spending.

Departmental and other non-tax revenues are derived from licenses,
registrations and fees generated through cash transactions and reimbursement and
assessments for services. Annual revenues from these sources increased 11.8%
from $1.187 billion in fiscal 1992 to $1.327 billion in fiscal 1993, decreased
10.5% to $1.188 billion in fiscal 1994, increased 7.2% to $1.273 billion in
fiscal 1995 and decreased 5.4% to $1.208 billion in fiscal 1996. Departmental
and other non-tax revenues are projected to increase 3.8% to $1.254 billion in
fiscal 1997.

Interfund transfers and other sources from non-budgeted funds totaled
approximately $1.032 billion in fiscal 1996, an increase of 5.2% compared to
fiscal 1995. For the budgeted operating funds, interfund transfers include
transfers of profits from the State Lottery and Arts Lottery Funds and
reimbursements for the budgeted costs of the State Lottery Commission, which
accounted for $558.0 million, $600.2 million, $667.3 million, $709.5 million and
$727.5 million in fiscal 1992 through 1996, respectively and which are expected
to account for $752.7 million in fiscal 1997.

In fiscal 1991, special laws authorized transfers among the General,
Highway and Local Aid Funds to eliminate certain deficit fund balances.
Legislation included within the fiscal 1993 budget prohibits, beginning with
fiscal 1992, the transfer of operating funds from the Highway Fund to the
General Fund.
<PAGE>
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On September 29, 1995, the Governor signed a tribal-state compact
between the Wampanoag Tribe of Gay Head and the Commonwealth which establishes
the relationship between the tribe and the Commonwealth with respect to the
operation of a casino in the city of New Bedford. The compact is subject to
approval by the Legislature and by the United States Secretary of the Interior.
The Governor also filed companion legislation that would authorize the licensing
of up to 700 slot machines at each of the four race tracks now licensed in the
state, as well as a casino in Hampden County. On November 9, 1995, the United
States Secretary of the Interior announced that he would not approve the
tribal-state compact between the Wampanoag Tribe of Gay Head and the
Commonwealth until after the Legislature had approved it. The Legislature did
not act on the compact prior to concluding its formal sessions on July 31, 1996.
On January 17, 1997, the Governor re-filed the compact with the Legislature.

LIMITATIONS ON TAX REVENUES

In Massachusetts efforts to limit and reduce levels of taxation have
been under way for several years. Limits were established on state tax revenues
by legislation enacted on October 25, 1986 and by an initiative petition
approved by the voters on November 4, 1986. The two measures are inconsistent in
several respects.

Chapter 62F, which was added to the General Laws by initiative petition
in November, 1986, establishes a State tax revenue growth limit for each fiscal
year equal to the average positive rate of growth in total wages and salaries in
the Commonwealth, as reported by the federal government, during the three
calendar years immediately preceding the end of such fiscal year. Chapter 62F
also requires that allowable state tax revenues be reduced by the aggregate
amount received by local governmental units from any newly authorized or
increased local option taxes or excises. Any excess in State tax revenue
collections for a given fiscal year over the prescribed limit, as determined by
the State Auditor, is to be applied as a credit against the then current
personal income tax liability of all taxpayers in the Commonwealth in proportion
to the personal income tax liability of all taxpayers in the Commonwealth for
the immediately preceding tax year. Unlike Chapter 29B, as described below, the
initiative petition did not exclude principal and interest payments on
Commonwealth debt obligations from the scope of its tax limit. However, the
preamble contained in Chapter 62F provides that "although not specifically
required by anything contained in this chapter, it is assumed that from
allowable State tax revenues as defined herein the Commonwealth will give
priority attention to the funding of state financial assistance to local
governmental units, obligations under the state governmental pensions systems,
and payment of principal and interest on debt and other obligations of the
Commonwealth."

The legislation enacted in October, 1986, which added Chapter 29B to
the General Laws, also established an allowable state revenue growth factor by
reference to total wages and salaries in the Commonwealth. However, rather than
utilizing a three-year average wage and salary growth rate, as used by Chapter
62F, Chapter 29B utilizes an allowable state revenue growth factor equal to
one-third of the positive percentage gain in Massachusetts wages and salaries,
as reported by the federal government, during the three calendar years
immediately preceding the end of a given fiscal year. Additionally, unlike
Chapter 62F, Chapter 29B allows for an increase in maximum state tax revenues to
fund an increase in local aid and excludes from its definition of state tax
revenues (i) income derived from local option taxes and excises, and (ii)
revenues needed to fund debt service costs.
<PAGE>
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Tax revenues in fiscal 1992 through fiscal 1996 were lower than the
limit set by either Chapter 62F or Chapter 29B. The Executive Office for
Administration and Finance currently estimates that State tax revenues in fiscal
1997 will not reach the limit imposed by either of these statutes.

4. RHODE ISLAND

SPECIAL CONSIDERATIONS REGARDING INVESTMENTS IN
RHODE ISLAND MUNICIPAL SECURITIES

The following is a summary of certain information contained in the
Information Statement of the State of Rhode Island and Providence Plantations
dated June 5, 1997. The summary does not purport to be a complete description
and is current as of the date of the information statement. The Funds are not
responsible for the accuracy or timeliness of this information.

Rhode Island municipal securities may fluctuate in value in response to
a variety of factors, including the economic strength of State and local
governments and the availability of federal funding.

OVERVIEW OF THE ECONOMY

POPULATION CHARACTERISTICS

Rhode Island experienced modest population increases between 1980 and
1990. The 1990 United States census count for Rhode Island was 1,005,000, or
5.9% more than the 949,000 counted in 1980. While the Rhode Island population
did not change significantly between 1989 and 1993, it decreased by 1.0% between
1993 and 1996. Bureau of the Census estimates from 1996 show the Rhode Island
population to be 990,000. In contrast, the total United States population
increased by approximately 9.7% between 1980 and 1990, 3.4% between 1990 and
1993, and 2.9% between 1993 and 1996.

PERSONAL INCOME, CONSUMER PRICES AND POVERTY

Per capita personal income levels in Rhode Island have been consistent
with those in the United States since 1970. In addition, Rhode Island has
maintained a poverty rate well below the national average. In 1995, 10.6% of the
Rhode Island population was below the poverty line, while 13.8% of the
population of the United States fell below the poverty line.

EMPLOYMENT

Total employment levels in Rhode Island grew at a rate of 1.0% in 1994,
1.5% in 1995, and 0.3% in 1996. The only employment sector that declined in 1996
was manufacturing, which has experienced declining employment levels since 1985.
The sector employing the greatest number of people in Rhode Island continues to
be the service sector, which contributed approximately one-third of total
non-agricultural employment in 1994.
<PAGE>
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ECONOMIC BASE AND PERFORMANCE

Rhode Island has a diversified economic base which includes traditional
manufacturing, high technology, and service industries. A substantial portion of
products produced by these sectors is exported. Like most other historically
industrial states, Rhode Island has seen a shift in employment from
labor-intensive manufacturing industries to technology and service-based
industries.

HUMAN RESOURCES

Skilled human capital is the foundation of economic strength in Rhode
Island. It provides the basis for a technologically dynamic and industrially
diverse regional economy. The Rhode Island population is well-educated with
27.6% of its residents over the age of 25 having received at least an
Associate's degree. In addition, per pupil spending on public elementary and
secondary education in Rhode Island has been significantly higher than the
national average since 1980. For the 1994-95 academic year Rhode Island spent
25% more per pupil than the national average.

ECONOMIC FORECAST

The Revenue Estimating Conference incorporates a range of economic
forecasts and economic information in making revenue estimates. During its May
1997 meeting, forecasts were presented by Data Resources, Inc. (DRI), the New
England Economic Project (NEEP), and Regional Financial Associates. Current
employment and labor force trends were also presented by the Department of Labor
and Training.

While growth will be slower than the past year, there is little
recession risk for fiscal year 1997 and fiscal year 1998, with the risk growing
toward the end of 1998 to approximately 30% based on the DRI/McGraw-Hill
forecast.

EMPLOYMENT. The economists generally agreed that employment would grow
1.1% for fiscal year 1997, an increase over the fiscal year 1996 growth of 0.6%.
Benchmark revisions for fiscal year 1996 employment data had resulted in a
reduction in non-farm employment growth from 1.3% to 0.6%. The revised fiscal
year 1997 forecast reflects significant increases from the December projections
of 0.3% growth for fiscal year 1997.

There is lack of agreement over the forecast employment growth for
fiscal year 1998, however. Both New England Economic Project and Regional
Financial Associates estimate growth of approximately 0.6%, while DRI is more
optimistic with 1.4% job growth. This is a difference between the forecasts of
approximately 3,600 new jobs.

PERSONAL INCOME. Personal income growth for fiscal year 1997 is
forecast to be approximately 4.7% which is less than the 5.7% experience in
fiscal year 1996. Fiscal year 1998 growth varies by forecaster between 4.0 and
4.9%. The difference in the estimates of the three economists is based on the
emphasis of contributing factors. The 4.9% estimate for personal income growth
is based on the assumptions that wage rates (even for unskilled workers) will
continue to grow and remain at the elevated levels and that employment losses in
the manufacturing sector will begin to slow through fiscal year 1998. On the
other hand, the 4.0% forecast is based on the assumption that the manufacturing
employment losses will continue at a fairly constant rate through fiscal year
1998.
<PAGE>
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WAGE AND SALARY INCOME. One of the factors contributing to the
differences in personal income growth is differences in estimated wage and
salary income growth. The projection provided by the three economists range from
3.1% to 4.9% for fiscal year 1997 and from 2.5% to 5.6% in fiscal year 1998.
Again, the differences are attributable to the level of anticipated employment
losses in the manufacturing sector and to the anticipated strength of wage
growth throughout the forecast period.

GENERAL FUND REVENUES AND EXPENDITURES

The State draws nearly all of its revenue from a series of non-property
related taxes and excises, principally the personal income tax and general
retail sales and use tax, from federal assistance payments and grants-in-aid,
and from earnings and receipts from certain State-operated programs and
facilities. The State additionally derives revenue from a variety of special
purpose fees and charges which must be used for specific purposes as required by
State law.

MAJOR SOURCES OF STATE REVENUE

TAX REVENUES. Approximately 66.3% of all taxes and departmental
receipts in fiscal year 1996 were derived from the Rhode Island personal income
tax and the sales and use tax. They constituted 59.0% of all general revenues.

PERSONAL INCOME TAX. State law provides for a personal income tax on
residents and non-residents (including estates and trusts) equal to a percentage
of the federal income tax liability attributable to the taxpayer's Rhode Island
income. Effective with the passage of Chapter 6 of the 1991 Rhode Island Public
Laws, the State rate became 27.5 % of the taxpayer's federal income tax
liability for the period January 1, 1991 and thereafter. However, Article 30 of
the 1993 Appropriations Act provided for a second tier rate of 32.0% on the
amount of a taxpayer's federal tax liability which is in excess of fifteen
thousand dollars. This provision remained in effect through tax year 1993,
although the Tax Administrator, using his authority to adjust rates (as
described below), modified the second tier rates in October 1993. This was done
to offset the effects of changes in federal tax law contained in the Omnibus
Budget Reconciliation Act of 1993 (H.R. 2264).

The Rhode Island personal income tax accounted for approximately 32.6%
of the State's fiscal year 1996 general revenues.

BUSINESS CORPORATION TAX. The business tax is imposed on corporations
deriving income from sources within the State or engaging in activities for the
purpose of profit or gain. Article 20 of the 1990 Budget as amended set a rate
of 9.0% effective July 1, 1989. Passage of the fiscal year 1991 Reissuance of
Appropriations Act provided for a surtax of 11.0% on the amount otherwise due
for corporations whose taxable year ends on or after March 31, 1991 and before
January 1, 1993.

The Corporation tax was amended in 1993 to change the carry-back,
carry-forward provisions from 3 years back, 15 years forward to five years
forward. Two reductions to the business corporation tax were enacted as part of
the fiscal year 1994 Budget; the first repealed the 11.0% surtax for
corporations whose taxable years begin on or after January 1, 1994 (an extension
to January 1, 1997 was enacted in 1993), and the second doubled the investment
tax credit from two to four percent for investments made beginning January 1,
1994.
<PAGE>
-18-

Corporations dealing in securities on their own behalf, whose gross
receipts from such activities amount to at least 90.0% of their total gross
receipts, have been exempt from the net worth computation but are required to
pay the 9.0% income tax. Regulated investment companies and real estate
investment trusts and personal holding companies pay a tax at the rate of
10(cent) per $100 of gross income or $100, whichever is greater.

SALES AND USE TAX. The State assesses a tax on all retail sales,
subject to certain exceptions, and on hotel and other public accommodation
rentals, as well as upon the storage, use or other consumption of tangible
personal property in the State. The sales and use tax is imposed upon the
retailer at the rate of 7.0% of the gross receipts from taxable sales. Included
as major exemptions from the tax are: (a) food (excluding food sold by
restaurants, drive-ins or other eating places) for human consumption off the
premises of the retailer; (b) clothing; (c) medicines sold on prescription; (d)
fuel used in the heating of homes and residential premises; (e) domestic water
usage; (f) gasoline and other motor fuels otherwise specifically taxed; (g)
sales of tangible property and public utility services when the property or
service becomes a component part of a manufactured product for resale, or when
the property or service is consumed directly in the process of manufacturing or
processing products for resale and such consumption occurs within one year from
the date such property is first used in such production; (h) tools, dies and
molds and machinery and equipment (including replacement parts thereof) used
directly and exclusively in an industrial plant in the actual manufacture,
conversion or processing of tangible personal property to be sold; (i) sales of
air and water pollution control equipment for installation pursuant to an order
by the State Director of Environmental Management; and (j) sales of boats or
vessels to nonresidents for use outside the State.

OTHER TAXES. In addition to the above described taxes, the State
imposes various fees, taxes and excises for the registration of domestic and
foreign corporations, the sale of liquor and other alcoholic beverages, the
registration of motor vehicles and the operation of pari-mutuel betting.

DEPARTMENTAL REVENUES. The largest category of departmental earnings is
the group defined as licenses and fees, due largely to the assessment of the
hospital licensing fee. There was a one year hospital licensing fee, which
yielded $77.3 million in fiscal year 1995. The fiscal year 1996 Appropriations
Act extended the fee one year but at a lower rate generating $37.5 million. The
fiscal year 1997 Appropriations Act extended the fee for an additional year at
the same rate of 2.2%. The fiscal year 1998 budget would extend the fee for an
additional one year. The second largest category of revenue is sales and
services, which includes disproportionate share revenues. Other departmental
revenues include various miscellaneous receipts such as investment earnings on
General Fund balances.

RESTRICTED RECEIPTS. In fiscal year 1996, the State received a total of
$92.8 million in restricted receipts excluding transfers into the General Fund,
based upon audited statements. These reflect various specialized fees and
charges, interest on certain funds and accounts maintained by the State and
private contributions and grants to certain State programs. Such receipts are
restricted under State law to offset State expenditures for the program under
which such receipts are derived.

OTHER SOURCES. The largest component of Other Sources is the transfer
from the State Lottery. The State Lottery Fund was created in 1974 for the
receipt and disbursement of revenues of the State Lottery Commission from sales
of lottery tickets and license fees.
<PAGE>
-19-

For fiscal year 1996, Lottery transfers totaled $90.4 million based on
audited statements.

The second largest single component of Other Sources is the gas tax
transfer from the Intermodal Surface Transportation Fund. Gasoline tax receipts
not dedicated for use by transportation agencies became available to the general
fund. This amounted to $38.3 million in fiscal 1996.

Other Miscellaneous Sources in fiscal year 1996 totaled $59.9 million
based upon audited statements. It included $14.6 million in prior year Medical
Assistance recoveries, $14.5 million in DEPCO excess payments, $3.8 million in
settlements for employee medical costs and numerous other recoveries and
adjustments.

FEDERAL RECEIPTS. In fiscal year 1996, the State collected receipts of
$863.5 million from the federal government, representing grants-in-aid and
reimbursements to the State for expenditures for various health, welfare and
educational programs and distribution of various restricted or categorical
grants-in-aid.

Federal grants-in-aid reimbursements are normally conditioned to some
degree, depending on the particular program being funded, on matching resources
by the State ranging from a 50% matching expenditure to in-kind contributions.
The largest categories of federal grants and reimbursements are made for medical
assistance payments for the indigent (Title XIX) and Aid to Families with
Dependent Children (AFDC). The federal participatory rate for these two programs
are recalculated annually, and the major determinant in the rate calculation is
the relative wealth of the State. The federal match rate is 53.9% as of October
1, 1996.

REVENUE ESTIMATES

Current statutes require that a Revenue Estimating Conference convene
no less than three times a year: October, December and May. The following
paragraphs describe the revisions made at the May 1997 Revenue Estimating
Conference to both the enacted estimates and those adopted in December for
fiscal years 1997 and 1998.

FISCAL YEAR 1997. The fiscal year 1997 estimate was revised upward by
$66.1 million over the enacted level and $33.5 million over the revised estimate
made at the December Revenue Estimating Conference. This is a revision of 3.8%
to the enacted estimate and 1.9% over December. The estimate includes
adjustments resulting from passage of the fiscal year 1997 Supplemental
Appropriations Act, 97-H-5248, Substitute A.

The largest revision was a $27.9 million increase in estimated personal
income taxes over the December estimate. This was an increase of $42.2 million
to the enacted estimate. The revisions to the December estimate were: $10.6
million increased for estimated filings, $8.4 million increase in final
payments, $0.2 million decrease in estimated refunds, and an $8.7 million
increase in estimated withholding payments. The Conference adopted estimated
payments of $129.0 million, growth of 12.9% over fiscal year 1996, reflecting
market activity. Refunds are estimated to be 4.3% above fiscal year 1996.
Withholding growth is estimated at 4.9%.

Total general business taxes estimates were within $0.5 million of the
December estimate with gains in Corporate Income Tax ($10.8 million) and Public
Utilities Gross

<PAGE>
-20-

Earnings Taxes ($3.3 million) being offset by lower estimates for financial
institutions ($10.9 million), insurance companies ($2.0 million), and bank
deposit taxes ($1.1 million).

Estimated sales tax revenues of $488.5 million reflects 6.4% growth
over fiscal year 1996 receipts. The estimate is $4.1 million over the December
estimate. There was little change to the December estimates for the other sales
and use type taxes.

Other adjustments include: an increase of $1.8 million in inheritance
taxes; a downward revision of $3.0 million for department earnings; and a $3.3
million increase to lottery revenues. The lottery estimate change includes a
$6.9 million increase to the video lottery terminal estimate and a $1.0 million
increase to the KENO estimate offset by a decrease of $4.6 million to the
December estimate for the regular games, including Powerball.

The estimate also contains adjustments to the December estimates that
are included in the Governor's Budget that do not require legislation, a
reclassification in reappropriations of $12.2 million to surplus, plus changes
to current law contained in 97-H-5742, Substitute A.

FISCAL YEAR 1998. The fiscal year 1998 estimate was revised upward by
$34.3 million over the December Conference estimates primarily as a result of
larger fiscal year 1997 estimates. The discussion that follows details the
revisions made based on current law.

Personal income tax revenues are estimated to grow 3.0% to $642.5
million for fiscal year 1998. This is an increase of $25.5 million from the
December estimate. The overall estimate for personal income tax reflects: 2.3%
growth on estimated returns; 2.8% growth on final payments; an increase of 2.9%
to refunds; and, 3.2% growth for withholding receipts. The estimate reflects a
forecast end to the marked stock market growth fueling fiscal year 1997 returns,
and slower growth in withholdings.

Total business taxes are estimated at $193.4 million, which is a
decrease of $4.1 million from the December estimate. The estimate is $25.0
million below the revised fiscal year 1997 estimate, reflecting zero percent
adjusted growth on most sources combined with decreases due to tax law changes
lowering the public utilities gross earnings tax on energy used in
manufacturing, the telephone tax, electric utility restructuring, eliminating
the bank deposits tax on banks, ending the nursing home tax in September, and
the non-recurrence of $7.7 million for financial institutions.

Estimated sales tax revenues of $502.9 million are $2.9 million above
the December estimate reflecting 3.3% adjusted growth over fiscal year 1997.
Estimates for other taxes and departmental earnings were adjusted based upon the
revisions to the fiscal year 1997 estimates. The decrease from fiscal year 1997
to fiscal year 1998 for licenses and fees reflects the end of the tax on
hospitals at the end of fiscal year 1997 under current law.

Lottery estimates were increased $9.8 million solely as a result of
increased video lottery terminal estimates. The Conference members agreed to a
video lottery terminal estimate reflecting 12.5% growth, down from the 30 plus
percent growth of recent periods.
<PAGE>
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EXPENDITURES

Expenditures for fiscal year 1997 reflect General Fund appropriations
which were enacted on July 18, 1996, as modified by the Supplemental
Appropriations Bill enacted on May 17, 1997. Revenues for fiscal year 1997
reflect the May 1997 Revenue Estimating Conference consensus estimates. General
Revenues for fiscal year 1998 are predicted upon consensus estimates of the
Revenue Estimating Conference of May 1997, as adjusted by net revenues changes
recommended by the Governor in the amount of $63.7 million. Expenditures for
fiscal year 1998 reflect the Governor's recommended budget submitted to the
Legislature in February 1997.

The State is required to enact and maintain a balanced budget. In the
event of a budgetary imbalance, the available free surplus will be reduced
and/or additional resources (i.e., taxes, fines, fees, licenses, etc.) will be
required and/or certain of the expenditure controls will be put into effect. A
combination of these measures will be utilized by the State in order to maintain
a balanced budget.

INDEBTEDNESS

Under the State Constitution, the General Assembly has no power to
incur State debts in excess of $50,000 without the consent of the people, except
in the case of war, insurrection or invasion, or to pledge the faith of the
State to the payment of obligations of others without such consent. By judicial
interpretation, the limitation stated above has been judged to include all debts
of the State for which its full faith and credit are pledged, including general
obligation bonds and notes; bonds and notes guaranteed by the State; and debts
or loans insured by agencies of the State, such as the Industrial-Recreational
Building Authority. However, non-binding agreements of the State to appropriate
monies in aid of obligations of a State agency, such as the provisions of law
governing the capital reserve funds of the Port Authority and Economic
Development Corporation, now known as the Rhode Island Economic Development
Corporation, Housing and Mortgage Finance Corporation, or to appropriate monies
to pay rental obligations under State long-term leases, such as the State's
lease agreements with the Convention Center Authority and the Resource Recovery
Corporation, are not subject to this limitation.

DIRECT DEBT. Direct debt is authorized by the voters as general
obligation bonds and notes. As of June 1, 1997, the State had $699,465,036 of
bonds outstanding and $388,627,176 of authorized but unissued direct debt.

GUARANTEED DEBT. Guaranteed debt of the State includes bonds and notes
issued by or on behalf of certain agencies, commissions, and authorities created
by the General Assembly and charged with enterprise undertakings, for the
payment of which debt the full faith and credit of the State are pledged in the
event that the revenues of such entities may at any time be insufficient. These
include the Blackstone Valley District Commission, the Rhode Island Turnpike and
Bridge Authority, and the Narragansett Bay Water Quality Management District
Commission. As of June 1, 1997, these entities had bonds outstanding of
$54,887,449 and $1,514,000 of authorized but unissued debt.

FREE SURPLUS. State law provides that all unexpended or unencumbered
balances of general revenue appropriations, whether regular or special, shall
lapse to General Fund surplus at the end of each fiscal year, provided, however,
that such balances may be reappropriated by the Governor in the ensuing fiscal
year for the same purpose for which the monies were originally appropriated by
the General Assembly. Free surplus
<PAGE>
-22-

is the amount available at the end of any fiscal year for future appropriation
by the General Assembly.

The State is required to enact and maintain a balanced budget. In the
event of a budgetary imbalance, the available free surplus will be reduced
and/or additional resources (i.e. taxes, fines, fees, licenses, etc.) will be
required and/or certain of the expenditure controls will be put into effect.

A combination of these measures will be utilized by the State in order
to maintain a balanced budget.
<PAGE>
APPENDIX B

DESCRIPTION OF SECURITIES RATINGS1/

The ratings of Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Rating Services ("S&P"), and FITCH IBCA, Inc. ("FITCH IBCA") represent
their opinions as to the quality of various debt securities, and are not
absolute standards of quality. Debt securities with the same maturity,
coupon and rating may have different yields, while debt securities of the same
maturity and coupon with different ratings may have the same yield. The ratings
below are as described by the rating agencies. Ratings are generally given to
securities at the time of issuance. While the rating agencies may, from time to
time, revise such ratings, they undertake no obligation to do so.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
FOUR HIGHEST BOND RATINGS

AAA Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally are referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

AA Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower then the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

A Bonds which are rated A possess many favorable investments attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.

BAA Bonds which are rated Baa are considered as medium grade
obligations, since they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any greater length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.

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

1/As described by the rating agencies. Ratings are generally given to securities
at the time of issuance. While the rating agencies may, from time to time,
revise such ratings, they undertake no obligation to do so.
<PAGE>
-2-

Note: Those bonds in the Aa, A and Baa categories which Moody's
believes possess the strongest credit attributes are designated by the symbols
Aa1, A1 and Baa1.

DESCRIPTION OF STANDARD & POOR'S RATING SERVICES
FOUR HIGHEST BOND RATINGS

AAA An obligation rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.

AA An obligation rated AA differs from the highest rated issues only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is still strong.

A An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.

BBB An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

Plus (+) or minus (-): The ratings from AA to BBB may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.

DESCRIPTION OF FITCH IBCA, INC.'S
FOUR HIGHEST INTERNATIONAL LONG-TERM CREDIT RATINGS

When assigning ratings, FITCH IBCA considers the historical and
prospective financial condition, quality of management, and the operating
performance of the issuer and of any guarantor, any special features of a
specific issue or guarantee, the issue's relationship to other obligations of
the issuer, as well as developments in the economic and political
environment that might affect the issuer's financial strength and credit
quality.

Variable rate demand obligations and other securities which contain a
demand feature will have a dual rating, such as 'AAA/F1+'. The first rating
denotes long-term ability to make principal and interest payments. The second
rating denotes ability to meet a demand feature in full and on time.

AAA Highest credit quality. 'AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.

AA Very high credit quality. 'AA' ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.

A High credit quality. 'A' ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
<PAGE>
-3-

capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings. BBB Good credit
quality. 'BBB' ratings indicate that there is currently a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this capacity. This is the lowest
investment-grade category.

"+" or "-" may be appended to a rating to denote relative status
within major rating categories. Such suffixes are not added to the 'AAA'
long-term category.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
TWO HIGHEST RATINGS OF STATE AND MUNICIPAL NOTES

Moody's ratings for state and municipal short-term obligations are
designated Moody's Investment Grade ("MIG"). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors affecting
the liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk, such
as long-term secular trends, may be less important over the short run.

MIG 1/VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.

MIG 2/VMIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

DESCRIPTION OF STANDARD & POOR'S RATING SERVICES
TWO HIGHEST RATINGS OF STATE AND MUNICIPAL NOTES

A S&P note rating reflects the liquidity factors and market access
risks unique to notes. Notes maturing in three years or less will likely receive
a note rating. Notes maturing beyond three years most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:

Amortization schedule -- the larger the final maturity
relative to other maturities, the more likely it will be
treated as a note.

Source of payment -- the more dependent the issue is on the
market for its refinancing, the more likely it will be treated
as a note.

Note rating symbols are as follows:

SP-1 Strong capacity to pay principal and interest. Issues determined to possess
very strong characteristics are given a plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest with some vulnerability
to adverse financial and economic changes over the term of the notes.

DESCRIPTION OF STANDARD & POOR'S RATING SERVICES
RATINGS OF TAX-EXEMPT DEMAND BONDS
<PAGE>
-4-

S&P assigns "dual" ratings to all debt issues that have a put or demand
feature as part of their structure.

The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, "AAA/A-1+"). With short-term demand debt, note rating symbols are used
with the commercial paper rating symbols (for example, "SP-1+/A-1+").

DESCRIPTION OF FITCH IBCA, INC.'S
TWO HIGHEST INTERNATIONAL SHORT-TERM CREDIT RATINGS

A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial commitments
in a timely manner.

F1 Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.

F2 Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
TWO HIGHEST SHORT-TERM DEBT RATINGS

Moody's short-term debt ratings are opinions of the ability of issuers
to repay punctually short-term senior debt obligations having an original
maturity not in excess of one year.

PRIME-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics: (1)
leading market positions in well-established industries; (2) high rates of
return on funds employed; (3) conservative capitalization structure with
moderate reliance on debt and ample asset protection; (4) broad margins in
earnings coverage of fixed financial charges and high internal cash generation;
and (5) well-established access to a range of financial markets and assured
sources of alternate liquidity.

PRIME-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

DESCRIPTION OF STANDARD & POOR'S RATING SERVICES
TWO HIGHEST COMMERCIAL PAPER RATINGS
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-5-

A S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.

A-1 A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligations is still strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.

A-2 A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
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INVESTMENT ADVISERS BOSTON 1784 FUNDS(REGISTRATION MARKET)

BankBoston, N.A. BOSTON 1784 TAX-FREE MONEY MARKET FUND
100 Federal Street BOSTON 1784 U.S. TREASURY MONEY MARKET FUND
Boston, Massachusetts 02110 BOSTON 1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
BOSTON 1784 PRIME MONEY MARKET FUND
Kleinwort Benson Investment BOSTON 1784 INSTITUTIONAL PRIME MONEY MARKET FUND
Management Americas Inc. BOSTON 1784 SHORT-TERM INCOME FUND
75 Wall Street BOSTON 1784 INCOME FUND
New York, New York 10005 BOSTON 1784 U.S. GOVERNMENT MEDIUM-TERM INCOME FUND
BOSTON 1784 TAX-EXEMPT MEDIUM-TERM INCOME FUND
DISTRIBUTOR BOSTON 1784 CONNECTICUT TAX-EXEMPT INCOME FUND
BOSTON 1784 FLORIDA TAX-EXEMPT INCOME FUND
SEI Investments Distribution Co. BOSTON 1784 MASSACHUSETTS TAX-EXEMPT INCOME FUND
1 Freedom Valley Drive BOSTON 1784 RHODE ISLAND TAX-EXEMPT INCOME FUND
Oaks, Pennsylvania 19456 BOSTON 1784 ASSET ALLOCATION FUND
BOSTON 1784 GROWTH AND INCOME FUND
ADMINISTRATOR BOSTON 1784 GROWTH FUND
BOSTON 1784 SMALL CAP EQUITY FUND
SEI Fund Resources BOSTON 1784 LARGE CAP EQUITY FUND
1 Freedom Valley Drive BOSTON 1784 INTERNATIONAL EQUITY FUND
Oaks, Pennsylvania 19456

LEGAL COUNSEL

Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103 STATEMENT OF ADDITIONAL INFORMATION

CUSTODIAN

BankBoston, N.A. OCTOBER 1, 1997, AS SUPPLEMENTED
100 Federal Street NOVEMBER 5, 1997, DECEMBER 2, 1997
Boston, Massachusetts 02110 AND FEBRUARY 27, 1998

- ----------------------------------------------------
Boston 1784 Funds(REGISTRATION MARK):
[BULLET] are not insured by the FDIC or any other governmental agency;
[BULLET] are not guaranteed by BankBoston, N.A. or any of its affiliates;
[BULLET] are not deposits or obligations of BankBoston, N.A. or any of
its affiliates; and
[BULLET] involve investment risks, including possible loss of principal.
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BankBoston, N.A. serves as investment adviser, shareholder servicing agent and
custodian for Boston 1784 Funds. Boston 1784 Funds are distributed by SEI
Investments Distribution Co., a party independent of BankBoston, N.A. and any of
its affiliates. Financial Services Counselors are registered representatives of
BankBoston Investor Services, Inc., (member NASD/SIPC) a wholly-owned subsidiary
of BankBoston, N.A.