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APPENDIX A
DESCRIPTION OF RATINGS
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The following descriptions are summaries of certain published ratings.
Description of Commercial Paper Ratings
--------------------------------------------------------------------------------
The following descriptions of commercial paper ratings have been published by
Standard and Poor's Ratings Group ("S&P"), Xxxxx'x Investors Service, Inc.
("Moody's"), Fitch Investors Service, Inc. ("Fitch"), Duff and Xxxxxx, Inc.
("Duff"), and IBCA Limited and IBCA, Inc. (together, "IBCA"). As of the date
hereof, each of S&P, Moody's, Fitch, Duff and IBCA is a nationally recognized
statistical rating organization within the meaning of applicable SEC rules.
S&P's ratings are graded into several categories of which A is the highest.
This category is divided into sub-categories as follows:
A-1 This highest sub-category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
Commercial paper issues rated Prime-1 or Prime-2 by Moody's are judged by
Moody's to be of "superior" quality and "strong" quality, respectively, on the
basis of relative repayment capacity.
Commercial paper issues rated F-1+, F-1 and F-2 by Fitch are judged by Fitch to
be of "exceptionally strong" quality, "very strong" quality and "good" quality,
respectively, on the basis of relative repayment capacity.
The rating Duff-1+ is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1+ is regarded as having the highest certainty of timely
payment with outstanding liquidity factors and safety just below risk free U.S.
Treasury short-term obligations. Paper rated Duff-1 is regarded as having a
very high certainty of timely payment, excellent liquidity factors and good
fundamental protection factors. Risk factors are minor.
The designation A1 by IBCA indicates that the obligation is supported by the
highest capacity for timely repayment. Where issues possess a particularly
strong credit feature, a rating of A1+ is assigned. Obligations rated A2 are
supported by a good capacity for timely repayment.
Description of Municipal Note Ratings
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S&P's municipal note ratings reflect the liquidity concerns and market access
risks unique to notes. An SP-1 rating indicates a strong capacity to pay
principal and interest. Issues determined to possess very strong
characteristics are given a plus (+) designation. An SP-2 rating indicates a
satisfactory capacity to pay principal and interest, with some vulnerability to
adverse financial and economic changes over the term of the notes.
Moody's MIG-1/VMIG-1 designation denotes best quality. Municipal notes that
obtain this rating possess strong protection due to established cash flows,
superior liquidity support or demonstrated broad-based access to the market for
refinancing. Moody's MIG-2/VMIG-2 designation denotes high quality. Margins of
protection are ample although not so large as in the MIG-1/VMIG-1 group.
A-1
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APPENDIX B
TAXABLE EQUIVALENT YIELD TABLE
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This table is for illustrative purposes only and is not intended to predict the
actual return an individual would earn on an investment in the 1784 Tax-Free
Money Market Fund. No assurance can be made that the Fund will attain any
particular yield. The tax rates used in these tables are based upon published
1995 marginal tax rates currently available and scheduled to be in effect. The
tables do not take into account changes in tax rates that are proposed from
time to time. Investors should consult their tax advisers to determine their
actual tax rates.
1784 TAX-FREE MONEY MARKET FUND
Find your Federal tax bracket based on your taxable income.
You would need the taxable yield
listed opposite the Federal
1995 tax bracket in the chart below to
Taxable Income* Federal have a tax-exempt yield of:
---------------------------------------- Marginal -----------------------------------
Single Joint Rate 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%
------------ ------------------- -------- ----- ----- ----- ----- ----- -----
$ 23,351-- 56,550 $ 39,001-- 94,250 28.00% 2.08% 2.78% 3.47% 4.17% 4.86% 5.56%
56,551-- 117,950 94,251--143,600 31.00% 2.17% 2.90% 3.62% 4.35% 5.07% 5.80%
117,951-- 256,500 143,601--256,500 36.00% 2.34% 3.13% 3.91% 4.69% 5.47% 6.25%
256,501 and more 256,501 and more 39.60% 2.48% 3.31% 4.14% 4.97% 5.79% 6.62%
*This amount represents taxable income as defined in the Internal Revenue Code.
Note: Information in this table is provided as of June 30, 1995.
B-1
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PROSPECTUS
[LOGO OF 1784 FUNDS APPEARS HERE]
Investment Adviser:
THE FIRST NATIONAL BANK OF BOSTON
1784 FUNDS (the "Trust") is a mutual fund consisting of several professionally
managed portfolios, or funds, of securities. The Trust provides a convenient
way to invest in one or more of these funds. This Prospectus relates to shares
of the 1784 TAX-FREE MONEY MARKET FUND and Class A shares of the 1784 U.S.
TREASURY MONEY MARKET FUND. The 1784 Tax-Free Money Market Fund and the 1784
U.S. Treasury Money Market Fund are referred to herein as the "Funds" or the
"Money Market Funds."
The Fund shares described in this Prospectus ("Shares") are offered primarily
to individuals and institutional investors, including accounts for which The
First National Bank of Boston ("Bank of Boston"), its affiliates and
correspondents, and other financial institutions act in a fiduciary, agency or
custodial capacity. Investors in Shares are referred to hereinafter as
"Shareholders." Shares are currently offered without any sales charges or
distribution fees.
AN INVESTMENT IN THE MONEY MARKET FUNDS IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT ANY MONEY MARKET FUND
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, BANK OF BOSTON OR ANY OF ITS AFFILIATES. THE SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY AND INVOLVE INVESTMENT RISKS, INCLUDING RISK
TO PRINCIPAL.
This Prospectus sets forth concisely the information about the Trust and the
Funds that a prospective investor should know before investing in the Funds.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated October 2, 1995, has
been filed with the Securities and Exchange Commission (the "SEC") and is
available without charge through the Distributor, SEI Financial Services
Company, 000 Xxxx Xxxxxxxxxx Xxxx, Xxxxx, XX 00000 or by calling 1-800-BKB-
1784. The Statement of Additional Information is incorporated into this
Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
OCTOBER 2, 1995
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EXPENSE SUMMARY
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Following are (i) a tabular summary of expenses relating to purchases and sales
of shares of the 1784 Tax-Free Money Market Fund and Class A shares of the 1784
U.S. Treasury Money Market Fund and annual operating expenses of the Funds, and
(ii) an example illustrating the dollar cost of such expenses on a hypothetical
$1,000 investment in shares of each of the Funds.
Shareholder Transaction Expenses
--------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of the offering price) None
Sales Charge Imposed on Reinvested Dividends
(as a percentage of the offering price) None
Deferred Sales Charge Imposed on Redemptions (as a percentage of the of-
fering price) None
Redemption Fees (1) None
Exchange Fee None
Annual Operating Expenses
--------------------------------------------------------------------------------
(As a percentage of average net assets)
1784 U.S.
Treasury
1784 Tax- Money Market
Free Fund
Money Market Class A
Fund Shares
--------------------------------------------------------------
Advisory Fees (after fee waiver)(2) 0.33% 0.40%
Other Expenses (2) 0.20% 0.25%
--------------------------------------------------------------
Total Operating Expenses (2) 0.53% 0.65%
--------------------------------------------------------------------------------
(1) If proceeds of a redemption of Fund shares are paid by wire transfer, a
wire transfer charge (presently $12.00) will be imposed.
(2) Bank of Boston, which serves as the Adviser for the Trust, has agreed to
waive its fee in an amount that operates to limit total operating expenses of
each of the Money Market Funds to not more than 0.65% of that Fund's average
daily net assets on an annualized basis; this limitation would not apply to any
brokerage commissions, interest expense or taxes or to extraordinary expense
items, including but not limited to litigation expenses. SEI Financial
Management Corporation, which acts as the Trust's Administrator, has agreed to
waive its fee from certain funds of the Trust to assist these funds in
maintaining a competitive expense ratio. Bank of Boston contributes to the
Funds in order to limit other operating expenses and to assist the Funds in
maintaining a competitive expense ratio. Fee waivers by the Adviser and the
Administrator, and contributions by the Bank of Boston, are voluntary and may
be terminated at any time. From time to time the Adviser may also waive
additional portions of its fees to reduce net operating expense to less than
that shown in the table above. Certain other parties may also agree to waive
portions of their fees from time to time on a month to month basis. Additional
information may be found under "The Adviser" and "The Administrator." Absent
waivers, the Adviser's investment advisory fee is calculated at an annual rate
of 0.40% of the average daily net assets of each Fund. Absent the waiver of
fees by the Adviser and Administrator, and voluntary contributions by the Bank
of Boston, other expenses and estimated total operating expenses would be as
follows: 0.24% and 0.64% of average daily net assets of the 1784 Tax-Free Money
Market Fund and 0.67% and 0.97% of average daily net assets represented by
Class A shares of the 1784 U.S. Treasury Money Market Fund. Other expenses are
based on actual expenses for each Fund's fiscal year ended May 31, 1995, and
include expense items described under "General Information -- The Trust." A
person who purchases shares through a financial institution may be charged
separate fees by the financial institution.
Example
--------------------------------------------------------------------------------
An investor would pay the following expenses on a hypothetical $1,000
investment assuming a 5% annual
2
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total return and redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------------------------
1784 Tax-Free Money Market Fund $5 $17 $30 $66
1784 U.S. Treasury Money Market Fund Class A
Shares $ 7 $21 $36 $81
Absent voluntary waivers by the Adviser and Administrator and contributions
made by the Bank of Boston, the amounts for this example for one year, three
years, five years and ten years would be $7, $20, $36 and $80 for shares of the
1784 Tax-Free Money Market Fund and $10, $31, $54 and $119 for Class A shares
of the 1784 U.S. Treasury Money Market Fund. The example is based on actual
expenses for each Fund's fiscal year ended May 31, 1995. THE EXAMPLE SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RETURN AND ACTUAL
EXPENSES AND RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose of
this table is to assist the investor in understanding the various costs and
expenses that may be directly or indirectly borne by investors in the Funds.
Additional information may be found under "General Information -- The Trust,"
"The Adviser," and "The Administrator."
SUMMARY
--------------------------------------------------------------------------------
The following information is qualified in its entirety by reference to the more
detailed information included elsewhere in this Prospectus and in the Statement
of Additional Information.
1784 Funds (the "Trust") is an open-end management investment company which
provides a convenient way to invest in one or more professionally managed funds
of securities. The following provides basic information about the 1784 Tax-Free
Money Market Fund and 1784 U.S. Treasury Money Market Fund (each, a "Fund" or a
"Money Market Fund," and collectively, the "Funds" or the "Money Market
Funds"). Each of the Money Market Funds is a diversified fund.
What Is the Investment Objective? The investment objective of the 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 the 1784 U.S. Treasury Money Market Fund is to preserve
principal value and maintain a high degree of liquidity while providing current
income. Each Fund's investment objective may be changed only with the consent
of holders of a majority of that Fund's outstanding shares. There can be no
assurance that any Money Market Fund will achieve its investment objective. See
"Investment Objective" and "Investment Limitations."
What Are the Permitted Investments? Each of the Funds will limit its
investments to "eligible securities" under applicable SEC rules which are
deemed to present minimal credit risks. The securities in each Fund's portfolio
mature or are deemed to mature within 397 days, and the average maturity of the
investments in each Fund's portfolio (on a dollar-weighted basis) is 90 days or
less. The 1784 Tax-Free Money Market Fund under normal circumstances invests at
least 80% of its net assets in securities issued by or on behalf of the states,
territories and possessions of the United States, 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. The 1784 U.S. Treasury Money Market Fund under normal
circumstances invests at least 65% of its total assets in U.S. Treasury
Obligations and repurchase agreements involving such obligations. Under normal
circumstances the Fund intends to invest the balance of its investable assets
in other securities issued or guaranteed as to principal and interest by the
U.S. Government or any of its agencies or instrumentalities (collectively,
"U.S. Government Obligations") and repurchase agreements involving such
obligations. Distributions of the 1784 U.S. Treasury Money Market Fund derived
from interest on obligations of the U.S. Government and certain of its agencies
and instrumentalities may be exempt from state and local
3
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taxes in certain states. See "Taxes," "Investment Policies," "Description of
Permitted Investments and Techniques" and "Certain Investment Policies and
Guidelines."
Who Is the Adviser? The First National Bank of Boston ("Bank of Boston" or the
"Adviser") serves as the Adviser for the Trust and is entitled to a fee which
is calculated daily and paid monthly at an annual rate of 0.40% of the average
daily net assets of each of the Funds. The Adviser has agreed for an indefinite
period of time to waive all or a portion of its fee in order to limit the total
operating expenses of the Money Market Funds on an annualized basis to not more
than 0.65% of the average daily net assets of each of the Funds. Bank of Boston
contributes to the Funds in order to limit operating expenses and to assist the
Funds in maintaining a competitive expense ratio. Fee waivers and contributions
may be terminated at any time. See "The Adviser."
Who Is the Administrator? SEI Financial Management Corporation serves as the
Administrator for the Trust under an Administration Agreement and is entitled
to a fee which is calculated daily and paid monthly at an annual rate of 0.15%
of the Trust's first $300 million of average daily net assets, 0.12% of the
Trust's second $300 million of average daily net assets and 0.10% of the
Trust's average daily net assets over $600 million. Each Money Market Fund's
portion of such fee is based on that Fund's average daily net assets. The
Administrator has agreed to waive a portion of its fees on a month to month
basis under certain circumstances. See "The Administrator."
Who Is the Shareholder Servicing Agent and Transfer Agent? SEI Financial
Management Corporation acts as dividend disbursing agent and shareholder
servicing agent for the Trust under the Administration Agreement and as
transfer agent for the Trust under a separate transfer agent agreement. See
"The Shareholder Servicing and Transfer Agent."
Who Is the Distributor? SEI Financial Services Company acts as distributor of
the Trust's shares. No compensation is paid to the Distributor for distribution
services for shares of the 1784 Tax-Free Money Market Fund or Class A shares of
the 1784 U.S. Treasury Money Market Fund. See "The Distributor."
How Do I Purchase Shares? Purchases may be made through the Distributor by the
close of business Monday through Friday except on days when the New York Stock
Exchange or the Federal Reserve Bank of Boston is closed ("Business Days").
Shares may also be purchased through broker-dealers which have established
dealer agreements with the Distributor. Purchase orders submitted through
broker-dealers normally will be received by the Distributor on the Business Day
after they are received by the broker-dealer.
A purchase order will be effective as of the Business Day the order is received
by the Distributor if the Distributor receives a purchase order in good form
and payment of federal funds before 12:00 noon Eastern Time ("ET") on that day.
The purchase price for shares of the 1784 Tax-Free Money Market Fund and Class
A shares of the 1784 U.S. Treasury Money Market Fund is the net asset value per
share (normally $1.00) next determined after the purchase order and federal
funds are received and accepted by the Distributor. When a Shareholder
purchases shares by check, the order is considered received by the Distributor
when the check is converted into federal funds, normally within two Business
Days. Shares purchased will begin accruing dividends on the date of purchase.
The minimum initial investment is $1,000; all subsequent purchases must be at
least $250. Minimum investment requirements are lower for accounts established
for automatic investment programs and under tax-deferred retirement programs
(including IRAs). See "Purchase of Shares."
How Do I Redeem Shares? Redemptions may be made through the Transfer Agent on
any Business Day. Redemption orders must be placed in good form prior to 12:00
noon ET on any Business Day to be effective on that day. See "Redemption of
Shares."
How Are Distributions Paid? Substantially all of the net investment income
(exclusive of capital gains) of each
4
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of the Funds is determined and declared on each Business Day as a dividend to
shareholders of record as of the close of business on that day. On redemption,
a Shareholder will receive dividends up to but not including the day a valid
redemption request is received by the Transfer Agent. Any capital gains will be
distributed at least annually. Distributions are paid in additional shares of
the 1784 Tax-Free Money Market Fund or Class A shares of the 1784 U.S. Treasury
Money Market Fund, as applicable, unless the Shareholder elects to take the
payment in cash. See "Dividends and Distributions."
How Do I Make Exchanges? Once payment for Shares has been received by the
Distributor, those shares may be exchanged for shares of one or more other
portfolios of the Trust at net asset value, provided the amount of the exchange
meets the minimum investment requirements for the other portfolio of the Trust.
There are no charges for an exchange. If an exchange request in good order is
received by the Distributor by 12:00 noon ET on any Business Day, the exchange
usually will occur on that day. A Shareholder must obtain and should read the
prospectus of the other portfolio and consider the differences in investment
objectives and policies before making any exchange. See "Exchanges."
CONDENSED FINANCIAL INFORMATION
--------------------------------------------------------------------------------
The following table provides condensed financial information about the Money
Market Funds for the period from the commencement of operations (June 7, 1993
for the 1784 U.S. Treasury Money Market Fund and June 14, 1993 for the 1784
Tax-Free Money Market Fund) through May 31, 1995. The information should be
read in conjunction with the financial statements appearing in the Funds'
Annual Report to Shareholders, which are incorporated by reference in the
Statement of Additional Information. The financial statements and notes, as
well as the table below, covering the period through May 31, 1995 have been
audited by Coopers & Xxxxxxx L.L.P., independent accountants, whose report is
included in the Funds' Annual Report. Copies of the Annual Report may be
obtained without charge from the Distributor. Only Class A shares of the 1784
U.S. Treasury Money Market Fund were outstanding during the period covered by
the table.
FINANCIAL HIGHLIGHTS
Shares of the 1784 Tax-Free Money Market Fund and Class A Shares of the 1784
U.S. Treasury Money Market Fund
For the Period Ended May 31, 1995
--------------------------------------------------------------------------------
For a Share Outstanding Throughout the Period
Ratio Ratio of
Net Net Ratio of Expenses Net Income
Asset Dividends Net Assets Ratio of Net to Average to Average
Value Net from Net Asset Value End of Expenses Income Net Assets Net Assets
Beginning Investment Investment End Total of Period to Average to Average (Excluding (Excluding
of Period Income Income of Period Return (000) Net Assets Net Assets Waivers) Waivers)
--------- ---------- ---------- ----------- ------ --------- ----------- ---------- ----------- ----------
TAX-FREE
MONEY MARKET(1)
====================
6/14/93-5/31/94 $1.00 0.02 (0.02) $1.00 2.31%* $407,448 0.27%** 2.39%** 0.71%** 1.95 %**
6/1/94-5/31/95 $1.00 0.03 (0.03) $1.00 3.29% $539,412 0.50% 3.28% 0.61% 3.17 %
U.S. TREASURY
MONEY MARKET(2)
====================
6/7/93-5/31/94 $1.00 0.03 (0.03) $1.00 2.64%* $ 5,593 0.65%** 2.91%** 6.42%** (2.86)%**
6/1/94-5/31/95 $1.00 0.05 (0.05) $1.00 4.81% $55,068 0.60% 5.13% 0.92% 4.81 %
* Returns are for the period indicated and have not been annualized.
** Ratios for this period have been annualized.
(1) The Tax-Free Money Market Fund commenced operations on June 14, 1993.
(2) The U.S. Treasury Money Market Fund commenced operations on June 7, 1993.
-------------
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THE TRUST
--------------------------------------------------------------------------------
1784 Funds (the "Trust") is an open-end management investment company that
offers units of beneficial interest, or shares, in several separate
professionally managed investment portfolios, or funds. Shares of the funds may
be offered in one or more classes. Each share of each fund or class represents
an undivided, proportionate interest in that fund or the assets of that fund
allocated to that class. Shares of the 1784 U.S. Treasury Money Market Fund are
offered through three separate classes, Class A, Class C and Class D, which
differ by the amount of distribution costs associated with each class. This
Prospectus relates to Class A shares of the Trust's 1784 U.S. Treasury Money
Market Fund and shares of the Trust's 1784 Tax-Free Money Market Fund, each of
which is a diversified fund. Information regarding Class C and Class D shares
of the 1784 U.S. Treasury Money Market Fund and shares of the Trust's other
funds is contained in separate prospectuses that may be obtained from the
Trust's distributor, SEI Financial Services Company (the "Distributor"), 000
Xxxx Xxxxxxxxxx Xxxx, Xxxxx, Xxxxxxxxxxxx 00000, or by calling 1-800-BKB-1784.
INVESTMENT OBJECTIVE
--------------------------------------------------------------------------------
The investment objective of the 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 the 1784 U.S. Treasury Money Market Fund is to
preserve principal value and maintain a high degree of liquidity while
providing current income.
There can be no assurance that the investment objective of any Money Market
Fund will be met. The investment objective of each Fund is a fundamental policy
of that Fund, and therefore cannot be changed without the consent of holders of
a majority of that Fund's outstanding shares. See "Investment Limitations."
INVESTMENT POLICIES
--------------------------------------------------------------------------------
Each of the Money Market Funds is required to comply with regulations of the
SEC applicable to money market funds using the amortized cost method for
calculating net asset value. These regulations impose certain quality, maturity
and diversification restraints on investments by each of the Funds. Under these
regulations, a Fund will invest only in U.S. dollar-denominated securities,
will maintain an average maturity on a dollar-weighted basis of 90 days or
less, and will acquire only "eligible securities" (as defined under applicable
SEC rules) that have a maturity of 397 days or less and that present minimal
credit risks as determined by or on behalf of the Board of Trustees of the
Trust. In certain circumstances, the maturity of a security will be deemed to
be the period remaining until the next interest rate adjustment date or until
payment of the security may be demanded. For a further discussion of these
rules (including the definition of "eligible securities"), see "Description of
Permitted Investments and Techniques -- Restraints on Investments by Money
Market Funds."
The 1784 Tax-Free Money Market Fund is a diversified fund which, as a matter of
fundamental policy, will invest at least 80% of its net assets under normal
market conditions in eligible securities 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").
The 1784 Tax-Free Money Market Fund may purchase municipal obligations with
demand features, including floating or variable rate obligations. In addition,
the Fund may invest in commitments to purchase securities on a "when-issued"
basis, and reserves the right to purchase securities subject to a standby
commitment. The Adviser has discretion to invest up to 20% of the Fund's net
assets in securities subject to the alternative minimum tax and the following
types of taxable money
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market instruments: (1) securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities; (2) repurchase agreements; (3) bank
obligations described under "Description of Permitted Investments and
Techniques;" (4) asset-backed securities; and (5) commercial paper, other
short-term debt instruments and variable and floating rate instruments. All
such taxable money market instruments must comply with the limitations on
investments described under "Description of Permitted Investments and
Techniques -- Restraints on Investments by Money Market Funds."
For more information regarding the permitted investments and investment
practices of the 1784 Tax-Free Money Market Fund, the purposes of these
investments and investment practices and certain risks associated with certain
of these investments and investment practices, see "Certain Investment Policies
and Guidelines" and "Description of Permitted Investments and Techniques."
The 1784 U.S. Treasury Money Market Fund is a diversified fund which will under
normal circumstances invest at least 65% of its total assets in bills, notes,
and bonds issued by the U.S. Treasury and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal Reserve book-entry system (such component parts of obligations are
commonly referred to as "STRIPS" and all of the foregoing obligations are
referred to collectively as "U.S. Treasury Obligations") and in repurchase
agreements involving U.S. Treasury Obligations. In addition to U.S. Treasury
Obligations, the Fund may invest in other securities issued or guaranteed as to
principal and interest by the U.S. Government or any of its agencies and
instrumentalities (the foregoing obligations are referred to collectively as
"U.S. Government Obligations") and repurchase agreements involving U.S.
Government Obligations. Under normal circumstances the Fund intends to invest
all of its investable assets in U.S. Treasury Obligations, U.S. Government
Obligations and repurchase agreements involving U.S. Treasury Obligations or
U.S. Government Obligations.
For more information regarding the permitted investments and investment
practices of the 1784 U.S. Treasury Money Market Fund, the purposes of these
investments and investment practices and certain risks associated with certain
of these investments and investment practices, see "Certain Investment Policies
and Guidelines" and "Description of Permitted Investments and Techniques."
CERTAIN INVESTMENT POLICIESAND GUIDELINES
--------------------------------------------------------------------------------
A Money Market Fund's investments in STRIPS will be limited to securities with
maturities of less than 397 days. Investing in these securities entails certain
risks, including that these interest components may be more volatile in market
value than Treasury bills of comparable maturity, as further described in
"Description of Permitted Investments and Techniques." No Money Market Fund may
invest more than 20% of its total assets in STRIPS or actively trade STRIPS
(i.e., combine the components of STRIPS to create derivative securities).
Each Money Market Fund may invest in when-issued securities and variable rate
and floating rate obligations. When investing in when-issued securities, a Fund
will not accrue income until delivery of the securities and will invest in such
securities only for the purpose of actually acquiring the securities and not
for the purpose of leveraging. Investing in when-issued securities may have the
effect of leveraging. A Fund may invest up to 25% of its total assets in
forward commitments or commitments to purchase securities on a when-issued
basis. While awaiting delivery of securities purchased on such basis, a Fund
will establish a segregated account consisting of cash, short-term money market
instruments or high quality debt securities equal to the amount of the
commitments to purchase securities on such basis.
In addition, each Money Market Fund may, from time to time, engage in
securities lending; however, loans made by a Fund of the securities it holds
may not exceed 33 1/3% of that Fund's total assets.
7
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INVESTMENT LIMITATIONS
--------------------------------------------------------------------------------
The investment objective of each Fund and the following investment limitations
are fundamental policies of that Fund. It is also a fundamental policy of the
1784 Tax-Exempt Money Market Fund to invest at least 80% of its net assets
under normal market conditions in Municipal Securities. Fundamental policies
cannot be changed with respect to a Fund without the consent of the holders of
a majority of that Fund's outstanding shares. The term "majority of the
outstanding shares" means the vote of (i) 67% or more of the Fund's shares
present at a meeting, if more than 50% of the outstanding shares of the Fund
are present or represented by proxy, or (ii) more than 50% of the Fund's
outstanding shares, whichever is less.
A Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and repurchase agreements
involving such securities) if as a result more than 5% of the total assets of
the Fund would be invested in the securities of such issuer or more than 10% of
the outstanding voting securities of such issuer would be owned by the Fund;
provided, however, that the 1784 Tax-Free Money Market Fund may invest up to
25% of its total assets without regard to this restriction as permitted by
applicable law. The U.S. Treasury Money Market Fund will be diversified with
respect to 100% of its assets provided that the Fund may invest up to 25% of
its total assets in a single issuer for a period of up to three business days
if such securities qualify as "first tier securities" under applicable SEC
rules. The 1784 Tax-Free Money Market Fund will be diversified with respect to
75% of its total assets. For purposes of these limitations, loan participations
are considered to be issued by both the issuing bank and the underlying
corporate borrower, and a repurchase agreement is deemed to be an acquisition
of the underlying securities, provided that the seller's obligation to
repurchase the securities from the Fund is fully collateralized.
2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry or securities the
interest upon which is paid from revenue of similar type of industrial
development projects, provided that this limitation does not apply to (i)
investments in obligations issued or guaranteed by the U.S. Government or any
of its agencies and instrumentalities and repurchase agreements involving such
securities; (ii) obligations issued by domestic banks, foreign branches of
domestic banks and U.S. branches of foreign banks, to the extent that the Fund
may under the Investment Company Act of 1940, as amended, reserve freedom of
action to concentrate its investments in such securities; and (iii) in the case
of the 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 clause
(ii). For purposes of these limitations, (i) loan participations are considered
to be issued by both the issuing bank and the underlying corporate borrower;
(ii) utility companies will be divided according to their services; for
example, gas, gas transmission, electric and telephone will each be considered
a separate industry; and (iii) financial service companies will be classified
according to the end users of their services; for example, automobile finance,
bank finance and diversified finance will each be considered a separate
industry.
3. Make loans, except that 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
this Prospectus and in the Statement of Additional Information.
4. 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 the Fund's total assets and then only as a temporary measure for
extraordinary or emergency purposes (e.g., to meet Shareholder redemption
requests). A Fund will not purchase any securities for
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its portfolio at any time at which its borrowings equal or exceed 5% of its
total assets (taken at market value).
The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.
THE ADVISER
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The First National Bank of Boston ("Bank of Boston" or the "Adviser") manages
the assets of each Fund pursuant to an Investment Advisory Agreement (the
"Advisory Agreement") with the Trust. Subject to such policies as the Board of
Trustees of the Trust may determine, the Adviser makes investment decisions for
each Fund. For its services under the Advisory Agreement, the Adviser receives
from each Fund a fee accrued daily and paid monthly at an annual rate equal to
0.40% of the average daily net assets of that Fund. However, the Adviser has
agreed for an indefinite period of time to waive all or a portion of its fees
in order to limit the total operating expenses of each of the Funds on an
annualized basis to not more than 0.65% of its average daily net assets; this
limitation would not apply to any brokerage commissions, interest expense or
taxes or to extraordinary expense items, including but not limited to
litigation expenses. Fee waivers may be terminated at any time. From time to
time the Adviser may also waive additional portions of its fees to reduce net
operating expenses to less than the amount specified above. For the fiscal year
ended May 31, 1995, the fees payable to Bank of Boston under the Advisory
Agreement with respect to each of the Funds were as follows: for 1784 Tax-Free
Money Market Fund, $1,876,167, of which $405,489 was voluntarily waived (after
giving effect to such waiver, 0.31% of such Fund's average daily net assets for
that period); and for 1784 U.S. Treasury Money Market Fund, $101,839, of which
$32,878 was voluntarily waived (after giving effect to such waiver, 0.27% of
such Fund's average daily net assets for that period). In addition, the Bank of
Boston contributed $101,116 to the 1784 Tax-Free Money Market Fund and $14,629
to the 1784 U.S. Treasury Money Market Fund to decrease the Funds' other
operating expenses and to assist the Funds in maintaining a competitive expense
ratio. The Funds may execute brokerage or other agency transactions through the
Adviser or an affiliate.
Bank of Boston, a national banking association, is the successor to a number of
banking institutions, the first of which was chartered in 1784. All of the
capital stock of Bank of Boston (except directors' qualifying shares) is owned
by Bank of Boston Corporation, a registered bank holding company. Bank of
Boston is engaged in providing a wide variety of financial services to
individuals, corporate and institutional customers, governments, and other
financial institutions throughout New England, the United States and
internationally. These services include individual and community banking,
consumer finance, mortgage origination and servicing, domestic corporate and
investment banking, leasing, international banking services, commercial real
estate lending, private banking, trust services, correspondent banking, and
securities and payments processing. Bank of Boston's principal business address
is 000 Xxxxxxx Xxxxxx, Xxxxxx, XX 00000. Prior to the organization of the Trust
in 1993, the Adviser had not served as the investment adviser for management
investment companies. The Adviser also manages the other funds comprising the
Trust.
Bank of Boston has been providing asset management services since 1890. Its
portfolio managers are responsible for investing in money market, equity, and
fixed income securities and they have earned national recognition and respect.
The investment management group within Bank of Boston which manages the Money
Market Funds is the same group which has managed Bank of Boston's collective
trust funds with similar investment objectives. As of December 31, 1994, Bank
of Boston and its affiliates managed more than $13 billion in assets worldwide.
Bank of Boston and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of the
Funds, including outstanding loans to such issuers which may be repaid in whole
or in part with the proceeds of
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securities so purchased. Bank of Boston and its affiliates deal, trade and
invest for their own account in certain types of securities purchased on behalf
of the Funds. Bank of Boston and its affiliates may sell such securities to and
purchase them from other investment companies sponsored by SEI Financial
Services Company or its affiliates. The Adviser has informed the Trust that, in
making its investment decisions, it does not obtain or use material inside
information in the possession of any division or department of Bank of Boston
or in the possession of any affiliate of Bank of Boston.
The Xxxxx-Xxxxxxxx Act prohibits certain financial institutions, such as Bank
of Boston, from engaging in the business of underwriting securities of open-end
investment companies, such as the Funds. Bank of Boston takes the position,
based on the advice of counsel, that the investment advisory services it
provides under the Advisory Agreement do not constitute underwriting activities
and are consistent with the requirements of the Xxxxx-Xxxxxxxx Act and other
relevant federal and state legal and regulatory precedent. State laws on this
issue may differ from applicable federal law, and banks and financial
institutions may be required to register as dealers pursuant to state
securities laws. Future changes in either federal or state statutes or
regulations relating to the permissible activities of banks, as well as future
judicial or administrative decisions and interpretations of present and future
federal and state statutes and regulations, could prevent Bank of Boston from
continuing to perform such services for the Trust. If Bank of Boston were to be
prevented from acting as the Adviser, the Trust would seek alternative means
for obtaining such services.
THE ADMINISTRATOR
--------------------------------------------------------------------------------
SEI Financial Management Corporation (the "Administrator"), a wholly-owned
subsidiary of SEI Corporation ("SEI"), and the Trust are parties to an
administration agreement dated as of June 1, 1993 (the "Administration
Agreement"). Under the terms of the Administration Agreement, the Administrator
provides the Trust with administrative services other than investment advisory
services, including all regulatory reporting, necessary office space,
equipment, personnel, and facilities.
The Administrator is entitled to a fee which is calculated daily and paid
monthly at an annual rate of 0.15% of the Trust's first $300 million of average
daily net assets, 0.12% of the Trust's second $300 million of average daily net
assets and 0.10% of the Trust's average daily net assets over $600 million.
Each Money Market Fund's portion of such fee is based on the average daily net
assets of such Fund. The Administrator has agreed to waive a portion of its
fees on a month to month basis under certain circumstances for certain of the
portfolios of the Trust.
THE SHAREHOLDER SERVICING AND TRANSFER AGENT
--------------------------------------------------------------------------------
SEI Financial Management Corporation acts as dividend disbursing agent and
shareholder servicing agent for the Trust. Compensation for these services is
paid under the Administration Agreement. SEI Financial Management Corporation
also acts as transfer agent (the "Transfer Agent") under a separate transfer
agency agreement. The principal business address of the Transfer Agent is 000
Xxxx Xxxxxxxxxx Xxxx, Xxxxx, XX 00000.
THE DISTRIBUTOR
--------------------------------------------------------------------------------
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary
of SEI, and the Trust are parties to a distribution agreement (the
"Distribution Agreement") dated as of June 1, 1993. No compensation is paid to
the Distributor for distribution services with respect to shares of the 1784
Tax-Free Money Market Fund or Class A shares of the 1784 U.S. Treasury Money
Market Fund. Financial institutions that are the record owner of shares for the
accounts of their customers may impose separate fees for the account services
to their customers. The Money Market Funds may execute brokerage or other
agency transactions through the Distributor, for which the Distributor receives
compensation.
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From time to time the Distributor may provide incentive compensation to
employees of banks (including Bank of Boston), broker-dealers and investment
counselors, and to its own employees, in connection with the sale of shares of
the Funds or other portfolios of the Trust. Under any such program, the
Distributor will provide promotional incentives, in the form of cash or other
compensation, including merchandise, airline vouchers, trips and vacation
packages. Such promotional incentives will be offered uniformly to all program
participants and will be predicated upon the amount of shares of the Funds and
other portfolios of the Trust sold by the participant.
PURCHASE OF SHARES
--------------------------------------------------------------------------------
Shares of the 1784 Tax-Free Money Market Fund and Class A shares of the 1784
U.S. Treasury Money Market Fund ("Shares") are sold on a continuous basis and
may be purchased directly from the Trust's Distributor, either by mail or by
telephone. Shares may also be purchased through a broker-dealer which has
established a dealer agreement with the Distributor.
Purchases of Shares may be made Monday through Friday except on days when the
New York Stock Exchange or the Federal Reserve Bank of Boston is closed
("Business Days"). Current holidays for the New York Stock Exchange and/or the
Federal Reserve Bank of Boston are New Year's Day, Xxxxxx Xxxxxx Xxxx Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Thanksgiving and Christmas. Except as provided below, the minimum
initial investment is $1,000 and all subsequent purchases of Shares must be at
least $250. Minimum investment amounts may be waived at the Distributor's
discretion. No minimum purchase amount applies to subsequent purchases made by
reinvestment of dividends.
The purchase price for Shares is their net asset value (normally $1.00 per
share) next determined after the order is received and accepted by the
Distributor. Net asset value per share of each of the Funds is determined as of
12:00 noon ET on each Business Day.
A purchase order for Shares will be effective as of the Business Day the order
is received by the Distributor if the Distributor receives a purchase order in
good form and payment of federal funds before 12:00 noon ET on that day. Shares
may also be purchased through broker-dealers which have established dealer
agreements with the Distributor. Purchase orders submitted through broker-
dealers normally will be received by the Distributor on the Business Day after
they are received by the broker-dealer. When a Shareholder purchases Shares by
check, the order is considered received by the Distributor when the check is
converted into
federal funds, normally within two Business Days.
By Mail
--------------------------------------------------------------------------------
Investors may purchase Shares by completing and signing an Account Application
and mailing it, along with a check (or other negotiable bank instrument or
money order) payable to the Fund in which such Shares are being purchased,
e.g., "1784 Tax-Free Money Market Fund" or "1784 U.S. Treasury Money Market
Fund," to SEI Financial Management Corporation (the "Transfer Agent"), X.X. Xxx
0000, Xxxxx, XX 00000-0000. Subsequent purchases may be made at any time by
mailing a check (or other negotiable bank draft or money order) to the Transfer
Agent.
Account Applications can be obtained by calling the Distributor at 1-800-BKB-
1784.
By Telephone
--------------------------------------------------------------------------------
If a Shareholder has previously submitted an Account Application, that
Shareholder may also purchase Shares by telephone by calling the Distributor
toll-free at 0-000-XXX-0000. Orders by telephone will not be executed until an
Account Application and payment of federal funds have been received.
Tax-Deferred Retirement Programs
--------------------------------------------------------------------------------
The 1784 U.S. Treasury Money Market Fund is eligible for purchase by tax-
deferred programs such as IRAs, KEOGHs and 401(k) plans, and the minimum
initial investment requirement for Class A shares for an
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account established under such a program is $250. Bank of Boston offers a
number of tax-deferred retirement plans through which Class A shares of the
1784 U.S. Treasury Money Market Fund may be purchased. All Fund accounts
established under a tax-deferred retirement program must elect to have all
dividends reinvested in the Fund.
Systematic Investment Plan (SIP)
--------------------------------------------------------------------------------
A Shareholder of any Fund may also arrange for periodic additional investments
in the Fund through automatic deductions by Direct Deposit (if available from a
Shareholder's employer) or by Automated Clearing House ("ACH") from a checking
account by completing the appropriate section of the Account Application. The
Systematic Investment Plan is subject to account minimum initial purchase
amounts and minimum maintained balance requirements. The minimum pre-authorized
investment amount is $50 per month. An Account Application may be obtained by
contacting the Distributor at 1-800-BKB-1784.
Other Information Regarding Purchases
--------------------------------------------------------------------------------
Shares may also be purchased through financial institutions, including Bank of
Boston, which provide shareholder services or other assistance to the Trust.
Texas residents may only purchase Shares through the Distributor. Shares
purchased by persons ("Customers") through financial institutions may be held
of record by the financial institution. Financial institutions may impose cut-
off times for receipt of purchase orders directed through them to allow for
processing and transmittal of these orders to the Distributor. Customers should
contact their financial institution for information as to the institution's
procedures for transmitting purchase, exchange or redemption orders to the
Distributor. The Distributor's receipt of an order may be delayed by one or
more Business Days.
Customers who desire to transfer the registration of Shares beneficially owned
by them but held of record by a financial institution should contact the
institution to accomplish such change. Other Shareholders who desire to
transfer the registration of their Shares should contact the Administrator.
Purchases may be made by ACH transactions, as well as by check or wire
transfer.
Depending upon the terms of a particular Customer account, a financial
institution may charge a Customer account fees. Information concerning these
services and any charges will be provided to the Customer by the financial
institution.
No certificates representing Shares will be issued.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust and/or its
Shareholders to accept such offer. Each Fund will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine. These
procedures will include verification of a caller's identity by asking for his
or her name, address, telephone number, Social Security number, and account
number. If these or other reasonable procedures to confirm that instructions
communicated by telephone are genuine are not followed, the Fund may be liable
for any losses to a Shareholder due to unauthorized or fraudulent instructions.
Otherwise, the investor will bear all risk of loss relating to a purchase,
redemption or exchange by telephone or a wire transfer.
For all purchases, if payment is not made or a check received for purchases of
Shares does not clear, the purchase will be canceled and the investor could be
liable for any losses or fees incurred.
The net asset value per share of each Fund is determined by dividing the value
of the Fund's investments and other assets, less any liabilities, by the total
outstanding shares of the Fund. It is anticipated that the net asset value of
each share of each Fund will remain constant at $1.00 (although there can be no
assurance that any Fund will be able to maintain this stable net asset value).
Securities of the Funds are valued based on the amortized cost method described
in the Statement of Additional Information.
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REDEMPTION OF SHARES
--------------------------------------------------------------------------------
Shareholders may redeem their Shares on any Business Day and Shares may
ordinarily be redeemed by mail or telephone, with proceeds payable by check,
ACH or wire transfer. A redemption is treated, for federal and state income tax
purposes, as a sale of the Shares redeemed; a redemption could, therefore,
result in taxable gain or loss to the Shareholder. If proceeds are paid by wire
transfer, a wire transfer charge (presently $12.00) will be imposed.
By Mail
--------------------------------------------------------------------------------
A written request for redemption must be received by the Transfer Agent in good
form in order to constitute a valid request for redemption. All account holders
must sign the redemption request. Under certain circumstances, the Transfer
Agent may require that the signatures on the request be guaranteed by a
commercial bank, by a member firm of a domestic stock exchange, or by another
eligible guarantor institution. Redemption requests may be mailed to SEI
Financial Management Corporation, X.X. Xxx 0000 Xxxxx, XX 00000-0000 or 000
Xxxx Xxxxxxxxxx Xxxx, Xxxxx, XX 00000.
By Telephone
--------------------------------------------------------------------------------
Shares may be redeemed by telephone if the Shareholder elects that option on
the Account Application (unless a written redemption request, with the
Shareholder's signature guaranteed, is required; see "Signature Guarantees"
below). Telephone redemption orders must be placed with the Transfer Agent
prior to 12:00 noon ET on any Business Day to be effective on such day. The
Shareholder may have the proceeds mailed to his or her address or wired to a
commercial bank account previously designated on the Account Application. Under
most circumstances, payments will be transmitted on the next Business Day
following receipt of a valid request for redemption. Telephone redemption
requests may be made by calling the Transfer Agent at 1-800-BKB-1784.
Shareholders may not close their account by telephone. During periods of
drastic economic or market changes or severe weather or other emergencies,
Shareholders may find it difficult to implement a telephone redemption. If such
a case should occur, another method of redemption, such as written request sent
via an overnight delivery service, should be considered.
Signature Guarantees
--------------------------------------------------------------------------------
If a Shareholder requests a redemption for an amount in excess of $25,000, a
redemption of any amount to be payable to anyone other than the Shareholder of
record or a redemption of any amount to be sent to any address other than the
Shareholder's address of record with the applicable Fund (or in the case of ACH
or wire transfers, other than as provided in the Shareholder's Account
Application), all account holders on the Shareholder's account must sign a
written redemption request and their signatures must be guaranteed by a
commercial bank, by a member firm of a domestic stock exchange or by another
eligible guarantor institution. The Trust and the Transfer Agent reserve the
right to amend these requirements for the applicable Fund at any time without
notice. For questions about the proper form of redemption requests, call 1-800-
BKB-1784.
Other Information Regarding Redemptions
--------------------------------------------------------------------------------
All redemption orders for Shares are effected at the net asset value per share
next determined after receipt, by the Transfer Agent, of a valid request for
redemption in good form, as described above. Payment to Shareholders for Shares
redeemed will be made within seven days after receipt by the Transfer Agent of
the request for redemption. Each Fund will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures will include verification of a caller's identity by asking for his
or her name, address, telephone number, Social Security number, and account
number. If these or other reasonable procedures to confirm that instructions
communicated by telephone are genuine are not followed, the Fund may be liable
for any losses to a Shareholder due to unauthorized or fraudulent instructions.
Otherwise, the investor will bear all risk of loss relating to a purchase,
redemption or exchange by telephone or a wire transfer.
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Forwarding of redemption proceeds for Shares purchased, or received in exchange
for Shares purchased, by check (including certified or cashier's checks) may be
delayed for 15 or more days to ensure that payment has been collected for the
purchase of such Shares. Each Fund intends to pay cash for all Shares redeemed,
but under abnormal conditions which make payment in cash unwise, payment may be
made wholly or partly in Fund securities with a market value equal to the
redemption price. In such cases, an investor may incur brokerage costs in
converting such securities to cash.
Due to the relatively high costs of handling small investments, each Fund
reserves the right to redeem, at net asset value, the Shares of any Shareholder
if, because of redemptions of Shares by or on behalf of the Shareholder (and
not solely because of market declines), the account of such Shareholder in the
Fund has a value of less than the minimum initial purchase amount for that Fund
(normally $1,000). Accordingly, an investor purchasing Shares in only the
minimum investment amount may be subject to such involuntary redemption if the
investor thereafter redeems any of these Shares. Before the Fund exercises its
right to redeem such Shares and to send the proceeds to the Shareholder, the
Shareholder will be given notice that the value of such shares in his or her
account is less than the minimum amount and will be allowed 60 days to make an
additional investment in the Fund in an amount which will increase the value of
the account to at least the minimum amount. Accounts established under a tax-
deferred retirement program may be subject to involuntary redemption as
described above only if such account has a value of less than $250, the minimum
initial purchase amount for such accounts.
The right of any Shareholder to receive payment with respect to any redemption
may be suspended or the payment of the redemption proceeds postponed during any
period in which the New York Stock Exchange is closed (other than weekends or
holidays) or trading on such Exchange is restricted, or to the extent otherwise
permitted by the Investment Company Act of 1940 if an emergency exists. See
"Purchase and Redemption of Shares" in the Statement of Additional Information
for examples of when the right of redemption may be suspended.
SYSTEMATIC WITHDRAWAL PLAN
--------------------------------------------------------------------------------
A Shareholder 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 must be at least $100, except in
certain limited circumstances. A withdrawal payment under the plan is treated,
for federal and state income tax purposes, as a sale of a number of Fund shares
sufficient to fund the payment; such payment could, therefore, result in
taxable gain or loss to the Shareholder.
EXCHANGES
--------------------------------------------------------------------------------
Some or all of the Shares for which payment has been received by the
Distributor (i.e., an established account) may be exchanged at their net asset
value for shares of one or more of the other portfolios of the Trust, including
Shares of the other Money Market Fund. Exchanges will be made only after
instructions in writing or by telephone are received for an established account
by the Distributor.
In the case of Shares held of record by Bank of Boston or one of its affiliates
but beneficially owned by a Customer, to exchange such shares the Customer
should contact Bank of Boston or the affiliate, who will contact the
Distributor and effect the exchange on behalf of the Customer. If an exchange
request in good order is received by the Distributor by 12:00 noon ET on any
Business Day, the exchange usually will occur on that day. Any Shareholder or
Customer who wishes to make an exchange must have received a current prospectus
of the portfolio of the Trust in which he or she wishes to invest before the
exchange will be effected. Residents of any state may only exchange shares for
shares of another portfolio of the Trust if that portfolio is registered in
that state.
Each exchange must involve either Shares having an aggregate value of at least
$250 or all the Shares in the account, and the amount of the exchange must meet
the
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minimum investment requirements for the portfolio of the Trust into which the
exchange is being made.
Exchanges may be made by telephone only if that option has been elected by the
Shareholder on the Account Application. Shares may be exchanged by telephone by
calling the Distributor toll free at 1-800-BKB-1784.
No fees are currently charged to Shareholders directly in connection with
exchanges, although each of the Money Market Funds reserves the right, upon not
less than 60 days' written notice, to charge Shareholders a nominal fee in
accordance with rules promulgated by the SEC. Each of the Money Market Funds
also reserves the right to reject any exchange request in whole or in part. The
exchange privilege (or any aspect of it) may be changed or terminated at any
time.
Other portfolios of the Trust may impose distribution fees based on their net
assets. Class C and Class D shares of the 1784 U.S. Treasury Money Market Fund
are subject to distribution fees.
An exchange is treated, for federal or state income tax purposes, as a sale of
the Shares exchanged; an exchange could, therefore, result in taxable gain or
loss to the Shareholder.
CHECKWRITING
--------------------------------------------------------------------------------
A Shareholder in any Fund may redeem Shares by writing checks on his or her
account for $250 or more. Once a Shareholder has signed and returned a
signature card agreement, that Shareholder will receive a supply of checks.
A check may be made payable to any person, and the Shareholder's account will
continue to earn dividends until the check clears. The checkwriting privilege
is available on the terms specified in the signature card agreement and may be
terminated or changed by the applicable Fund at any time.
Because of the difficulty of determining in advance the exact value of a Fund
account, a Shareholder may not use a check to close his or her account. These
checks are currently free, i.e., there is no charge for this service; however,
the Shareholder's account will be charged a fee for stopping payment of a check
upon a Shareholder's request or if the check cannot be honored because of
insufficient funds or for other valid reasons.
PERFORMANCE
--------------------------------------------------------------------------------
From time to time the Trust advertises the "current yield" and "effective
yield" (also referred to as "effective compound yield") of the 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 by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when annualized,
the income earned by an investment in the Fund is assumed to be reinvested. The
"effective yield" will be slightly higher than the "current yield" because of
the compounding effect of this assumed reinvestment. The Trust may also
advertise a "tax-equivalent yield" for the 1784 Tax-Free Money Market Fund; the
"tax-equivalent yield" is calculated by determining the yield that would have
to be achieved on a fully taxable investment to produce the after-tax
equivalent of the 1784 Tax-Free Money Market Fund's yield, assuming certain tax
brackets for a Shareholder.
The Trust may periodically compare performance of a Fund to that of other
mutual funds tracked by mutual fund rating services, to that of broad groups of
comparable mutual funds or to that of unmanaged indices which may assume
investment of dividends but generally do not reflect deductions for
administrative and management costs.
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TAXES
--------------------------------------------------------------------------------
The following is a discussion of certain United States federal income tax
considerations relevant to the purchase, ownership, and disposition of Shares
in the Money Market Funds. The discussion, which is based on current tax laws,
regulations, rulings, and judicial decisions (all of which are subject to
change at any time by legislative, judicial, or administrative action), is not
intended to be complete; therefore, prospective investors should consult their
own tax advisers as to the tax consequences to them of an investment in the
Money Market Funds. Additional Information concerning taxes is set forth in the
Statement of Additional Information.
Tax Status of the Money Market Funds
--------------------------------------------------------------------------------
Each Money Market Fund is treated as a separate entity for federal income tax
purposes, and is not combined with the other Money Market Funds or the Trust's
other portfolios. The Trust intends to qualify each Money Market Fund each year
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), and to make distributions to its
Shareholders in accordance with the timing requirements set out in the Code. As
a result, it is expected that the Money Market Funds will not be required to
pay any federal income or excise taxes.
Tax Treatment of Shareholders
--------------------------------------------------------------------------------
1784 U.S. Treasury Money Market Fund
Shareholders of the 1784 U.S. Treasury Money Market Fund generally will have to
pay federal income taxes and may be subject to state or local taxes on the
dividends and capital gain distributions they receive from the Fund, whether
paid in cash or in additional shares. Distributions from net investment income
and short-term capital gains will be taxable to Shareholders as ordinary
income, while distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses) will be taxable to
Shareholders as long-term capital gains, regardless of how long the
Shareholders have held their shares.
Distributions of the Fund that are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities (but
generally not from capital gains realized upon the disposition of such
obligations) may be exempt from state and local taxes. The Fund intends to
advise Shareholders of the extent, if any, to which their respective
distributions consist of such interest. 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.
1784 Tax-Free Money Market Fund
The Trust expects that dividends paid to Shareholders by the 1784 Tax-Free
Money Market Fund from interest on Municipal Securities will be exempt from
federal income tax because the 1784 Tax-Free Money Market Fund intends to
satisfy certain requirements of the Code. One such requirement is that at the
close of each quarter of its taxable year, at least 50% of the value of the
Fund's total assets consist of obligations whose interest is exempt from
federal income tax.
Distributions of income from capital gains, from investments in taxable
securities, and from certain other transactions (including repurchase
agreements) will be taxable to the Shareholders, whether paid in cash or in
additional shares. Distributions from taxable net investment income and short-
term capital gains will be taxable to Shareholders as ordinary income, while
distributions of net capital gains will be taxable to Shareholders as long-term
capital gains, regardless of how long the Shareholders have held their shares.
Depending on the nature of the distribution and the residence of the
Shareholder, certain 1784 Tax-Free Money Market Fund distributions will be
subject to state and local income taxes.
Interest on indebtedness incurred by Shareholders to purchase or carry shares
of the 1784 Tax-Free Money
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Market Fund will not be deductible for federal income tax purposes. Dividends
from interest on Municipal Securities are taken into account in calculating the
amount of social security and railroad retirement benefits that may be subject
to federal income tax. Certain distributions of exempt-interest dividends may
also be a tax preference item for purposes of the federal individual and
corporate alternative minimum tax and all exempt-interest dividends may
increase a corporate Shareholder's alternative minimum tax. Entities or persons
who are "substantial users" (or persons related to "substantial users") of
facilities financed by private activity bonds should consult their tax advisers
before purchasing shares of the 1784 Tax-Free Money Market Fund.
General
The Trust expects that none of the dividends received from the Money Market
Funds will be eligible for the dividends received deduction for corporations.
Any Money Market Fund dividend that is declared in October, November, or
December of a calendar year, payable to shareholders of record in such a month,
and that is paid the following January will be treated as if received by the
Shareholders on December 31 of the year in which the dividend is declared.
The Trust will make annual reports to Shareholders of the federal income tax
status of all Money Market Fund distributions.
The exchange or redemption of Shares is a taxable event to the Shareholder,
although the Trust intends to attempt to maintain a stable share price of $1.00
per share. Under certain circumstances, realized losses may be disallowed or
short-term capital losses may be converted into long-term capital losses.
The Funds will generally withhold tax payments at the rate of 30% on dividends
and other payments that are subject to such withholding and that are made to
persons who are neither citizens nor residents of the U.S., although the 30%
rate may be reduced to the extent provided by an applicable tax treaty. Each
Fund is also required in certain circumstances to withhold 31% of taxable
dividends and certain redemption proceeds paid to any Shareholder (including a
shareholder who is neither a citizen nor a resident of the U.S.) who does not
furnish to the Fund certain information and certifications or who is otherwise
subject to backup withholding. Backup withholding will not, however, be applied
to payments that have been subject to 30% (or lower treaty rate) withholding.
GENERAL INFORMATION
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The Trust
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The Trust was organized as a Massachusetts business trust under a Declaration
of Trust dated February 5, 1993. The Declaration of Trust permits the Trust to
issue an unlimited number of shares of beneficial interest of each of the
portfolios (referred to as "series") of the Trust, each of which is a separate
fund. In addition to the Money Market Funds, the Trust includes the following
funds: 1784 Institutional U.S. Treasury Money Market Fund, 1784 U.S. Government
Medium-Term Income Fund, 1784 Short-Term Income Fund, 1784 Income Fund, 1784
Tax-Exempt Medium-Term Income Fund, 1784 Connecticut Tax-Exempt Income Fund,
1784 Rhode Island Tax-Exempt Income Fund, 1784 Massachusetts Tax-Exempt Income
Fund, 1784 Growth and Income Fund, 1784 Asset Allocation Fund and 1784
International Equity Fund. All consideration received by the Trust for shares
of any fund and all assets of such fund belong to that fund and are subject to
liabilities related thereto. The Trust reserves the right to create and issue
additional series of shares, and reserves the right to create and issue shares
of additional classes of any or all series.
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses and reports to Shareholders,
costs of custodian services and registering the shares of the Funds and other
series under federal and state
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securities laws, pricing, insurance expenses, brokerage costs, interest
charges, taxes, amortization of organization expenses, and any extraordinary
expenses including but not limited to litigation expenses. For the fiscal year
ended May 31, 1995, the total expenses of each of the Funds were as follows:
for the 1784 Tax-Free Money Market Fund, $2,859,695, of which $512,760 was
voluntarily waived or reimbursed by the Bank of Boston (after giving effect to
such waiver, 0.50% of such Fund's average daily net assets for that period);
and for the 1784 U.S. Treasury Money Market Fund, $236,501, of which $82,688
was voluntarily waived or reimbursed by the Bank of Boston (after giving effect
to such waiver, 0.60% of such Fund's average daily net assets for that period).
Under applicable law, Shareholders could, under certain circumstances, be held
personally liable for the obligations of the Trust. However, the risk of a
Shareholder incurring financial loss on account of such Shareholder liability
is limited to circumstances in which the Trust would be unable to meet its
obligations and inadequate insurance existed. The Trust believes that the
likelihood of such circumstances is remote.
Trustees of the Trust
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The management and affairs of the Trust are supervised by its Board of
Trustees. The Trustees have approved contracts under which, as described above,
certain companies provide essential management, administrative and Shareholder
services to the Trust.
Voting Rights
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Each Share held entitles the Shareholder of record to one vote. Each fund or
class will vote separately on matters relating solely to that fund or class. As
a Massachusetts business trust, the Trust is not required to hold annual
meetings of Shareholders but approval will be sought for certain changes in the
operation of the Trust and for the election of Trustees under certain
circumstances. In addition, a Trustee may be removed by the remaining Trustees
or by Shareholders at a special meeting called upon written request of
Shareholders owning at least 10% of the outstanding shares of the Trust. In the
event that such a meeting is requested, the Trust will provide appropriate
assistance and information to the Shareholders requesting the meeting.
Reporting
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The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
Shareholder Inquiries
--------------------------------------------------------------------------------
Shareholder inquiries should be directed to SEI Financial Management
Corporation, X.X. Xxx 0000, Xxxxx, Xxxxxxxxxxxx, 00000-0000, at 1-800-BKB-1784.
Dividends and Distributions
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The net investment income (exclusive of capital gains) of each Money Market
Fund is determined and declared on each business day as a dividend for
Shareholders of record as of the close of business on that day. On redemption,
a Shareholder will receive dividends up to but not including the day a valid
redemption request is received by the Transfer Agent. Currently, capital gains
of the Money Market Funds, if any, are distributed at least annually.
Dividends are paid by the Money Market Funds in additional Shares, unless the
Shareholder has elected to take such payment in cash, on the first business day
of each month. Shareholders may change their election by providing written
notice to the Administrator at least 15 days prior to the change.
If dividend payments are returned and unclaimed within 30 days, they will be
reinvested and the Shareholder will be deemed to have elected to receive future
dividend and capital gain distributions in additional Shares.
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Counsel and Independent Accountants
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Xxxxxxx, Xxxx & Xxxxx, Boston, MA, serve as counsel to the Trust. Coopers &
Xxxxxxx L.L.P., Boston, MA, serve as the independent accountants of the Trust.
Custodian
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Bank of Boston, 000 Xxxxxxx Xxxxxx, Xxxxxx, XX 00000, acts as Custodian of the
Trust. The Custodian holds cash, securities and other assets of the Trust as
required by the Investment Company Act of 1940. Under a separate agreement,
Bank of Boston also provides certain accounting services for the Trust.
DESCRIPTION OF PERMITTED INVESTMENTS AND TECHNIQUES
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The following is a description of the permitted investments and investment
techniques for the Funds.
U.S. Treasury Obligations -- U.S. Treasury obligations include bills, notes and
bonds issued by the U.S. Treasury and separately traded interest and principal
component parts of such obligations that are transferable through the Federal
Reserve book-entry system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS"). STRIPS are sold as zero coupon securities.
These securities are usually structured with two classes that receive different
portions of the interest and principal payments from the underlying obligation.
The yield to maturity on the interest-only class is extremely sensitive to the
rate of principal payments on the underlying obligation. The market value of
the principal-only class generally is unusually volatile in response to changes
in interest rates. See "Zero Coupon Securities" below for more information on
these securities. Each Fund also may invest in Treasury Receipts, which are
unmatured interest coupons of U.S. Treasury bonds and notes which have been
separated and resold in a custodial receipt program administered by the U.S.
Treasury.
U.S. Government Obligations -- Certain Federal agencies such as the Government
National Mortgage Association ("GNMA") have been established as
instrumentalities of the U.S. Government to supervise and finance certain types
of activities. Issues of these agencies, while not direct obligations of the
U.S. Government, are either backed by the full faith and credit of the United
States (e.g., GNMA) or supported by the issuing agencies' right to borrow from
the Treasury. The issues of other agencies are supported only by the credit of
the instrumentality (e.g., Federal National Mortgage Association, "FNMA"). Each
Fund may invest in securities issued by any Federal agency or instrumentality.
Variable and Floating Rate Instruments -- Certain of the obligations purchased
by the Funds may carry variable or floating rates of interest and may involve a
conditional or unconditional demand feature permitting the holder to demand
payment of principal at any time, or at specified intervals. Such obligations
may include variable amount master demand notes. Such instruments bear interest
at rates which are not fixed, but which vary with changes in specified market
rates or indices, such as a Federal Reserve composite index. A demand
instrument with a demand notice period exceeding seven days may be considered
illiquid if there is no secondary market for such security; therefore, a Fund
will not invest more than 10% of its net assets in such instruments and other
illiquid securities.
The interest rate on these securities may be reset daily, weekly, quarterly, or
some other reset period and may have a floor or ceiling on interest rate
charges. There is a risk that the current interest rate on such obligations may
not accurately reflect existing market interest rates.
A demand instrument with an unconditional demand feature may be an "eligible
security" or "first tier security," depending on whether the unconditional
demand feature is, respectively, an eligible security or first-tier security. A
demand instrument without an unconditional demand feature may be an eligible
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security or a first tier security only if it meets the requirements for those
categories and the demand instrument or the long-term debt securities of its
issuer have been rated by at least two nationally recognized statistical rating
organizations (one if it is the only organization rating such obligation or
issuer) in one of the two highest long-term rating categories or, if unrated,
determined to be of comparable quality. See "Restraints on Investments by Money
Market Funds" below.
Standby Commitments -- A Money Market Fund may acquire securities subject to a
standby commitment which permits a Fund to sell the security at a fixed price
prior to maturity. The underlying municipal securities subject to a standby
commitment may be sold at any time at the market rates. In certain cases, a
premium may be paid for a standby commitment. A premium paid will have the
effect of reducing the yield otherwise payable on the underlying security. The
purpose of engaging in transactions involving standby commitments is to
maintain flexibility and liquidity to permit the Fund to meet redemptions and
remain as fully invested as possible in municipal securities. Each Fund will
limit standby commitment transactions to institutions which the Adviser
believes present minimal credit risk, pursuant to guidelines adopted by the
Trust's Board of Trustees.
There is no limit to the percentage of Fund securities that any Fund may
purchase subject to a standby commitment but the amount paid directly or
indirectly for a standby commitment held by any Fund will not exceed 1/2 of 1%
of the value of the total assets of the Fund.
Repurchase Agreements -- A repurchase agreement is an agreement by which a
person obtains a security and simultaneously commits to return the security to
the seller at an agreed upon price (including principal and interest) on an
agreed upon date within a number of days from the date of purchase. The
Custodian or its agent will hold the security as collateral for the repurchase
agreement. Collateral must be maintained at a value at least equal to 100% of
the purchase price. A Fund bears a risk of loss in the event the other party
defaults on its obligations and the Fund is delayed or prevented from its right
to dispose of the collateral securities or if the Fund realizes a loss on the
sale of the collateral securities. The Adviser will enter into repurchase
agreements on behalf of a Fund only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the agreement based on
guidelines established and periodically reviewed by the Trustees. Pursuant to
an exemptive order of the SEC, each of the Funds may enter into repurchase
agreements on a pooled basis with other portfolios of the Trust.
Forward Commitments or Purchases On a When-Issued Basis -- The Money Market
Funds may enter into forward commitments or purchase securities on when-issued
basis, which means that the price of the securities is fixed at the time of
commitment and that the delivery and payment will ordinarily take place beyond
customary settlement time. The interest rate realized on these securities is
fixed as of the purchase date and no interest accrues to the Fund before
settlement. These securities are subject to market fluctuation due to changes
in market interest rates and will have the effect of leveraging the Fund's
assets; the securities are also subject to fluctuation in value pending
settlement based upon public perception of the creditworthiness of the issuer
of these securities. Securities purchased on a when-issued or forward
commitment basis may expose a Fund to risk because such securities may
experience such fluctuations in value prior to their actual delivery.
Agreements to purchase securities on a when-issued or forward commitment basis
will only be made with the intention of taking delivery and not for speculative
purposes. A Fund may invest up to 25% of its assets in forward commitments or
commitments to purchase securities on a when-issued basis. While awaiting
delivery of securities purchased on such bases, a Fund will establish a
segregated account consisting of cash, short-term money market instruments or
high quality debt securities equal to the amount of the commitments to purchase
securities on such bases.
Securities Lending -- In order to generate additional income, a Money Market
Fund may lend the securities in which it is invested pursuant to agreements
requiring
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that the loan be continuously secured by cash, U.S. Treasury Obligations, U.S.
Government Obligations or any combination of cash and such securities as
collateral equal at all times to 100% of the market value of the securities
lent. A Fund may lend up to 33 1/3% of the value of its total assets. The Fund
will continue to receive interest on the securities lent while simultaneously
earning interest on the investment of cash collateral in U.S. Treasury
Obligations or U.S. Government Obligations. Collateral is marked to market
daily to provide a level of collateral at least equal to the market value of
the securities lent. There may be risks of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially. However, loans will only be made to borrowers deemed by the
Adviser to be of good standing and when, in the judgment of the Adviser, the
consideration which can be earned currently from such securities loans
justifies the attendant risk.
Zero Coupon Securities -- Zero coupon securities are fixed income securities
that have been stripped of their unmatured interest coupons. A zero coupon
security pays no interest or principal to its holder during its life. A zero
coupon security is sold at a discount, frequently substantial, and redeemed at
face value at its maturity date. The amount of the discount fluctuates with the
market price of the security, and is accreted over the life of the security.
Such accretion constitutes the income earned on the security for both
accounting and tax purposes. The market prices of zero coupon securities are
generally more volatile than the market prices of securities of similar
maturity that pay interest periodically, and zero coupon securities are likely
to respond to a greater degree to interest rate changes than are non-zero
coupon securities with similar maturity and credit qualities.
Money Market Funds -- A Fund may not invest 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. The 1784 U.S. Treasury Money Market
Fund does not intend to invest in other money market funds.
The 1784 Tax-Free Money Market Fund may also invest in the following types of
securities:
Receipts -- Receipts represent interests in separately traded interest and
principal component parts of U.S. Treasury obligations that are issued by banks
or brokerage firms and are created by depositing U.S. Treasury obligations into
a special account at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the certificates
or receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts include
"Treasury Investment Growth Receipts" ("TIGRs"), and "Certificates of Accrual
on Treasury Securities" ("CATS"). TIGRs and CATS are sold as zero coupon
securities. See "Zero Coupon Securities" for more information on these
securities.
Bank Obligations -- Bank obligations include certificates of deposit, time
deposits (including Eurodollar time deposits) and bankers' acceptances and
other short-term debt obligations issued by domestic banks, foreign
subsidiaries or foreign branches of domestic banks, domestic and foreign
branches of foreign banks, domestic savings and loan associations and other
banking institutions. The Fund may invest in such obligations, however, only if
the issuer (or the parent company, in the case of subsidiaries or branches) has
assets of at least $1 billion.
Bankers' Acceptances -- A banker's acceptance is a xxxx of exchange or time
draft drawn on and accepted by a commercial bank. It is used by corporations to
finance the shipment and storage of goods and to furnish dollar exchange.
Maturities are generally six months or less.
Certificates of Deposit -- A certificate of deposit is a negotiable interest-
bearing instrument with a specific maturity. Certificates of deposit are issued
by banks and savings and loan institutions in exchange for the deposit of funds
and normally can be traded in the secondary market prior to maturity.
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Time Deposits -- A time deposit is a non-negotiable receipt issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot
be traded in the secondary market. Time deposits with a withdrawal penalty are
considered to be illiquid securities; therefore, the Fund will not invest more
than 10% of its net assets in such time deposits and other illiquid securities.
Commercial Paper -- Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from one to 270 days.
Municipal Securities -- Municipal securities the 1784 Tax-Free Money Market
Fund may purchase include (i) debt obligations issued by or on behalf of public
authorities to obtain funds to be used for various public facilities, for
refunding outstanding obligations, for general operating expenses, and for
lending such funds to other public institutions and facilities, and (ii)
certain private activity and industrial development bonds issued by or on
behalf of public authorities to obtain funds to provide for the construction,
equipment, repair, or improvement of privately operated facilities. Municipal
notes include (but are not limited to) general obligation notes, tax
anticipation notes, revenue anticipation notes, bond anticipation notes,
certificates of indebtedness, demand notes, and construction loan notes.
Municipal bonds include (but are not limited to) general obligation bonds,
revenue or special obligation bonds, private activity and industrial
development bonds. General obligation bonds are backed by the taxing power of
the issuing municipality. Revenue bonds are backed by the revenues of a project
or facility; tolls from a toll bridge for example. The payment of principal and
interest on private activity and industrial development bonds generally 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 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 the 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 to 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 may deem relevant.
Restraints on Investments by Money Market Funds -- Investments by the Money
Market Funds are subject to limitations imposed under regulations adopted by
the SEC. Under these regulations money market funds may acquire only
obligations that present minimal credit risks and that are "eligible
securities," which means they are (i) rated, at the time of investment, by at
least
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two nationally recognized statistical rating organizations (one if it is the
only organization rating such obligation) in the highest short-term rating
category or, if unrated, determined to be of comparable quality (a "first tier
security"), or (ii) rated according to the foregoing criteria in the second
highest short-term rating category (or rated by one nationally recognized
statistical rating organization in the highest short-term rating category and
by another organization in the second highest short-term rating category) or,
if unrated, determined to be of comparable quality ("second tier security"). A
security is not considered to be unrated if its issuer has outstanding
obligations of comparable priority and security that have a short-term rating.
The Adviser will determine that an obligation presents minimal credit risks or
that unrated instruments are of comparable quality in accordance with
guidelines established by the Trustees. Under normal circumstances, the 1784
U.S. Treasury Money Market Fund intends to invest all of its investable assets
in U.S. Treasury Obligations, U.S. Government Obligations and repurchase
agreements involving U.S. Treasury Obligations or U.S. Government Obligations.
The Board of Trustees of the Trust has certain obligations, in the event that a
security ceases to be a first-tier security or ceases to be a second-tier
security, to reassess whether such security continues to present only minimal
credit risks.
Each Money Market Fund will invest only in U.S. dollar-denominated securities,
will maintain an average maturity on a dollar-weighted basis of 90 days or less
and will acquire only "eligible securities" that have or are deemed to have a
maturity of 397 days or less and that present minimal credit risks as
determined by or on behalf of the Board of Trustees of the Trust. Each Fund
will comply with the various requirements of Rule 2a-7 under the Investment
Company Act of 1940, which regulates money market funds. In particular, each
Fund will determine the effective maturity of its investments (including
certain variable rate instruments, where maturity may be deemed to be the
period remaining until the next interest rate adjustment date or until payment
of the security may be demanded) according to Rule 2a-7 as in effect from time
to time.
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