<PAGE>
Securities Act of 1933 Registration No. 333-37727
Investment Act of 1940 Registration No. 881-8436
- - - - - - - - - - - - - - - - - - - -
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- - - - - - - - - - - - - - - - - - - -
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. 5 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY [x]
ACT OF 1940
Amendment No. 7 [X]
KOBRICK INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
101 Federal Street, Boston, Massachusetts 02110
(Address of Principal Executive Offices) (Zip Code)
(617) 342-3500
Registrant's Telephone Number, including Area Code:
- - - - - - - - - - - - - - - - - - - -
Frederick R. Kobrick
President
Kobrick Investment Trust
101 Federal Street
Boston, Massachusetts 02110
(Name and Address of Agent for Service)
Copies to:
John E. Pelletier, Esq. Thomas J. Kelly, Esq.
New England Funds, L.P. Mintz, Levin, Cohn, Ferris,
399 Boylston Street Glovsky and Popeo, P.C.
Boston, Massachusetts 02110 One Financial Center
- - - - - - - - - - - - - - - - - - - -
It is proposed that this filing will become effective under Rule 485:
[ ] Immediately upon filing pursuant to paragraph (b),
[ ] On ____________ pursuant to paragraph (b),
[ ] 60 days after filing pursuant to paragraph (a)(1),
[X] On October 29, 1999 pursuant to paragraph (a)(1),
[ ] 75 days after filing pursuant to paragraph (a)(2),
[ ] On ___________ pursuant to paragraph (a)(2).
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
KOBRICK FUNDS
ALL-CAP EQUITY
Kobrick Capital Fund
LARGE-CAP EQUITY
Kobrick Growth Fund
SMALL-CAP EQUITY
Kobrick Emerging Growth Fund
PROSPECTUS
November 1, 1999
WHAT'S INSIDE
GOALS, STRATEGIES & RISKS
PAGE
FUND FEES & EXPENSES
PAGE
MANAGEMENT TEAM
PAGE
FUND SERVICES
PAGE
FUND PERFORMANCE
PAGE
The Securities and Exchange Commission has not approved any Fund's shares or
determined whether this Prospectus is accurate or complete. Anyone who tells you
otherwise is committing a crime.
For general information on the Funds or any of their services and for assistance
in opening an account, contact your financial representative or call New England
Funds.
New England Funds
399 Boylston Street, Boston, Massachusetts 02116
800-225-5478
<PAGE>
TABLE OF CONTENTS
GOALS, STRATEGIES & RISKS
Kobrick Capital Fund
Kobrick Growth Fund
Kobrick Emerging Growth Fund
FUND FEES & EXPENSES
MORE ABOUT RISK
MANAGEMENT TEAM
Meet the Funds' Investment Adviser
Meet the Funds' Portfolio Managers
FUND SERVICES
Investing in the Funds
How Sales Charges are Calculated
Ways to Reduce or Eliminate Sales Charges
It's Easy to Open an Account
Buying Shares
Selling Shares
Selling Shares in Writing
Exchanging Shares
Restrictions on Buying, Selling and Exchanging Shares
How Fund Shares Are Priced
Dividends and Distributions
Tax Consequences
Compensation to Securities Dealers
Additional Investor Services
FUND PERFORMANCE
Kobrick Capital Fund
Kobrick Growth Fund
Kobrick Emerging Growth Fund
GLOSSARY OF TERMS
If you have any questions about any of the terms used in this Prospectus, please
refer to the "Glossary of Terms."
To learn more about the possible risks of investing in a Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Funds may engage. Please read this section carefully
before you invest.
Fund shares are not bank deposits and are not guaranteed, endorsed or insured by
the Federal Deposit Insurance Corporation or any other government agency, and
are subject to investment risks, including possible loss of the principal
invested.
<PAGE>
Goals, Strategies & Risks FUND FOCUS
KOBRICK CAPITAL FUND Stability Income Growth
-------------------------
High X
ADVISER: Kobrick Funds LLC (the "Adviser") --------- ------ ------
MANAGER: Frederick R. Kobrick Mod.
CATEGORY: All-Cap Equity --------- ------ ------
Low X X
TICKER SYMBOL: CLASS A CLASS B CLASS C
-------------------------------
INVESTMENT GOAL
The Capital Fund seeks maximum capital appreciation by investing primarily in
equity securities of companies with small, medium and large capitalizations.
INVESTMENT STRATEGIES
Under normal market conditions, the Capital Fund will invest substantially all
of its assets in equity securities of companies with small, medium and large
capitalizations, including those that the Adviser believes are undervalued
special situations and emerging growth companies. This approach provides the
Adviser with flexibility to emphasize in the Fund companies with different
capitalizations as market conditions change. The Adviser considers emerging
growth companies to be those companies that are less mature and have the
potential to grow substantially faster than the economy. The Adviser's bottom-up
approach utilizes quantitative and qualitative analysis to select individual
companies, not sectors, with the greatest potential for growth. In selecting
investments for the Fund, the Adviser generally seeks companies in a wide range
of industries and considers a variety of factors, including any one or more of
the following:
the strength of a company's management team expected growth in earnings
relative financial condition competitive position and
entrepreneurial character business strategy
new or innovative products,
services or processes
In making investment decisions, the Adviser employs the following four-part
investment approach:
o Screening: The Adviser analyzes thousands of companies in order to find a
select group that have the potential to meet its buy disciplines described
below. Many of the companies within this group are special situation
companies which, because of unique circumstances, such as an ability to fill
a particular niche, are attractive investments.
o Portfolio Construction: The Adviser applies buy disciplines which emphasize
strong management, compelling valuations and high earnings growth. At the
core of this approach is regular contact with a company's management team to
assess their ability to execute the company's strategy. The Adviser considers
potential risks in selecting securities to construct a diversified portfolio
that limits volatility.
o Portfolio Supervision: The Adviser closely monitors each holding in the
Fund's portfolio to determine whether it continues to possess the factors
identified when the original investment was made. This process includes
continuous review of absolute and relative valuations, evaluation of
management's execution of the company's strategy and assessment of the
company's prospects relative to the overall economic, political and financial
environment.
o Portfolio Realignment: The Adviser will generally sell a position when its
target price, which is continuously evaluated, is reached, when there is a
change in a company's management or strategy, or when a company fails to
execute its strategy.
Although it is anticipated that most of the Capital Fund's assets will be
invested in equity securities, the Fund may invest at any time up to 35% of its
total assets in other types of securities (including corporate bonds and
securities of the U.S. government). As the Fund's investment goal provides
flexibility to emphasize different capitalizations of companies as market
conditions change, the Fund may engage in frequent trading of securities. This
may produce higher transaction costs and a higher level of capital gains, which
may lower your return.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
INVESTMENT RISKS
EQUITY Because the Capital Fund invests primarily in equity securities,
SECURITIES: its major risks are those commonly associated with investing in
stocks. This means that you may lose money on your investment due
to unpredictable drops in a stock's value or periods of
below-average performance in a given stock or in the stock market
as a whole. Growth stocks are generally more sensitive to market
movements than other types of stocks, primarily because their
stock prices are based heavily on future expectations. Small
capitalization and emerging growth companies may be subject to
more abrupt price movements, limited markets and less liquidity
than larger, more established companies, which could adversely
affect the value of the portfolio. With special situation
companies, the primary risk is that they may not achieve their
expected value because events do not materialize as anticipated.
Because the Fund invests in, among other things, undervalued
special situations, emerging growth companies and companies with
small capitalizations, an investment in the Fund involves greater
than average risks. Accordingly, the value of the Fund's shares
may fluctuate more widely than the value of shares of a fund that
invests in larger, more established companies.
<PAGE>
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Kobrick Capital Fund. The performance information below represents the Fund's
performance, restated to account for fees and expenses under agreements
currently in effect. The Fund's past performance does not necessarily indicate
how the Fund will perform in the future.
The bar chart shows the Fund's adjusted total returns for Class A shares for the
one calendar year since the Fund's inception on December 31, 1997.+ The returns
for the other classes of shares offered by this Prospectus differ from the Class
A returns shown in the bar chart, depending upon the respective expenses of each
class. The chart does not reflect any sales charge that you may be required to
pay when you buy or redeem the Fund's shares. A sales charge will reduce your
return.
(total return)
1998 50%
[to be recalculated as appropriate for new expense ratio]
+ The Capital Fund's Class A shares total return year-to-date as of September
30, 1999 was ___%
Highest Quarterly Return: Fourth Quarter 1998, up 40.32%
Lowest Quarterly Return: Third Quarter 1998, down 13.86%
The table below shows how the Fund's average annual total returns for the
one-year and since-inception periods compared to those of the Russell 3000
Index, a market value-weighted, unmanaged index of large company stocks. They
are also compared to the Lipper Capital Appreciation Funds Index, which shows
the performance of a category of mutual funds with an investment style similar
to that of the Capital Fund, as calculated by Lipper, Inc. It is not possible to
invest directly in an index. The Fund's total returns are adjusted to reflect
the Fund's expenses for Class A, B, and C shares and the maximum sales charge
that you may pay when you buy or redeem the Fund's shares. The Russell 3000
Index returns have not been adjusted for ongoing management, distribution and
operating expenses and sales charges applicable to mutual fund investments. The
Lipper Capital Appreciation Funds Index returns have been adjusted for these
expenses but do not reflect any sales charges.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIOD ENDED DECEMBER 31, 1998) PAST 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Kobrick Capital Fund: Class A (inception 12/31/97) 50.0%
Russell 3000 Index 22.3%
Lipper Capital Appreciation Funds Index 20.0%
- --------------------------------------------------------------------------------
Kobrick Capital Fund: Class B (inception 12/31/97) %
Russell 3000 Index %
Lipper Capital Appreciation Funds Index %
- --------------------------------------------------------------------------------
Kobrick Capital Fund: Class C (inception 12/31/97) %
Russell 3000 Index %
Lipper Capital Appreciation Funds Index %
- --------------------------------------------------------------------------------
[to be recalculated as appropriate for new expense ratio and sales charge]
Until November 1, 1999, the Fund had only one class of shares and was offered
without a sales charge. These returns have been adjusted to reflect expenses and
sales loads of the Fund's new multiple class structure. See "Fund Fees &
Expenses."
<PAGE>
Goals, Strategies & Risks FUND FOCUS
KOBRICK GROWTH FUND Stability Income Growth
-------------------------
High X
ADVISER: Kobrick Funds LLC (the "Adviser") --------- ------ ------
MANAGER: Michael E. Nance Mod. X
CATEGORY: Large-Cap Equity --------- ------ ------
Low X
TICKER SYMBOL: CLASS A CLASS B CLASS C
-------------------------------
INVESTMENT GOAL
The Growth Fund seeks long-term growth of capital by investing primarily in
equity securities of companies with large capitalizations that the Adviser
believes have better than average long-term growth potential.
INVESTMENT STRATEGIES
Under normal market conditions, the Growth Fund will be primarily invested in
equity securities of large capitalization companies that the Adviser expects
will have better than average long-term growth potential. The Adviser's
bottom-up approach utilizes quantitative and qualitative analysis to select
individual companies, not sectors, with the greatest potential for growth. The
Fund invests in a diversified portfolio of securities of larger, more
established companies in a broad range of industries. The Adviser seeks to
invest in companies which offer the greatest potential for profitable expansion
and sustained growth and considers a variety of factors, including any one or
more of the following:
management that can execute business plans a sound business strategy
expected growth in earnings compelling valuations
A company's valuations are based on a variety of measures including
price/earnings to growth rates, price to book value and price to sales.
Potential income is not a major factor in the selection of investments.
In making investment decisions, the Adviser employs the following four-part
investment approach:
o Screening: The Adviser analyzes thousands of companies in order to find a
select group that have the potential to meet its buy disciplines described
below.
o Portfolio Construction: The Adviser applies buy disciplines which emphasize
strong management, compelling valuations and high earnings growth. At the
core of this approach is regular contact with a company's management team to
assess their ability to execute the company's strategy. The Adviser considers
potential risks in selecting securities to construct a diversified portfolio
that limits volatility.
o Portfolio Supervision: The Adviser closely monitors each holding in the
Fund's portfolio to determine whether it continues to possess the factors
identified when the original investment was made. This process includes
continuous review of absolute and relative valuations, evaluation of
management's execution of the company's strategy and assessment of the
company's prospects relative to the overall economic, political and financial
environment.
o Portfolio Realignment: The Adviser will generally sell a position when its
target price, which is continuously evaluated, is reached, when there is a
change in a company's management or strategy, or when a company fails to
execute its strategy.
Although it is anticipated that most of the Growth Fund's assets will be
invested in equity securities of companies with large capitalizations, the Fund
may invest at any time up to 35% of its total assets in other types of
securities (including corporate bonds and securities of the U.S. government) and
in smaller capitalization and emerging growth companies.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
INVESTMENT RISKS
EQUITY Because the Growth Fund invests primarily in equity securities,
SECURITIES: its major risks are those commonly associated with investing in
stocks. This means that you may lose money on your investment due
to sudden, unpredictable drops in a stock's value or periods of
below-average performance in a given stock or in the stock market
as a whole. Growth stocks are generally more sensitive to market
movements than other types of stocks, primarily because their
stock prices are based heavily on future expectations. Because of
these and other risks, the Fund may underperform certain other
stock funds during periods when large company growth stocks are
generally out of favor.
PERFORMANCE
Since the Fund has only been in existence since September 1, 1998, its
performance and its comparison to broad-based securities market indexes are not
permitted to be included in this Prospectus. The Fund's performance is generally
compared to the S&P Composite Index of 500 Stocks and Lipper Large Company Funds
Index.
<PAGE>
Goals, Strategies & Risks FUND FOCUS
KOBRICK EMERGING GROWTH FUND Stability Income Growth
-------------------------
High X
ADVISER: Kobrick Funds LLC (the "Adviser") --------- ------ ------
MANAGER: Frederick R. Kobrick Mod.
CATEGORY: Small-Cap Equity --------- ------ ------
Low X X
TICKER SYMBOL: CLASS A CLASS B CLASS C
-------------------------------
INVESTMENT GOAL
The Emerging Growth Fund seeks to provide growth of capital by investing
primarily in equity securities of emerging growth companies, with an emphasis on
companies with small capitalizations.
INVESTMENT STRATEGIES
Under normal market conditions, the Emerging Growth Fund will invest
substantially all of its assets in equity securities of emerging growth
companies in any industry, with emphasis on companies with small
capitalizations.
The Adviser considers emerging growth companies to be those companies which are
less mature and have the potential to grow substantially faster than the
economy. The small capitalization companies in which the Fund invests are
generally comparable to the size of companies included in the Russell 2000
Index, which is a commonly used index of small stock performance. The median
market capitalization in this index as of September 30, 1999 was approximately
$___ million and the largest market capitalization in this index as of such date
was approximately $___ billion. Levels of capitalization and the companies
constituting the Russell 2000 Index could vary over time because of market
conditions and other factors relating to small capitalization companies
generally and investments in such companies. While a company's market
capitalization may be small at the time the Fund first invests in the company,
the Fund may continue to hold and acquire shares of the company after its market
capitalization increases. Small and emerging growth companies that are
identified as good candidates for the Fund can be found in a variety of
industries. In selecting investments for the Fund, the Adviser may consider a
variety of factors, including any one or more of the following:
the strength of a company's management team expected growth in earnings
relative financial condition cash flow
competitive position and business strategy overall potential as an
new or innovative products, services enterprise
or processes
In making investment decisions, the Adviser employs the following four-part
investment approach:
o Screening: The Adviser analyzes thousands of companies in order to find a
select group that have the potential to meet its buy disciplines described
below. Many of the companies within this group are special situation
companies which, because of unique circumstances, such as an ability to fill
a particular niche, are attractive investments.
o Portfolio Construction: The Adviser applies buy disciplines which emphasize
strong management, compelling valuations and high earnings growth. At the
core of this approach is regular contact with a company's management team to
assess their ability to execute the company's strategy. The Adviser considers
potential risks in selecting securities to construct a diversified portfolio
that limits volatility.
o Portfolio Supervision: The Adviser closely monitors each holding in the
Fund's portfolio to determine whether it continues to possess the factors
identified when the original investment was made. This process includes
continuous review of absolute and relative valuations, evaluation of
management's execution of the company's strategy and assessment of the
company's prospects relative to the overall economic, political and financial
environment.
o Portfolio Realignment: The Adviser will generally sell a position when its
target price, which is continuously evaluated, is reached, when there is a
change in a company's management or strategy, or when a company fails to
execute its strategy.
Although it is anticipated that most of the Emerging Growth Fund's assets will
be invested in equity securities of emerging growth companies, the Fund may
invest at any time up to 35% of its total assets in other types of securities
(including corporate bonds and securities of the U.S. government) and in
securities issued by larger, more mature companies and undervalued special
situation companies. As the Fund may engage in frequent trading of securities,
this may produce higher transaction costs and a higher level of capital gains,
which may lower your return.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
INVESTMENT RISKS
EQUITY Because the Emerging Growth Fund invests primarily in equity
SECURITIES: securities, its major risks are those commonly associated with
investing in stocks. This means that you may lose money on your
investment due to unpredictable drops in a stock's value or
periods of below-average performance in a given stock or in the
stock market as a whole. Growth stocks are generally more
sensitive to market movements than other types of stocks,
primarily because their stock prices are based heavily on future
expectations. Small capitalization and emerging growth companies
may be subject to more abrupt price movements, limited markets
and less liquidity than larger, more established companies, which
could adversely affect the value of the portfolio. With special
situation companies, the primary risk is that they may not
achieve their expected value because events do not materialize as
anticipated. Because the Fund invests in, among other things,
undervalued special situations, emerging growth companies and
companies with small capitalizations, an investment in the Fund
involves greater than average risks. Accordingly, the value of
the Fund's shares may fluctuate more widely than the value of
shares of a fund that invests in larger, more established
companies.
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Kobrick Emerging Growth Fund. The performance information below represents
the Fund's performance, restated to account for fees and expenses under
agreements currently in effect. The Fund's past performance does not necessarily
indicate how the Fund will perform in the future.
The bar chart shows the Fund's adjusted total returns for Class A shares for the
one calendar year since the Fund's inception on December 31, 1997.+ The returns
for the other classes of shares offered by this Prospectus differ from the Class
A returns shown in the bar chart, depending upon the respective expenses of each
class. The chart does not reflect any sales charge that you may be required to
pay when you buy or redeem the Fund's shares. A sales charge will reduce your
return.
(total return)
1998 39.5%
[to be recalculated as appropriate for a new expense ratio]
+ The Emerging Growth Fund's Class A shares total return year-to-date as of
September 30, 1999 was ___%.
Highest Quarterly Return: Fourth Quarter 1998, up 37.57%
Lowest Quarterly Return: Third Quarter 1998, down 19.27%
The table below shows how the Fund's average annual total returns for the
one-year and since-inception periods compare to those of the Russell 2000 Index,
a market value-weighted, unmanaged index of small company stocks. It is also
compared to the Lipper Small Company Funds Index, which shows the performance of
a category of all mutual funds with an investment style similar to that of the
Emerging Growth Fund, as calculated by Lipper, Inc. It is not possible to invest
directly in a index. The Fund's total returns are adjusted to reflect the Fund's
expenses for Class A, B, and C shares and the maximum sales charge that you may
pay when you buy or redeem the Fund's shares. The Russell 2000 Index returns
have not been adjusted for ongoing management, distribution and operating
expenses and sales charges applicable to mutual fund investments. The Lipper
Small Company Funds Index returns have been adjusted for these expenses but do
not reflect any sales charges.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIOD ENDED DECEMBER 31, 1998) PAST 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Kobrick Emerging Growth Fund: Class A (inception 12/31/97) 39.5%
Russell 2000 Index -3.4%
Lipper Small Company Funds Index 0.8%
- --------------------------------------------------------------------------------
Kobrick Emerging Growth Fund: Class B (inception 12/31/97) %
Russell 2000 Index %
Lipper Small Company Funds Index %
- --------------------------------------------------------------------------------
Kobrick Emerging Growth Fund: Class C (inception 12/31/97) %
Russell 2000 Index %
Lipper Small Company Funds Index %
- --------------------------------------------------------------------------------
[to be recalculated as appropriate for new expense ratio and sales charge]
Until November 1, 1999, the Fund had only one class of shares and was offered
without a sales charge. These returns have been adjusted to reflect expenses and
sales loads of the Fund's new multiple class structure. See "Fund Fees &
Expenses."
<PAGE>
FUND FEES & EXPENSES
The following tables describe the fees and expenses that you may pay if you buy
and hold shares of each Fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price)(1)(2) 5.75% None None
Maximum deferred sales charge (load)
(as a percentage of original purchase price
or redemption proceeds, as applicable )(2) (3) 5.00% 1.00%
Redemption fees None* None* None*
(1) A reduced sales charge on Class A shares applies in some cases. See "Ways to
Reduce or Eliminate Sales Charges."
(2) Does not apply to reinvested distributions.
(3) A 1.00% contingent deferred sales charge applies with respect to certain
purchases of Class A shares greater than $1,000,000 redeemed Within 1 year
after purchase, but not to any other purchases or redemptions of Class A
shares. See "How Sales Charges are Calculated."
* Generally, a transaction fee will be charged for expedited payment of
redemption proceeds such as by wire or overnight delivery.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, as a percentage of average daily
net assets)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
KOBRICK KOBRICK KOBRICK
CAPITAL FUND GROWTH FUND EMERGING GROWTH FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Distribution and/or service (12b-1) fees 0.25% 1.00%* 1.00%* 0.25% 1.00%* 1.00%* 0.25% 1.00%* 1.00%*
Other Expenses (a)(b) % % % % % % % % %
Total annual fund operating expenses % % % % % % % % %
Fee Waiver and/or Expense Reimbursement(a) % % % % % % % % %
Net Expenses % % % % % % % % %
* Because of the higher 12b-1 fees, long-term shareholders may pay more than the economic equivalent of the maximum front-end
sales charge permitted by rules of the National Association of Securities Dealers, Inc.
(a) The Adviser has agreed to cap the amount of Other Expenses at ___% for the Kobrick Capital Fund and Kobrick Emerging Growth
Fund and ___% for the Kobrick Growth Fund. Accordingly, to the extent Other Expenses exceed the amount of the respective cap,
the Adviser will reduce its fees and/or reimburse the Funds for certain expenses. For the Kobrick Capital Fund and the Kobrick
Emerging Growth Fund, which commenced operations on December 31, 1997, Other Expenses are based upon expenses incurred during
its fiscal year ended September 30, 1998. For the Kobrick Growth Fund (which commenced operations on December 31, 1997), Other
Expenses are based upon projected expenses for the fiscal year ending September 30, 1999. If the Adviser had not agreed to the
cap and if the reimbursements and waivers were not reduced or eliminated for a Fund, performance would be reduced accordingly.
(b) Until November 1, 1999, the Funds had only one class of shares and were offered without a sales charge and therefore other
expenses have been restated to account for fees and expenses under agreements currently in effect.
</TABLE>
<PAGE>
FUND FEES & EXPENSES
EXAMPLE
This example is intended to help you compare the cost of investing in each Fund
with the cost of investing in other mutual funds.
The example assumes that:
o You invest $10,000 in the Fund for the time periods indicated;
o Your investment has a 5% return each year; and
o The Fund's operating expenses remain the same.
Although your actual costs and returns may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
KOBRICK CAPITAL FUND KOBRICK GROWTH FUND KOBRICK EMERGING GROWTH FUND
-------------------- ------------------- ----------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
3 years $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
5 years $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
10 years* $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
(1) Assumes redemption at end of period
(2) Assumes no redemption at end of period
* Class B shares automatically convert to Class A shares after 8 years; therefore, Class B amounts are calculated using Class A
expenses in years 9 and 10.
</TABLE>
<PAGE>
MORE ABOUT RISK
The Funds have principal investment strategies that come with inherent risks.
The following is a list of risks to which each Fund may be subject by investing
in various types of securities or engaging in various practices.
MARKET RISK (All Funds) The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably based upon change in a company's
financial condition as well as overall market and economic conditions.
RISK OF SMALL CAPITALIZATION COMPANIES (Capital and Emerging Growth Funds) These
companies carry special risks, including narrower markets, limited financial and
management resources, less liquidity and greater volatility than large company
stocks.
MANAGEMENT RISK (All Funds) The risk that a strategy used by a Fund's portfolio
management may fail to produce the intended result.
CREDIT RISK (All Funds) The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to honor a
financial obligation.
INTEREST RATE RISK (All Funds) The risk of market losses attributable to changes
in interest rates. In general, the prices of fixed-income securities rise when
interest rates fall, and fall when interest rates rise.
INFORMATION RISK (All Funds) The risk that key information about a security is
inaccurate or unavailable.
OPPORTUNITY RISK (All Funds) The risk of missing out on an investment
opportunity because the assets necessary to take advantage of it are invested in
less profitable investments.
LIQUIDITY RISK (All Funds) The risk that certain securities may be difficult or
impossible to sell at the time and at the price that the seller would like. This
may result in a loss or may be costly to a Fund.
VALUATION RISK (All Funds) The risk that a Fund has valued certain securities at
a higher price than it can sell them for.
POLITICAL RISK (All Funds) The risk of losses directly attributable to
government or political actions.
YEAR 2000 (All Funds) Many computer systems today cannot distinguish between the
year 1900 and the year 2000. The Adviser does not currently anticipate that
computer problems related to the year 2000 will have a material effect on any
Fund. However, there can be no assurances in this area, including the
possibility that year 2000 computer problems could negatively affect
communication systems, investment markets including investments by a Fund or the
economy in general. The Funds and the Adviser have and will take steps that they
believe are reasonable to address this problem in their own computer systems and
to obtain assurances that reasonable steps are being taken by the Funds' major
service providers.
<PAGE>
Management Team
- ---------------
MEET THE FUNDS' INVESTMENT ADVISER
The Kobrick Funds family consists of three mutual funds designed to offer
investors a range of growth oriented investment opportunities. Kobrick Funds are
distributed through New England Funds, L.P. (the "Distributor"). This Prospectus
covers Class A, Class B, and Class C shares of Kobrick Capital Fund, Kobrick
Growth Fund and Kobrick Emerging Growth Fund, all of which constitute the
"Kobrick Funds." As a shareholder of one or more of the Kobrick Funds, you are
entitled to the same benefits and privileges as a shareholder of the New England
Funds, including the ability to exchange into or out of any fund in the New
England Funds family. The New England Funds family, which includes the Kobrick
Funds, includes 25 mutual funds with a total of $__billion in assets under
management as of September 30, 1999. New England Stock Funds, New England Bond
Funds, New England Star Funds and New England State Tax-Free Funds, constitute
the "New England Funds." New England Cash Management Trust Money Market Series
and New England Tax Exempt Money Market Trust constitute the "Money Market
Funds."
ADVISER
The Adviser, KOBRICK FUNDS LLC, located at 101 Federal Street, Boston,
Massachusetts 02110, serves as the investment adviser to each of the Funds and
is a subsidiary of Nvest Companies, L.P. ("Nvest Companies"). The Adviser, the
predecessor to which was formed in 1997, focuses primarily on managing
growth-oriented equity funds including each of the Funds. Nvest Companies is
part of an affiliated group including Nvest, L.P., a publicly-traded company
listed on the New York Stock Exchange. Nvest Companies' 14 principal subsidiary
or affiliated asset management firms, collectively, had more than $136 billion
in assets under management as of June 30, 1999.
In 1998, the Funds paid 1.00% of their respective average daily net assets to
the Advisor in advisory fees.
PORTFOLIO TRADES
In placing portfolio trades, the Adviser may use brokerage firms that market the
Funds' shares or are affiliated with Nvest Companies or the Adviser. In placing
trades, the Adviser will seek to obtain the best combination of price and
execution, which involves a number of judgmental factors. Such portfolio trades
are subject to applicable regulatory restrictions and related procedures adopted
by the Funds' Board of Trustees.
MEET THE FUNDS' PORTFOLIO MANAGERS
FREDERICK R. KOBRICK
Frederick Kobrick has managed Kobrick Capital Fund from its inception and
Kobrick Emerging Growth Fund from its inception until February 1, 1999 and
returned as its portfolio manager on April 9, 1999. Mr. Kobrick previously
managed the Kobrick Growth Fund from its inception until July 1, 1999. He has
been in the investment business for more than 28 years. For the 12 year period
immediately prior to becoming President of the predecessor to Kobrick Funds LLC
in 1997, he was an equity portfolio manager at State Street Research &
Management Company, where he served as Senior Vice President since 1989 and as a
member of the firm's Equity Investment Committee since 1985. He received an
M.B.A. from Harvard Business School and a B.A. from Boston University. Mr.
Kobrick is also a Chartered Financial Analyst. In addition to serving as senior
officer of the Adviser, Mr. Kobrick is also the portfolio manager and a
principal in private investment partnerships and may act in that capacity with
respect to other similar investment partnerships.
MICHAEL E. NANCE
Michael Nance has managed Kobrick Growth Fund since July 1999. Mr. Nance, Senior
Vice President of the Adviser, joined the company in June 1999. Prior to joining
the Adviser, he was a Senior Vice President at Putnam Investments, where he was
a co-manager of the Putnam Voyager Fund, as well as other institutional
accounts. Mr. Nance joined Putnam in 1994 as an Assistant Vice President and
equity analyst in the Global Equity Research Group. Mr. Nance received an M.B.A.
from the University of Chicago Graduate School of Business and a B.S. in
Industrial Engineering from Drexel University.
<PAGE>
Fund Services
- -------------
INVESTING IN THE FUNDS
CHOOSING A SHARE CLASS
Each Fund offers Class A, Class B and Class C shares to the public. Each class
has different costs associated with buying, selling and holding Fund shares,
which allows you to choose the class that best meets your needs. Which class you
choose will depend upon the size of your investment and how long you intend to
hold your shares. Class B shares, Class C shares and certain shareholder
features may not be available to you if you hold your shares in a street name
account. Your financial representative can help you decide which class of shares
is most appropriate for you.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
<S> <C> <C>
o You pay a sales charge when you buy o You do not pay a sales charge when you o You do not pay a sales charge when you
Fund shares. There are several ways to buy Fund shares. All of your money buy Fund shares. All of your money
reduce this charge. See the section goes to work for you right away. goes to work for you right away.
entitled "Ways to Reduce or Eliminate o You pay higher annual expenses than o You pay higher annual expenses than
Sales Charges." Class A shares. Class A shares.
o You will pay a charge on redemptions o You will pay a charge on redemptions
o You pay lower annual expenses than if you sell your shares within 6 years if you sell your shares within 1 year
Class B and Class C shares, giving you of purchase, as described in the of purchase.
the potential for higher returns per section "How Sales Charges are o Your Class C shares will automatically
share. Calculated." convert into Class A shares. If you
o Your Class B shares will automatically hold your shares for longer than 8
o You do not pay a sales charge on not convert into Class A shares after 8 years, you'll pay higher expenses than
orders of $1 million or more, but you years, which reduces your annual other classes.
may pay a charge on redemption if you expenses. o We will not accept an order for $1
redeem these shares within 1 year of o We will not accept an order for $1 million or more of Class C shares. You
purchase. million or more of Class B shares. You may, however, purchase $1 million or
may, however, purchase $1 million or more of Class A shares, which will
more of Class A shares, which will have no sales charge as well as lower
have no sales charge as well as lower annual expenses. You may pay a charge
annual expenses. You may pay a charge on redemption if you redeem these
on shares within 1 year of purchase. redemption if you redeem these shares
within 1 year of purchase.
</TABLE>
For expenses associated with Class A, B and C shares, see the section entitled
"Fund Fees and Expenses" in this Prospectus.
CERTIFICATES
Certificates will not be automatically issued for any class of shares. Upon
written request, you may receive certificates for Class A shares only.
<PAGE>
Fund Services
- -------------
HOW SALES CHARGES ARE CALCULATED
CLASS A SHARES
The price that you pay when you buy Class A shares ("offering price") is their
net asset value plus a sales charge (sometimes called a "front-end sales
charge") which varies depending upon the size of your purchase.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CLASS A SALES CHARGES
YOUR INVESTMENT AS A % OF OFFERING PRICE AS A % OF YOUR INVESTMENT
<S> <C> <C> <C>
Less than $ 50,000 5.75% 6.10%
$ 50,000 - $ 99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,999 2.50% 2.56%
$500,000 - $999,999 2.00% 2.04%
$1,000,000 or more* 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------
* For purchases of Class A shares of the Funds of $1 million or more or purchases by Retirement Plans (Plans under Sections
401(a) or 401(k) of the Internal Revenue Code with investments of $1 million or more or that have 100 or more eligible
employees), there is no front-end sales charge, but a contingent deferred sales charge of 1.00% may apply to redemptions of
your shares within one year of the date of purchase. See the section entitled "Ways to Reduce or Eliminate Sales Charges."
</TABLE>
CLASS B SHARES
The offering price of Class B shares is their net asset value, without a
front-end sales charge. However, there is a contingent deferred sales charge
("CDSC") on shares that you sell within 6 years of buying them. The amount of
the CDSC, if any, declines each year that you own your shares. The holding
period for purposes of timing the conversion to Class A shares and determining
the CDSC will continue to run after an exchange to Class B shares of another
Kobrick Fund or other New England Fund. The CDSC equals the following
percentages of the dollar amounts subject to the charge:
- --------------------------------------------------------------------------------
CLASS B CONTINGENT DEFERRED SALES CHARGE
YEAR SINCE PURCHASE CDSC ON SHARES BEING SOLD
1st 5.00%
2nd 4.00%
3rd 3.00%
4th 3.00%
5th 2.00%
6th 1.00%
Thereafter 0.00%
- --------------------------------------------------------------------------------
CLASS C SHARES
The offering price of Class C shares is their net asset value, without a
front-end sales charge. However, Class C shares are subject to a CDSC of 1.00%
on redemptions made within one year of the date of purchase. The holding period
for determining the CDSC will continue to run after an exchange to Class C
shares of another Kobrick Fund or other New England Fund.
- -------------------------------------------------------------------------------
CLASS C CONTINGENT DEFERRED SALES CHARGE
YEAR SINCE PURCHASE CDSC ON SHARES BEING SOLD
1st 1.00%
Thereafter 0.00%
- -------------------------------------------------------------------------------
HOW THE CDSC IS APPLIED TO YOUR SHARES
The CDSC is a sales charge you pay when you redeem certain Fund shares.
The CDSC:
o is calculated based on the number of shares you are selling;
o is based on either your original purchase price or the current net asset value
of the shares being sold, whichever is lower;
o is deducted from the proceeds of the redemption, not from the amount remaining
in your account; and
o for year one applies to redemptions through the day one year after the date on
which your purchase was accepted, and so on for subsequent years.
A CDSC WILL NOT BE CHARGED ON:
o increases in net asset value above the purchase price; or
o shares you acquired by reinvesting your dividends or capital gains
distributions.
To keep your CDSC as low as possible, each time that you place a request to sell
shares we will first sell any shares in your account that carry no CDSC. If
there are not enough of these shares available to meet your request, we will
sell the shares with the lowest CDSC.
EXCHANGES INTO SHARES OF A NEW ENGLAND MONEY MARKET FUND
If you exchange shares of a Fund into shares of the New England Money Market
Funds, the holding period for purposes of determining the CDSC and conversion to
Class A shares stops until you exchange back into shares of another Kobrick Fund
or New England Fund. If you choose to redeem those New England Money Market Fund
shares, a CDSC may apply.
<PAGE>
Fund Services
- -------------
WAYS TO REDUCE OR ELIMINATE SALES CHARGES
CLASS A SHARES
REDUCING SALES CHARGES
There are several ways you can lower your sales charge, including:
o LETTER OF INTENT -- allows you to purchase Class A shares of any Kobrick Fund
or other New England Fund over a 13-month period but pay sales charges as if
you had purchased all shares at once. This program can save you money if you
plan to invest $50,000 or more over 13 months. Purchases in Class B and Class
C shares may be used toward meeting the letter of intent.
o COMBINING ACCOUNTS -- allows you to combine shares of multiple Kobrick Funds
and other New England Funds and classes for purposes of calculating your sales
charge. You may combine your purchases with those of qualified accounts of a
spouse, parents, children, siblings, grandparents, grandchildren, in-laws,
individual fiduciary accounts, sole proprietorships, single trust estates and
any other group of individuals acceptable to the Distributor.
These privileges do not apply to the New England Money Market Funds unless
shares are purchased through an exchange from another Kobrick Fund or other
New England Fund.
ELIMINATING SALES CHARGES AND CDSC
Class A shares may be offered without front-end sales charges or a CDSC to the
following individuals and institutions:
o Any government entity that is prohibited from paying a sales charge or
commission to purchase mutual fund shares;
o Selling brokers, sales representatives or other intermediaries;
o Fund trustees and other individuals who are affiliated with any Kobrick Fund,
other New England Fund or Money Market Fund (this also applies to any spouse,
parents, children, siblings, grandparents, grandchildren and in-laws of those
mentioned);
o Participants in certain Retirement Plans with at least 100 members (one-year
CDSC may apply);
o Non-discretionary and non-retirement accounts of bank trust departments or
trust companies only if they principally engage in banking or trust
activities; and
o Investments of $25,000 or more in Kobrick Funds, other New England Funds or
Money Market Funds by clients of an adviser or subadviser to any Kobrick Fund,
other New England Fund or Money Market Fund.
o Accounts opened prior to November 1, 1999 that became Class A shareholders of
the relevant Fund, are not subject to applicable sales charges and may
exchange into Class A shares of another Kobrick Fund or other New England
Funds without the imposition of a sales charge.
REPURCHASING FUND SHARES
You may apply proceeds from redeeming Class A shares of the Funds WITHOUT PAYING
A SALES CHARGE to repurchase Class A shares of any Kobrick Fund or other New
England Fund. To qualify, you must reinvest some or all of the proceeds within
120 days after your redemption and notify New England Funds or your financial
representative at the time of reinvestment that you are taking advantage of this
privilege. You may reinvest your proceeds either by returning the redemption
check or by sending a new check for some or all of the redemption amount. Please
note: For federal income tax purposes, A REDEMPTION IS A SALE THAT INVOLVES TAX
CONSEQUENCES, EVEN IF THE PROCEEDS ARE LATER REINVESTED. Please consult your tax
adviser for how a redemption would affect you.
If you repurchase Class A shares of $1 million or more within 30 days after you
redeem such shares, the Distributor will rebate the amount of the CDSC charged
on the redemption.
CLASS A, B OR C SHARES
ELIMINATING THE CDSC
As long as we are notified at the time you sell, the CDSC for any share class
will generally be eliminated in the following cases:
o to make distributions from a retirement plan (a plan termination or total plan
redemption may incur a CDSC);
o to make payments through a systematic withdrawal plan; or
o due to shareholder death or disability.
If you think you may be eligible for a sales charge elimination or reduction,
contact your financial representative or New England Funds.
<PAGE>
Fund Services
- -------------
IT'S EASY TO OPEN AN ACCOUNT
TO OPEN AN ACCOUNT WITH NEW ENGLAND FUNDS:
1. Read this Prospectus carefully.
2. Determine how much you wish to invest. The following chart shows the
investment minimums for various types of accounts:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
TYPE OF ACCOUNT MINIMUM TO OPEN AN ACCOUNT MINIMUM TO OPEN AN ACCOUNT MINIMUM FOR EXISTING
USING INVESTMENT BUILDER ACCOUNTS
<S> <C> <C> <C>
Any account other than those listed below $2,500 $100 $100
Accounts registered under the Uniform Gifts to
Minors Act or the Uniform Transfers to Minors Act $2,000 $100 $100
Individual Retirement Accounts (IRA) $500 $100 $100
Retirement plans with tax benefits such as
corporate pension, profit sharing and Keogh plans $250 $100 $100
Payroll Deduction Investment Programs for
401(k), SARSEP, SEP, SIMPLE, 403(b)(7) and
certain other retirement plans $25 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3. Complete the appropriate parts of the account application, carefully
following the instructions. If you have any questions, please call your
financial representative or New England Funds at 1-800-225-5478. For more
information on New England Funds' investment programs, refer to the section
entitled "Additional Investor Services" in this Prospectus.
4. Use the following sections as your guide for purchasing shares.
SELF-SERVICING YOUR ACCOUNT
Buying or selling shares is easy with the services described below:
NEW ENGLAND FUNDS PERSONAL ACCESS LINE(TM) ("PAL")
800-225-5478, PRESS 1
NEW ENGLAND FUNDS WEB SITE
www.mutualfunds.com
You have access to your account 24 hours a day by calling PAL from a touch-tone
telephone or by visiting us online.
By using these customer service options, you may:
o purchase, exchange or redeem shares in your existing accounts (certain
restrictions may apply);
o review your account balance, recent transactions, Fund prices and recent
performance;
o order duplicate account statements; and
o obtain tax information.
Please see the following pages for other ways to buy, exchange or sell your
shares.
<PAGE>
Fund Services
- -------------
BUYING SHARES
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
THROUGH YOUR INVESTMENT DEALER
<S> <C> <C>
o Call your investment dealer for o Call your investment dealer for
information information
BY MAIL
o Make out a check in U.S. dollars for o Make out a check in U.S. dollars for
the investment amount, payable to "New the investment amount, payable to "New
England Funds." Third party checks England Funds." Third party checks
will generally not be accepted. will generally not be accepted.
o Mail the check with your completed o Fill out the detachable investment
application to New England Funds, P.O. slip from an account statement. If no
Box 8551, Boston, MA 02266-8551. slip is available, include with the
check a letter specifying the Fund
name, your class of shares, your
account number and the registered
account name(s). To make investing
even easier, you can order more
investment slips by calling
800-225-5478.
BY EXCHANGE
o The exchange must be for a minimum of o The exchange must be for a minimum of
$1,000 or for all of your shares. $1,000 or for all of your shares.
o Obtain a current prospectus for the o Call your investment dealer or New
Fund into which you are exchanging by England Funds at 800-225-5478 to
calling your investment dealer or New request an exchange.
England Funds at 800-225-5478. o See the section entitled "Exchanging
o Call your investment dealer or New Shares."
England Funds to request an exchange.
o See the section entitled "Exchanging
Shares."
BY WIRE
o Call New England Funds at 800-225-5478 o Instruct your bank to transfer funds
to obtain an account number and wire to State Street Bank & Trust Company,
transfer instructions. Your bank may ABA# 011000028, DDA# 99011538.
charge you for such a transfer. o Specify the Fund name, your class of
shares, your account number and the
registered account name(s). Your bank
may charge you for such a transfer.
AUTOMATIC INVESTING THROUGH INVESTMENT BUILDER
o Indicate on your application that you o Please call New England Funds at
would like to begin an automatic 800-225-5478 for a Service Options
investment plan through Investment Form. A signature guarantee may be
Builder and the amount of the monthly required to add this privilege.
investment ($100 minimum). o See the section entitled "Additional
o Send a check marked "Void" or a Investor Services."
deposit slip from your bank account
along with your application.
THROUGH AUTOMATED CLEARING HOUSE (ACH)
o Ask your bank or credit union whether o Call New England Funds at 800-225-5478
it is member of the ACH system. to add shares to your account through
o Complete the "Telephone Withdrawal and ACH.
Exchange" and "Bank Information" o If you have not signed up for the ACH
sections on your account application. system, please call New England Funds
o Mail your completed application to New for a Service Options Form. A
England Funds, P.O. Box 8551, Boston, signature guarantee may be required to
MA 02266-8551. add this privilege.
</TABLE>
<PAGE>
Fund Services
- -------------
SELLING SHARES
<TABLE>
TO SELL SOME OR ALL OF YOUR SHARES
Certain restrictions may apply. See section entitled "Restrictions on Buying, Selling and Exchanging Shares."
<CAPTION>
THROUGH YOUR INVESTMENT DEALER
<S> <C>
o Call your investment dealer for information.
BY MAIL
o Write a letter to request a redemption specifying the name of the Fund, the class of
shares, your account number, the exact registered account name(s), the number of shares
or the dollar amount to be redeemed and the method by which you wish to receive your
proceeds. Additional materials may be required. See the section entitled "Selling Shares
in Writing."
o The request must be signed by all of the owners of the shares including the capacity in
which they are signing, if appropriate.
o Mail your request to New England Funds, P.O. Box 8551, Boston, MA 02266-8551.
o Your proceeds (less any applicable CDSC) will be delivered by the method chosen in your
letter. If you choose to have your proceeds delivered by mail, they will generally be
mailed to you on the business day after the request is received in good order. You may
also choose to redeem by wire or through ACH (see below).
BY EXCHANGE
o Obtain a current prospectus for the Fund into which you are exchanging by calling your
investment dealer or New England Funds at 800-225-5478.
o Call New England Funds to request an exchange.
o See the section entitled "Exchanging Shares" for more details.
BY WIRE
o Fill out the "Telephone Withdrawal and Exchange" and "Bank Information" sections on your
account application.
o Call New England Funds at 800-225-5478 or indicate in your redemption request letter (see
above) that you wish to have your proceeds wired to your bank.
o Proceeds (less any applicable CDSC) will generally be wired on the next business day. A
wire fee (currently $5.00) will be deducted from the proceeds.
THROUGH AUTOMATED CLEARING HOUSE (ACH)
o Ask your bank or credit union whether it is a member of the ACH system.
o Complete the "Telephone Withdrawal and Exchange" and "Bank Information" sections on your
account application.
o If you have not signed up for the ACH system on your application, please call New England
Funds at 800-225-5478 for a Service Options Form.
o Call New England Funds to request a redemption through this system.
o Proceeds (less any applicable CDSC) will generally arrive at your bank within three
business days.
BY SYSTEMATIC WITHDRAWAL PLAN
o Please refer to the section entitled "Additional Investor Services" or call New England
Funds at 800-225-5478 or your financial representative for information.
o Because withdrawal payments may have tax consequences, you should consult your tax
adviser before establishing such a plan.
BY TELEPHONE
o You may receive your proceeds by mail, by wire or through ACH (see above). Call New
England Funds at 800-225-5478 to choose the method you wish to use to redeem your shares.
</TABLE>
<PAGE>
Fund Services
- -------------
SELLING SHARES IN WRITING
If you wish to redeem your shares in writing, all owners of the shares must sign
the redemption request in the exact names in which the shares are registered and
indicate any special capacity in which they are signing. In certain situations,
you will be required to make your request to sell shares in writing. In these
instances, a letter of instruction signed by the authorized owner is necessary.
In certain situations we also may require a signature guarantee or additional
documentation.
A signature guarantee protects you against fraudulent orders and is necessary
if:
o your address of record has been changed within the past 30 days;
o you are selling more than $100,000 worth of shares and you are requesting the
proceeds by check; or
o a proceeds check for any amount is mailed to an address other than the address
of record or not payable to the registered owner(s).
A notary public CANNOT provide a signature guarantee. A signature guarantee can
be obtained from one of the following sources:
o a financial representative or securities dealer; o a federal savings bank,
cooperative or other type of bank;
o a savings and loan or other thrift institution;
o a credit union; or o a securities exchange or clearing agency.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SELLER (ACCOUNT TYPE) REQUIREMENTS FOR WRITTEN REQUESTS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Individual, joint, sole proprietorship, UGMA/UTMA o The signatures on the letter must include all persons
(minor accounts) authorized to sign, including title, if applicable.
o Signature guarantee, if applicable (see above).
- ------------------------------------------------------------------------------------------------------------------------
Corporate or association accounts o The signatures on the letter must include all persons
authorized to sign, including title.
- ------------------------------------------------------------------------------------------------------------------------
Owners or trustees of trust accounts o The signature on the letter must include all trustees
authorized to sign, including title.
o If the names of the trustees are not registered on
the account, please provide a copy of the trust
document certified within the past 60 days.
o Signature guarantee, if applicable (see above).
- ------------------------------------------------------------------------------------------------------------------------
Joint tenancy whose co-tenants are deceased o The signatures on the letter must include all
surviving tenants of the account.
o Copy of the death certificate.
o Signature guarantee if proceeds check is issued to
other than the surviving tenants.
- ------------------------------------------------------------------------------------------------------------------------
Power of Attorney (POA) o The signatures on the letter must include the
attorney-in-fact, indicating such title.
o A signature guarantee.
o Certified copy of the POA document stating it is
still in full force and effect, specifying the exact
Fund and account number, and certified within 30 days
of receipt of instructions.*
- ------------------------------------------------------------------------------------------------------------------------
Qualified retirement benefit plans (except New England Funds o The signature on the letter must include all signatures
prototype documents) of those authorized to sign, including title.
o Signature guarantee, if applicable (see above).
- ------------------------------------------------------------------------------------------------------------------------
Executors of estates, administrators, guardians, conservators o The signature on the letter must include those
authorized to sign, including capacity.
o A signature guarantee.
o Certified copy of court document where signer derives
authority, e.g.: Letters of Administration,
Conservatorship, Letters Testamentary.*
- ------------------------------------------------------------------------------------------------------------------------
Individual Retirement Accounts (IRAs) o Additional documentation and distribution forms are
required.
- ------------------------------------------------------------------------------------------------------------------------
* Certification may be made on court documents by the court, usually certified by the clerk of the court. POA
certification may be made by a commercial bank, broker/member of a domestic stock exchange or a practicing attorney.
</TABLE>
<PAGE>
Fund Services
- -------------
EXCHANGING SHARES
In general, you may exchange shares of your Fund for shares of the same class of
another Kobrick Fund or other New England Fund without paying a sales charge or
a CDSC (see the sections entitled "Buying Shares" and "Selling Shares"). The
exchange must be for a minimum of $1,000 (or the total net asset value of your
account, whichever is less), or $100 if made under the Automatic Exchange Plan
(see the section entitled "Additional Investor Services"). All exchanges are
subject to the eligibility requirements of the Kobrick Fund, New England Fund or
Money Market Fund into which you are exchanging. The exchange privilege may be
exercised only in those states where shares of the Kobrick Funds, New England
Funds or Money Market Funds may be legally sold. For federal income tax
purposes, an exchange of Fund shares for shares of another Kobrick Fund, New
England Fund or Money Market Fund is treated as a sale on which gain or loss may
be recognized. Please refer to the Statement of Additional Information (the
"SAI") for more detailed information on exchanging Fund shares.
RESTRICTIONS ON BUYING, SELLING AND EXCHANGING SHARES
PURCHASE AND EXCHANGE RESTRICTIONS
Although the Funds do not anticipate doing so, they reserve the right to suspend
or change the terms of purchasing or exchanging shares. Each Fund and the
Distributor reserve the right to refuse or limit any purchase or exchange order
by a particular purchaser (or group of related purchasers) if the transaction is
deemed harmful to the best interest of the Fund's other shareholders or would
disrupt the management of the Fund. The Funds and the Distributor reserve the
right to restrict purchases and exchanges for the accounts of "market timers" by
limiting the transaction to a maximum dollar amount. An account will be deemed
to be one of a market timer if: (i) more than two exchange purchases of a given
Fund are made for the account in a calendar quarter or (ii) the account makes
one or more exchange purchases of a given Fund in a calendar quarter in an
aggregate amount in excess of 1% of the Fund's total net assets.
SELLING RESTRICTIONS
The table below describes restrictions placed on selling shares of any Fund
described in this Prospectus:
<TABLE>
<CAPTION>
RESTRICTION SITUATION
<S> <C>
The Fund may suspend the right of redemption or postpone payment for more than o When the New York Stock Exchange is
7 days: closed (other than a weekend/holiday)
o During an emergency
o Any other period permitted by the SEC
The Fund reserves the right to suspend account services or refuse transaction o With a notice of a dispute between
requests: registered owners
o With suspicion/evidence of a fraudulent
act
The Fund may pay the redemption price in whole or part by a distribution in kind o When it is detrimental for a Fund to
of readily marketable securities in lieu of cash or may take up to 7 days to pay make cash payments as determined in the
a redemption request in order to raise capital: sole discretion of the adviser or
subadviser
The Fund may close your account and send you the proceeds. You will have 60 days o When the Fund account falls below a set
after being notified of the Fund's intention to close your account to increase minimum (currently $1,000 as set by the
the account to the set minimum. This does not apply to certain qualified Fund's Board of Trustees)
retirement plans, automatic investment plans or accounts that have fallen below
the minimum solely because of fluctuations in a Fund's net asset value per
share:
The Fund may withhold redemption proceeds until the check or funds have cleared: o When redemptions are made within 10
calendar days of purchase by check or
ACH of the shares being redeemed
Telephone redemptions are not accepted for tax-qualified retirement accounts.
If you hold certificates representing your shares, they must be sent with your request for it to be honored.
The Funds recommend that certificates be sent by registered mail.
</TABLE>
<PAGE>
Fund Services
HOW FUND SHARES ARE PRICED
"Net asset value" is the price of one share of a Fund without a sales charge,
and is calculated each business day using this formula:
TOTAL MARKET VALUE OF SECURITIES +
CASH AND OTHER ASSETS - LIABILITIES
NET ASSET VALUE = ---------------------------------------
NUMBER OF OUTSTANDING SHARES
The net asset value of Fund shares is determined according to this schedule:
o A share's net asset value is determined at the close of regular trading on the
New York Stock Exchange (the "Exchange") on the days the Exchange is open for
trading. This is normally 4:00 p.m. Eastern time.
o The price you pay for purchasing, redeeming or exchanging a share will be
based upon the net asset value next calculated after your order is received
"in good order" by State Street Bank and Trust Company, the Fund's custodian
(plus or minus applicable sales charges as described earlier in this
Prospectus).
o Requests received by the Distributor after the Exchange closes will be
processed based upon the net asset value determined at the close of regular
trading on the next day that the Exchange is open, with the exception that
those orders received by your investment dealer before the close of the
Exchange and received by the Distributor before 5:00 p.m. Eastern time* on the
same day will be based on the net asset value determined on that day.
o A Fund heavily invested in foreign securities may have net asset value changes
on days when you cannot buy or sell its shares.
*Under limited circumstances, the Distributor may enter into a contractual
agreement where it may accept orders after 5:00 pm, but not later than 8:00 pm
Generally, during times of substantial economic or market change, it may be
difficult to place your order by phone. During these times, you may deliver your
order in person to the Distributor or send your order by mail as described in
"Buying Shares" and "Selling Shares."
Generally, Fund securities are valued as follows:
o EQUITY SECURITIES -- most recent sales or quoted bid price as provided by a
pricing service.
o DEBT SECURITIES (OTHER THAN SHORT-TERM OBLIGATIONS) -- based upon pricing
service valuations.
o SHORT-TERM OBLIGATIONS (REMAINING MATURITY OF LESS THAN 60 DAYS) -- amortized
cost (which approximates market value).
o SECURITIES TRADED ON FOREIGN EXCHANGES -- most recent sale/bid price on the
non-U.S. exchange, unless an occurrence after the close of the exchange will
materially affect its value. In that case, it is given fair value as
determined by or under the direction of the Fund's Board of Trustees at the
close of regular trading on the Exchange.
o OPTIONS -- last sale price, or if not available, last offering price.
o FUTURES -- unrealized gain or loss on the contract using current settlement
price. When a settlement price is not used, futures contracts will be valued
at their fair value as determined by or under the direction of the Fund's
Board of Trustees.
o ALL OTHER SECURITIES -- fair market value as determined by the Adviser under
the direction of the Fund's Board of Trustees.
The effect of fair value pricing as described above under "Securities traded on
foreign exchanges" and "All other securities" is that securities may not be
priced on the basis of quotations from the primary market in which they are
traded but rather, may be priced by another method that the Fund's Board of
Trustees believes actually reflects fair value.
<PAGE>
Fund Services
- -------------
DIVIDENDS AND DISTRIBUTIONS
The Funds generally distribute most or all of their net investment income
annually (other than capital gains) in the form of dividends. Each Fund
distributes all net realized long- and short-term capital gains annually, after
applying any available capital loss carryovers. The Funds' Board of Trustees may
adopt a different schedule as long as payments are made at least annually.
Depending on your investment goals and priorities, you may choose to:
o participate in the Dividend Diversification Program, which allows you to have
all dividends and distributions automatically invested at net asset value in
shares of the same class of another Kobrick Fund or other New England Fund
registered in your name. Certain investment minimums and restrictions may
apply. For more information about this program, see the section entitled
"Additional Investor Services."
o receive distributions from dividends and interest in cash while reinvesting
distributions from capital gains in additional shares of the same class of the
Fund or in the same class of another New England Fund.
o receive all distributions in cash.
Unless you select one of the options set forth above, distributions will
automatically be reinvested in shares of the same class of the Fund at net asset
value.
For more information or to change your distribution option, contact New England
Funds in writing or call 800-225-5478.
If you earn more than $10 annually in taxable income from a non-retirement plan
Fund, you will receive a Form 1099 to help you report the prior calendar year's
distributions on your federal income tax return. Be sure to keep the Form 1099
as a permanent record. A fee may be charged for any duplicate information
requested.
TAX CONSEQUENCES
Each Fund intends to meet all requirements of the Internal Revenue Code
necessary to qualify as a "regulated investment company" and thus does not
expect to pay any federal income tax on income and capital gains distributed to
shareholders.
Fund distributions paid to you either in cash or reinvested in additional shares
are generally taxable to you either as ordinary income or as capital gains.
Distributions derived from short-term capital gains or investment income are
generally taxable at ordinary income rates. If you are a corporation investing
in a Fund, a portion of these dividends may qualify for the dividends-received
deduction provided that you meet certain holding period requirements.
Distributions of gains from investments that a Fund owned for more than one year
that are designated by a Fund as capital gain dividends will generally be
taxable to a shareholder receiving such distributions as long-term capital gain,
regardless of how long the shareholder has held Fund shares.
An exchange of shares for shares of another Kobrick Fund, or other New England
Fund or Money Market Fund is treated as a sale, and any resulting gain or loss
may be subject to federal income tax. If you purchase shares of a Fund shortly
before it declares a capital gain distribution or a dividend, a portion of the
purchase price may be returned to you as a taxable distribution.
You should consult your tax adviser about any federal, state and local taxes
that may apply to the distributions you receive.
<PAGE>
Fund Services
- -------------
COMPENSATION TO SECURITIES DEALERS
As part of their business strategies, the Funds pay securities dealers that sell
their shares. This compensation originates from two sources: sales charges
(front-end or deferred) and 12b-1 fees (comprising the annual service and/or
distribution fees of a plan adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940). The sales charges are detailed in the section entitled
"How Sales Charges are Calculated." Each class of Fund shares pays an annual
service fee of 0.25% of its average daily net assets. In addition to this
service fee, Class B shares pay an annual distribution fee of 0.75% of their
average daily net assets for 8 years (at which time they automatically convert
into Class A shares). Class C shares are subject to a distribution fee of 0.75%
of their average daily net assets. Generally, the 12b-1 fees are paid to
securities dealers on a quarterly basis. The Distributor retains the first year
of such fees for Class C shares. Because these distribution fees are paid out of
the Fund's assets on an ongoing basis, over time these fees for Class B and
Class C shares will increase the cost of your investment and may cost you more
than paying the front-end sales charge on Class A shares.
The Distributor may, at its expense, pay concessions in addition to the payments
described above to dealers which satisfy certain criteria established from time
to time by the Distributor relating to increasing net sales of shares of the
Kobrick Funds or other New England Funds over prior periods, and certain other
factors. See the SAI for more details.
<PAGE>
Fund Services
- -------------
ADDITIONAL INVESTOR SERVICES
RETIREMENT PLANS
New England Funds offers a range of retirement plans, including IRAs, SEPs,
SARSEPs, SIMPLEs, 403(b) plans and other pension and profit sharing plans. Refer
to the section entitled "It's Easy to Open an Account" for investment minimums.
For more information about our Retirement Plans, call us at 800-225-5478.
INVESTMENT BUILDER PROGRAM
This is New England Funds' automatic investment plan. You may authorize
automatic monthly transfers of $100 or more from your bank checking or savings
account to purchase shares of one or more New England Funds. To join the
Investment Builder Program, please refer to the section entitled "Buying
Shares."
DIVIDEND DIVERSIFICATION PROGRAM
This program allows you to have all dividends and any other distributions
automatically invested in shares of the same class of another New England Fund
or Money Market Fund, subject to the eligibility requirements of that other Fund
and to state securities law requirements. Shares will be purchased at the
selected Fund's net asset value without a front-end sales charge or CDSC on the
dividend record date. Before establishing a Dividend Diversification Program
into any other New England Fund or Money Market Fund, please read its Prospectus
carefully.
AUTOMATIC EXCHANGE PLAN
New England Funds has an automatic exchange plan under which shares of a class
of a Fund are automatically exchanged each month for shares of the same class of
other New England Funds or Money Market Funds. There is no fee for exchanges
made under this plan, but there may be a sales charge in certain circumstances.
Please refer to the SAI for more information on the Automatic Exchange Plan.
SYSTEMATIC WITHDRAWAL PLAN
This plan allows you to redeem shares and receive payments from your Fund on a
regular schedule. Redemption of shares that are part of the Systematic
Withdrawal Plan are not subject to a CDSC. However, the amount or percentage
that you specify in the plan may not exceed, on an annualized basis, 10% of the
value of your Fund account based upon the value of your Fund account on the day
you establish your plan. To establish a Systematic Withdrawal Plan, please refer
to the section entitled "Selling Shares."
NEW ENGLAND FUNDS PERSONAL ACCESS LINE(TM) ("PAL")
This automated customer service system allows you to have access to your account
24 hours a day by calling 800-225-5478, press 1. With a touch-tone telephone,
you can obtain information about your current account balance, recent
transactions, Fund prices and recent performance. You may also use PAL to
purchase, exchange or redeem shares in any of your existing accounts. Certain
restrictions may apply.
NEW ENGLAND FUNDS WEB SITE
Visit us at www.mutualfunds.com to review your account balance and recent
transactions, to view daily prices and performance information or to order
duplicate account statements and tax information. You may also go online to
purchase, exchange or redeem shares in any of your existing accounts. Certain
restrictions may apply.
<PAGE>
Fund Performance
- ----------------
The financial highlights table is intended to help you understand each Fund's
financial performance since the Fund's commencement of operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the return that an investor would have earned on
an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information from the inception of each Fund to the period
ended September 30, 1998, has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report, along with each Fund's financial
statements, are included in the Statement of Additional Information, which is
available upon request. Also shown for each Fund are unaudited financial
highlights for the six months ended March 31, 1999.
KOBRICK CAPITAL FUND
CLASS A
SIX MONTHS FOR THE PERIOD
ENDED 12/31/97* TO
03/31/1999 09/30/1998
UNAUDITED) ---------------
----------
Net asset value, beginning of period $ 10.71 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment (loss) (0.05) (0.127) (c)
Net realized and unrealized gain 7.08 0.837
-------- --------
Total from investment operations 7.03 0.710
LESS DISTRIBUTIONS FROM AND IN EXCESS OF:
Net investment income -- --
Net realized gain -- --
-------- --------
Total distributions -- --
Net asset value, end of period $ 17.74 $ 10.71
======== ========
TOTAL RETURN (A) 65.64% 7.10%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period (000's) $ 93,151 $ 27,463
Ratios to average net assets:
Net expenses (b) 1.75% 1.75%
Gross expenses (b) 1.95% 2.21%
Net investment (loss) (b) (1.00)% (1.38)%
Portfolio turnover rate 250% 350%
* Commencement of operations
(a) Total Returns are historical and assume changes in share price and
reinvestments of dividends. Until November 1, 1999, the Fund had only one
class of shares and was offered without a sales charge. On November 1, 1999,
this class of shares became Class A shares and these returns have been
adjusted to reflect expenses and sales loads of the Fund's new multiple
class structure. Had certain expenses not been reduced during the periods
shown, total returns would have been lower. Periods of less than one year
are not annualized.
(b) Annualized for periods less than one year.
(c) Computed using the average shares method.
<PAGE>
Fund Performance
- ----------------
KOBRICK GROWTH FUND
CLASS A
SIX MONTHS FOR THE PERIOD
ENDED 12/31/98* TO
03/31/1999 09/30/1998
UNAUDITED) ---------------
----------
Net asset value, beginning of period $ 10.32 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment (loss) (0.01) (0.003) (c)
Net realized and unrealized gain 5.16 0.317
-------- --------
Total from investment operations 5.15 0.320
LESS DISTRIBUTIONS FROM AND IN EXCESS OF:
Net investment income -- --
Net realized gain -- --
-------- --------
Total distributions -- --
Net asset value, end of period $ 15.47 $ 10.32
======== ========
TOTAL RETURN (A) 49.93% 3.20%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period (000's) $ 42,463 $ 1,054
Ratios to average net assets:
Net expenses (b) 1.40% 1.40%
Gross expenses (b) 2.76% 11.11%
Net investment (loss) (b) (0.21)% 0.32%
Portfolio turnover rate 180% 11%
* Commencement of operations
(a) Total Returns are historical and assume changes in share price and
reinvestments of dividends. Until November 1, 1999, the Fund had only one
class of shares and was offered without a sales charge. On November 1, 1999,
this class of shares became Class A shares and these returns have been
adjusted to reflect expenses and sales loads of the Fund's new multiple
class structure. Had certain expenses not been reduced during the periods
shown, total returns would have been lower. Periods of less than one year
are not annualized.
(b) Annualized for periods less than one year.
(c) Computed using the average shares method.
<PAGE>
Fund Performance
- ----------------
KOBRICK EMERGING GROWTH FUND
CLASS A
SIX MONTHS FOR THE PERIOD
ENDED 12/31/97* TO
03/31/1999 09/30/1998
UNAUDITED) ---------------
----------
Net asset value, beginning of period $ 10.14 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment (loss) (0.07) (0.107) (c)
Net realized and unrealized gain 5.10 0.247 (d)
-------- --------
Total from investment operations 5.03 0.140
LESS DISTRIBUTIONS FROM AND IN EXCESS OF:
Net investment income -- --
Net realized gain -- --
-------- --------
Total distributions -- --
Net asset value, end of period $ 15.17 $ 10.14
======== ========
TOTAL RETURN (A) 49.70% 1.40%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period (000's) $ 43,146 $ 18,330
Ratios to average net assets:
Net expenses (b) 1.75% 1.75%
Gross expenses (b) 2.29% 2.24%
Net investment (loss) (b) (1.40)% (1.16)%
Portfolio turnover rate 138% 287%
* Commencement of operations
(a) Total Returns are historical and assume changes in share price and
reinvestments of dividends. Until November 1, 1999, the Fund had only one
class of shares and was offered without a sales charge. On November 1, 1999,
this class of shares became Class A shares and these returns have been
adjusted to reflect expenses and sales loads of the Fund's new multiple
class structure. Had certain expenses not been reduced during the periods
shown, total returns would have been lower. Periods of less than one year
are not annualized.
(b) Annualized for periods less than one year.
(c) Computed using the average shares method.
(d) Amount shown for a share outstanding does not correspond with the net
realized and unrealized gain (loss) on investments due to the timing of the
sales and repurchases of the fund shares in relation to fluctuating market
values of the investments of the Fund.
<PAGE>
GLOSSARY OF TERMS
BID PRICE -- the price a prospective buyer is ready to pay. This term is used by
traders who maintain firm bid and offer prices in a given security by standing
ready to buy or sell security units at publicly quoted prices.
BOTTOM-UP APPROACH -- The search for outstanding performance by first
considering individual companies before considering the impact of industry and
economic trends.
CAPITAL GAIN DISTRIBUTIONS -- Payments to a Fund's shareholders of profits
earned from selling securities in a Fund's portfolio. Capital gain distributions
are usually paid once a year.
DERIVATIVE -- A financial instrument whose value and performance is based on the
value and performance of another security or financial instrument.
DIVERSIFICATION -- The strategy of investing in a wide range of companies or
industries to reduce the risk if an individual company or sector of the market
suffers losses.
EARNINGS GROWTH -- A pattern of increasing rate of growth in earnings per share
from one period to another, which usually causes a stock's price to rise.
GROWTH INVESTING -- An investment style that emphasizes companies with strong
earnings growth. Growth investing is generally considered more aggressive than
"value" investing.
INCOME DISTRIBUTIONS -- Payments to a Fund's shareholders resulting from the net
interest or dividend income earned by a Fund's portfolio.
MARKET CAPITALIZATION -- Market price multiplied by number of shares
outstanding. The figures used to distinguish small, medium and large market
capitalizations may vary depending upon the index being used and/or the
guidelines set by the portfolio manager.
NET ASSET VALUE (NAV) -- The market value of one share of a Fund on any given
day without a front-end sales charge or CDSC. It is determined by dividing a
Fund's total net assets by the number of shares outstanding.
QUALITATIVE ANALYSIS -- An analysis of the qualities possessed by a company,
including its management, products and competitive positions, to help determine
if the company can execute its strategy.
QUANTITATIVE ANALYSIS -- An analysis of a company's historic financial
statements and applicable ratios, including price/earnings to growth rate and
price to book value, to determine its prospects for future growth.
TARGET PRICE -- Price that an investor is hoping a stock he or she has just
bought will rise to within a specified period of time. An investor may buy XYZ
at $20, with a target price of $40 in one year's time, for instance.
TOTAL RETURN -- The change in value of an investment in a Fund over a specific
time period expressed as a percentage. Total returns assume all earnings are
reinvested in additional shares of a Fund.
VOLATILITY -- The general variability of a portfolio's value resulting from
price fluctuations of its investments. In most cases, the more diversified a
portfolio is, the less volatile it will be.
<PAGE>
If you would like more information about the Kobrick Funds, the following
documents are available free upon request:
ANNUAL AND SEMIANNUAL REPORTS -- Provide additional information about each
Fund's investments. Each report includes a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI) -- Provides more detailed information
about the Funds and their investment limitations and policies, has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference.
To order a free copy of a Fund's annual or semiannual report or its SAI, contact
your financial representative, or the Funds at:
New England Funds, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Telephone: 800-225-5478
Internet: www.mutualfunds.com
Your financial representative or New England Funds will also be happy to answer
your questions or to provide any additional information that you may require.
You can review the Funds' reports and SAIs at the Public Reference Room of the
Securities and Exchange Commission. Text-only copies are available free from the
Commission's Web site at: www.sec.gov. Copies of these publications are also
available for a fee by writing or calling the Public Reference Room of the SEC,
Washington, D.C. 20549-6009
Telephone: 800-SEC-0330
New England Funds, L.P., and other firms selling shares of New England Funds are
members of the National Association of Securities Dealers, Inc. (NASD). As a
service to investors, the NASD has asked that we inform you of the availability
of a brochure on its Public Disclosure Program. The program provides access to
information about securities firms and their representatives. Investors may
obtain a copy by contacting the NASD at 800-289-9999 or by visiting their Web
site at www.NASDR.com.
KOBRICK FUNDS
Kobrick Capital Fund
Kobrick Growth Fund
Kobrick Emerging Growth Fund
Investment Company Act File No. 881-8436
<PAGE>
KOBRICK FUNDS
CLASS Y SHARES OF:
ALL-CAP EQUITY
Kobrick Capital Fund
LARGE-CAP EQUITY
Kobrick Growth Fund
SMALL-CAP EQUITY
Kobrick Emerging Growth Fund
PROSPECTUS
November 1, 1999
WHAT'S INSIDE
GOALS, STRATEGIES & RISKS
PAGE
FUND FEES & EXPENSES
PAGE
MANAGEMENT TEAM
PAGE
FUND SERVICES
PAGE
FUND PERFORMANCE
PAGE
The Securities and Exchange Commission has not approved any Fund's shares or
determined whether this Prospectus is accurate or complete. Anyone who tells you
otherwise is committing a crime.
For general information on the Funds or any of their services and for assistance
in opening an account, contact your financial representative or call Kobrick
Funds.
Kobrick Funds
P.O. Box 8551, Boston, Massachusetts 02266-8551
1-888-KCFUND1 (1-888-523-8631)
<PAGE>
TABLE OF CONTENTS
GOALS, STRATEGIES & RISKS
Kobrick Capital Fund
Kobrick Growth Fund
Kobrick Emerging Growth Fund
FUND FEES & EXPENSES
MORE ABOUT RISK
MANAGEMENT TEAM
Meet the Funds' Investment Adviser
Meet the Funds' Portfolio Managers
FUND SERVICES
It's Easy to Open an Account
Buying Shares
Selling Shares
Selling Shares in Writing
Exchanging Shares
Restrictions on Buying , Selling and Exchanging Shares
How Fund Shares Are Priced
Dividends and Distributions
Tax Consequences
Compensation to Securities Dealers
FUND PERFORMANCE
Kobrick Capital Fund
Kobrick Growth Fund
Kobrick Emerging Growth Fund
GLOSSARY OF TERMS
If you have any questions about any of the terms used in this Prospectus, please
refer to the "Glossary of Terms."
To learn more about the possible risks of investing in a Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Funds may engage. Please read this section carefully
before you invest.
Fund shares are not bank deposits and are not guaranteed, endorsed or insured by
the Federal Deposit Insurance Corporation or any other government agency, and
are subject to investment risks, including possible loss of the principal
invested.
<PAGE>
Goals, Strategies & Risks FUND FOCUS
KOBRICK CAPITAL FUND Stability Income Growth
-------------------------
High X
ADVISER: Kobrick Funds LLC (the "Adviser") --------- ------ ------
MANAGER: Frederick R. Kobrick Mod.
CATEGORY: All-Cap Equity --------- ------ ------
Low X X
TICKER SYMBOL: CLASS Y
-------
INVESTMENT GOAL
The Capital Fund seeks maximum capital appreciation by investing primarily in
equity securities of companies with small, medium and large capitalizations.
INVESTMENT STRATEGIES
Under normal market conditions, the Capital Fund will invest substantially all
of its assets in equity securities of companies with small, medium and large
capitalizations, including those that the Adviser believes are undervalued
special situations and emerging growth companies. This approach provides the
Adviser with flexibility to emphasize in the Fund companies with different
capitalizations as market conditions change. The Adviser considers emerging
growth companies to be those companies that are less mature and have the
potential to grow substantially faster than the economy. The Adviser's bottom-up
approach utilizes quantitative and qualitative analysis to select individual
companies, not sectors, with the greatest potential for growth. In selecting
investments for the Fund, the Adviser generally seeks companies in a wide range
of industries and considers a variety of factors, including any one or more of
the following:
the strength of a company's expected growth in earnings
management team competitive position and business
relative financial condition strategy
entrepreneurial character new or innovative products, services
or processes
In making investment decisions, the Adviser employs the following four-part
investment approach:
o Screening: The Adviser analyzes thousands of companies in order to find a
select group that have the potential to meet its buy disciplines described
below. Many of the companies within this group are special situation
companies which, because of unique circumstances, such as an ability to fill
a particular niche, are attractive investments.
o Portfolio Construction: The Adviser applies buy disciplines which emphasize
strong management, compelling valuations and high earnings growth. At the
core of this approach is regular contact with a company's management team to
assess their ability to execute the company's strategy. The Adviser considers
potential risks in selecting securities to construct a diversified portfolio
that limits volatility.
o Portfolio Supervision: The Adviser closely monitors each holding in the
Fund's portfolio to determine whether it continues to possess the factors
identified when the original investment was made. This process includes
continuous review of absolute and relative valuations, evaluation of
management's execution of the company's strategy and assessment of the
company's prospects relative to the overall economic, political and financial
environment.
o Portfolio Realignment: The Adviser will generally sell a position when its
target price, which is continuously evaluated, is reached, when there is a
change in a company's management or strategy, or when a company fails to
execute its strategy.
Although it is anticipated that most of the Capital Fund's assets will be
invested in equity securities, the Fund may invest at any time up to 35% of its
total assets in other types of securities (including corporate bonds and
securities of the U.S. government). As the Fund's investment goal provides
flexibility to emphasize different capitalizations of companies as market
conditions change, the Fund may engage in frequent trading of securities. This
may produce higher transaction costs and a higher level of capital gains, which
may lower your return.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
INVESTMENT RISKS
EQUITY Because the Capital Fund invests primarily in equity securities,
SECURITIES: its major risks are those commonly associated with investing in
stocks. This means that you may lose money on your investment due
to unpredictable drops in a stock's value or periods of
below-average performance in a given stock or in the stock market
as a whole. Growth stocks are generally more sensitive to market
movements than other types of stocks, primarily because their
stock prices are based heavily on future expectations. Small
capitalization and emerging growth companies may be subject to
more abrupt price movements, limited markets and less liquidity
than larger, more established companies, which could adversely
affect the value of the portfolio. With special situation
companies, the primary risk is that they may not achieve their
expected value because events do not materialize as anticipated.
Because the Fund invests in, among other things, undervalued
special situations, emerging growth companies and companies with
small capitalizations, an investment in the Fund involves greater
than average risks. Accordingly, the value of the Fund's shares
may fluctuate more widely than the value of shares of a fund that
invests in larger, more established companies.
<PAGE>
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Kobrick Capital Fund. The performance information below represents the Fund's
performance, restated to account for fees and expenses under agreements
currently in effect. The returns shown are those of the Fund's Class A shares
which are not offered in this Prospectus. Class Y shares would have
substantially similar annual returns because they would be invested in the same
portfolio of securities as the Class A shares and would only differ to the
extent that the classes do not have the same expenses. The Fund also offers
Class B and Class C shares in a separate prospectus. The Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
The bar chart shows the Fund's adjusted total returns for Class A shares for the
one calendar year since the Fund's inception on December 31, 1997.+ The returns
for Class B, C and Y shares differ from the Class A returns shown in the bar
chart, depending upon the respective expenses of each class. The chart does not
reflect any sales charge that you may be required to pay when you buy or redeem
the Fund's shares. A sales charge will reduce your return.
(total return)
1998 50%
[to be recalculated as appropriate for new expense ratio ]
+ The Capital Fund's Class A shares total return year-to-date as of September
30, 1999 was ___%
Highest Quarterly Return: Fourth Quarter 1998, up 40.32%
Lowest Quarterly Return: Third Quarter 1998, down 13.86%
The table below shows how the Fund's average annual total returns for the
one-year and since-inception periods compared to those of the Russell 3000
Index, a market value-weighted, unmanaged index of large company stocks. They
are also compared to the Lipper Capital Appreciation Funds Index, which shows
the performance of a category of mutual funds with an investment style similar
to that of the Capital Fund, as calculated by Lipper, Inc. It is not possible to
invest directly in an index. The Fund's total returns are adjusted to reflect
the Fund's expenses for Class A and Y shares and the maximum sales charge that
you may pay when you buy or redeem the Fund's shares. The Russell 3000 Index
returns have not been adjusted for ongoing management, distribution and
operating expenses and sales charges applicable to mutual fund investments. The
Lipper Capital Appreciation Funds Index returns have been adjusted for these
expenses but do not reflect any sales charges.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIOD ENDED DECEMBER 31, 1998) PAST 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Kobrick Capital Fund: Class A (inception 12/31/97) 50.0%
Russell 3000 Index 22.3%
Lipper Capital Appreciation Funds Index 20.0%
- --------------------------------------------------------------------------------
Kobrick Capital Fund: Class Y (inception 12/31/97) %
Russell 3000 Index %
Lipper Capital Appreciation Funds Index %
- --------------------------------------------------------------------------------
[to be recalculated as appropriate for new expense ratio and sales charge]
Until November 1, 1999, the Fund had only one class of shares and was offered
without a sales charge. These returns have been adjusted to reflect expenses and
sales loads of the Fund's new multiple class structure. See "Fund Fees &
Expenses."
<PAGE>
Goals, Strategies & Risks FUND FOCUS
KOBRICK GROWTH FUND Stability Income Growth
-------------------------
High X
ADVISER: Kobrick Funds LLC (the "Adviser") --------- ------ ------
MANAGER: Michael E. Nance Mod. X
CATEGORY: Large-Cap Equity --------- ------ ------
Low X
TICKER SYMBOL: CLASS Y
-------
INVESTMENT GOAL
The Growth Fund seeks long-term growth of capital by investing primarily in
equity securities of companies with large capitalizations that the Adviser
believes have better than average long-term growth potential.
INVESTMENT STRATEGIES
Under normal market conditions, the Growth Fund will be primarily invested in
equity securities of large capitalization companies that the Adviser expects
will have better than average long-term growth potential. The Adviser's
bottom-up approach utilizes quantitative and qualitative analysis to select
individual companies, not sectors, with the greatest potential for growth. The
Fund invests in a diversified portfolio of securities of larger, more
established companies in a broad range of industries. The Adviser seeks to
invest in companies which offer the greatest potential for profitable expansion
and sustained growth and considers a variety of factors, including any one or
more of the following:
management that can execute business plans a sound business strategy
expected growth in earnings compelling valuations
A company's valuations are based on a variety of measures including
price/earnings to growth rates, price to book value and price to sales.
Potential income is not a major factor in the selection of investments.
In making investment decisions, the Adviser employs the following four-part
investment approach:
o Screening: The Adviser analyzes thousands of companies in order to find a
select group that have the potential to meet its buy disciplines described
below.
o Portfolio Construction: The Adviser applies buy disciplines which emphasize
strong management, compelling valuations and high earnings growth. At the
core of this approach is regular contact with a company's management team to
assess their ability to execute the company's strategy. The Adviser considers
potential risks in selecting securities to construct a diversified portfolio
that limits volatility.
o Portfolio Supervision: The Adviser closely monitors each holding in the
Fund's portfolio to determine whether it continues to possess the factors
identified when the original investment was made. This process includes
continuous review of absolute and relative valuations, evaluation of
management's execution of the company's strategy and assessment of the
company's prospects relative to the overall economic, political and financial
environment.
o Portfolio Realignment: The Adviser will generally sell a position when its
target price, which is continuously evaluated, is reached, when there is a
change in a company's management or strategy, or when a company fails to
execute its strategy.
Although it is anticipated that most of the Growth Fund's assets will be
invested in equity securities of companies with large capitalizations, the Fund
may invest at any time up to 35% of its total assets in other types of
securities (including corporate bonds and securities of the U.S. government) and
in smaller capitalization and emerging growth companies.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
INVESTMENT RISKS
EQUITY Because the Growth Fund invests primarily in equity securities,
SECURITIES: its major risks are those commonly associated with investing in
stocks. This means that you may lose money on your investment due
to sudden, unpredictable drops in a stock's value or periods of
below-average performance in a given stock or in the stock market
as a whole. Growth stocks are generally more sensitive to market
movements than other types of stocks, primarily because their
stock prices are based heavily on future expectations. Because of
these and other risks, the Fund may underperform certain other
stock funds during periods when large company growth stocks are
generally out of favor.
PERFORMANCE
Since the Fund has only been in existence since September 1, 1998, its
performance and its comparison to broad based securities market indexes are not
permitted to be included in this Prospectus. The Fund's performance is generally
compared to the S&P Composite Index of 500 Stocks and Lipper Large Company Funds
Index.
<PAGE>
Goals, Strategies & Risks FUND FOCUS
KOBRICK EMERGING GROWTH FUND Stability Income Growth
-------------------------
High X
ADVISER: Kobrick Funds LLC (the "Adviser") --------- ------ ------
MANAGER: Frederick R. Kobrick Mod.
CATEGORY: Small-Cap Equity --------- ------ ------
Low X X
TICKER SYMBOL: CLASS Y
-------
INVESTMENT GOAL
The Emerging Growth Fund seeks to provide growth of capital by investing
primarily in equity securities of emerging growth companies, with an emphasis on
companies with small capitalizations.
INVESTMENT STRATEGIES
Under normal market conditions, the Emerging Growth Fund will invest
substantially all of its assets in equity securities of emerging growth
companies in any industry, with emphasis on companies with small
capitalizations.
The Adviser considers emerging growth companies to be those companies which are
less mature and have the potential to grow substantially faster than the
economy. The small capitalization companies in which the fund invests are
generally comparable to the size of companies included in the Russell 2000
Index, which is a commonly used index of small stock performance. The median
market capitalization in this index as of September 30, 1999 was approximately
$___ million and the largest market capitalization in this index as of such date
was approximately $___ billion. Levels of capitalization and the companies
constituting the Russell 2000 Index could vary over time because of market
conditions and other factors relating to small capitalization companies
generally and investments in such companies. While a company's market
capitalization may be small at the time the Fund first invests in the company,
the Fund may continue to hold and acquire shares of the company after its market
capitalization increases. Small and emerging growth companies that are
identified as good candidates for the Fund can be found in a variety of
industries. In selecting investments for the Fund, the Adviser may consider a
variety of factors, including any one or more of the following:
the strength of a company's management team expected growth in earnings
relative financial condition cash flow
competitive position and business strategy overall potential as an
new or innovative products, services enterprise
or processes
In making investment decisions, the Adviser employs the following four-part
investment approach:
o Screening: The Adviser analyzes thousands of companies in order to find a
select group that have the potential to meet its buy disciplines described
below. Many of the companies within this group are special situation
companies which, because of unique circumstances, such as an ability to fill
a particular niche, are attractive investments.
o Portfolio Construction: The Adviser applies buy disciplines which emphasize
strong management, compelling valuations and high earnings growth. At the
core of this approach is regular contact with a company's management team to
assess their ability to execute the company's strategy. The Adviser considers
potential risks in selecting securities to construct a diversified portfolio
that limits volatility.
o Portfolio Supervision: The Adviser closely monitors each holding in the
Fund's portfolio to determine whether it continues to possess the factors
identified when the original investment was made. This process includes
continuous review of absolute and relative valuations, evaluation of
management's execution of the company's strategy and assessment of the
company's prospects relative to the overall economic, political and financial
environment.
o Portfolio Realignment: The Adviser will generally sell a position when its
target price, which is continuously evaluated, is reached, when there is a
change in a company's management or strategy, or when a company fails to
execute its strategy.
Although it is anticipated that most of the Emerging Growth Fund's assets will
be invested in equity securities of emerging growth companies, the Fund may
invest at any time up to 35% of its total assets in other types of securities
(including corporate bonds and securities of the U.S. government) and in
securities issued by larger, more mature companies and undervalued special
situation companies. As the Fund may engage in frequent trading of securities,
this may produce higher transaction costs and a higher level of capital gains,
which may lower your return.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
INVESTMENT RISKS
EQUITY Because the Emerging Growth Fund invests primarily in equity
SECURITIES: securities, its major risks are those commonly associated with
investing in stocks. This means that you may lose money on your
investment due to unpredictable drops in a stock's value or
periods of below-average performance in a given stock or in the
stock market as a whole. Growth stocks are generally more
sensitive to market movements than other types of stocks,
primarily because their stock prices are based heavily on future
expectations. Small capitalization and emerging growth companies
may be subject to more abrupt price movements, limited markets
and less liquidity than larger, more established companies, which
could adversely affect the value of the portfolio. With special
situation companies, the primary risk is that they may not
achieve their expected value because events do not materialize as
anticipated. Because the Fund invests in, among other things,
undervalued special situations, emerging growth companies and
companies with small capitalizations, an investment in the Fund
involves greater than average risks. Accordingly, the value of
the Fund's shares may fluctuate more widely than the value of
shares of a fund that invests in larger, more established
companies.
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Kobrick Emerging Growth Fund. The performance information below represents
the Fund's performance, restated to account for fees and expenses under
agreements currently in effect. The returns are those of the Fund's Class A
shares which are not offered in this Prospectus. Class Y shares would have
substantially similar annual returns because they would be invested in the same
portfolio of securities as the Class A shares and would differ to the extent
that the classes do not have the same expenses. The Fund also offers Class B and
Class C shares in a separate prospectus. The Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
The bar chart shows the Fund's adjusted total returns for Class A shares for the
one calendar year since the Fund's inception on December 31, 1997.+ The returns
for Class B, C and Y shares differ from the Class A returns shown in the bar
chart, depending upon the respective expenses of each class. The chart does not
reflect any sales charge that you may be required to pay when you buy or redeem
the Fund's shares. A sales charge will reduce your return.
(total return)
1998 39.5%
[to be recalculated as appropriate for a new expense ratio]
+ The Emerging Growth Fund's Class A shares total return year-to-date as of
September 30, 1999 was ___%.
Highest Quarterly Return: Fourth Quarter 1998, up 37.57%
Lowest Quarterly Return: Third Quarter 1998, down 19.27%
The table below shows how the Fund's average annual total returns for the
one-year and since-inception periods compare to those of the Russell 2000 Index,
a market value-weighted, unmanaged index of small company stocks. It is also
compared to the Lipper Small Company Funds Index, which shows the performance of
a category of all mutual funds with an investment style similar to that of the
Emerging Growth Fund, as calculated by Lipper, Inc. It is not possible to invest
directly in a index. The Fund's total returns are adjusted to reflect the Fund's
expenses for Class A and Y shares and the maximum sales charge that you may pay
when you buy or redeem the Fund's shares. The Russell 2000 Index returns have
not been adjusted for ongoing management, distribution and operating expenses
and sales charges applicable to mutual fund investments. The Lipper Small
Company Funds Index returns have been adjusted for these expenses but do not
reflect any sales charge.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIOD ENDED DECEMBER 31, 1998) PAST 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
Kobrick Emerging Growth Fund: Class A (inception 12/31/97) 39.5%
Russell 2000 Index -3.4%
Lipper Small Company Funds Index 0.8%
- --------------------------------------------------------------------------------
Kobrick Emerging Growth Fund: Class Y (inception 12/31/97) %
Russell 2000 Index %
Lipper Small Company Funds Index %
- --------------------------------------------------------------------------------
[to be recalculated as appropriate for a new expense ratio and sales charges]
Until November 1, 1999, the Fund had only one class of shares and was offered
without a sales charge. These returns have been adjusted to reflect expenses and
sales loads of the Fund's new multiple class structure. See "Fund Fees &
Expenses."
<PAGE>
FUND FEES & EXPENSES
The following tables describe the fees and expenses that you may pay if you buy
and hold shares of each Fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
- --------------------------------------------------------------------------------
CLASS Y
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases None
Maximum deferred sales charge (load) None
Redemption fees None*
* Generally, a transaction fee will be charged for expedited payment of
redemption proceeds such as by wire or overnight delivery.
<TABLE>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, as a percentage of average daily net assets)
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
KOBRICK CAPITAL KOBRICK GROWTH FUND KOBRICK EMERGING GROWTH FUND
FUND CLASS Y CLASS Y CLASS Y
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 1.00% 1.00% 1.00%
Distribution and/or service (12b-1) fees 0.00% 0.00% 0.00%
Other Expenses (a)(b) % % %
Total annual fund operating expenses % % %
Fee Waiver and/or Expense Reimbursement(a) % % %
Net Expenses % % %
(a) The Adviser has agreed to cap the amount of Other Expenses at ___% for the Kobrick Capital Fund and
Kobrick Emerging Growth Fund and ___% for the Kobrick Growth Fund. Accordingly, to the extent Other
Expenses exceed the amount of the respective cap, the Adviser will reduce its fees and/or reimburse
the Funds for certain expenses. For the Kobrick Capital Fund and the Kobrick Emerging Growth Fund,
which commenced operations on December 31, 1997, Other Expenses are based upon expenses incurred
during its fiscal year ended September 30, 1998. For the Kobrick Growth Fund (which commenced
operations on September 1, 1998), Other Expenses are based upon projected expenses for the fiscal
year ending September 30, 1999. If the Adviser had not agreed to the cap and if the reimbursements
and waivers were not reduced or eliminated for a Fund, performance would be reduced accordingly.
(b) Until November 1, 1999, the Funds had only one class of shares and were offered without a sales
charge and therefore other expenses have been restated to account for fees and expenses under
agreements currently in effect.
</TABLE>
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in each Fund
with the cost of investing in other mutual funds.
The example assumes that:
o You invest $10,000 in the Fund for the time periods indicated;
o Your investment has a 5% return each year; and
o The Fund's operating expenses remain the same.
Although your actual costs and returns may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
KOBRICK CAPITAL FUND KOBRICK GROWTH FUND KOBRICK EMERGING GROWTH FUND
CLASS Y CLASS Y CLASS Y
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 year $ $ $
3 years $ $ $
5 years $ $ $
10 years $ $ $
</TABLE>
<PAGE>
MORE ABOUT RISK
The Funds have principal investment strategies that come with inherent risks.
The following is a list of risks to which each Fund may be subject by investing
in various types of securities or engaging in various practices.
MARKET RISK (All Funds) The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably based upon change in a company's
financial condition as well as overall market and economic conditions.
RISK OF SMALL CAPITALIZATION COMPANIES (Capital and Emerging Growth Funds) These
companies carry special risks, including narrower markets, limited financial and
management resources, less liquidity and greater volatility than large company
stocks.
MANAGEMENT RISK (All Funds) The risk that a strategy used by a Fund's portfolio
management may fail to produce the intended result.
CREDIT RISK (All Funds) The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to honor a
financial obligation.
INTEREST RATE RISK (All Funds) The risk of market losses attributable to changes
in interest rates. In general, the prices of fixed-income securities rise when
interest rates fall, and fall when interest rates rise.
INFORMATION RISK (All Funds) The risk that key information about a security is
inaccurate or unavailable.
OPPORTUNITY RISK (All Funds) The risk of missing out on an investment
opportunity because the assets necessary to take advantage of it are invested in
less profitable investments.
LIQUIDITY RISK (All Funds) The risk that certain securities may be difficult or
impossible to sell at the time and at the price that the seller would like. This
may result in a loss or may be costly to a Fund.
VALUATION RISK (All Funds) The risk that a Fund has valued certain securities at
a higher price than it can sell them for.
POLITICAL RISK (All Funds) The risk of losses directly attributable to
government or political actions.
YEAR 2000 (All Funds) Many computer systems today cannot distinguish between the
year 1900 and the year 2000. The Adviser does not currently anticipate that
computer problems related to the year 2000 will have a material effect on any
Fund. However, there can be no assurances in this area, including the
possibility that year 2000 computer problems could negatively affect
communication systems, investment markets including investments by a Fund or the
economy in general. The Funds and the Adviser have and will take steps that they
believe are reasonable to address this problem in their own computer systems and
to obtain assurances that reasonable steps are being taken by the Funds' major
service providers.
<PAGE>
Management Team
- ---------------
MEET THE FUNDS' INVESTMENT ADVISER
The Kobrick Funds family consists of three mutual funds designed to offer
investors a range of growth oriented investment opportunities. Kobrick Funds are
distributed through New England Funds, L.P. (the "Distributor"). This Prospectus
covers Class Y shares of Kobrick Capital Fund, Kobrick Growth Fund and Kobrick
Emerging Growth Fund, all of which constitute the "Kobrick Funds." As a
shareholder of one or more of the Kobrick Funds, you are entitled to the same
benefits and privileges as a shareholder of the New England Funds, including the
ability to exchange into or out of any fund in the New England Funds family. The
New England Funds family, which includes the Kobrick Funds, includes 25 mutual
funds with a total of $__billion in assets under management as of September 30,
1999. New England Stock Funds, New England Bond Funds, New England Star Funds
and New England State Tax-Free Funds, constitute the "New England Funds." New
England Cash Management Trust Money Market Series and New England Tax Exempt
Money Market Trust constitute the "Money Market Funds."
ADVISER
The Adviser, KOBRICK FUNDS LLC, located at 101 Federal Street, Boston,
Massachusetts 02110, serves as the investment adviser to each of the Funds and
is a subsidiary of Nvest Companies, L.P. ("Nvest Companies"). The Adviser, the
predecessor to which was formed in 1997, focuses primarily on managing
growth-oriented equity funds including the Funds. Nvest Companies is part of an
affiliated group including Nvest, L.P., a publicly-traded company listed on the
New York Stock Exchange. Nvest Companies' 14 principal subsidiary or affiliated
asset management firms, collectively, had more than $136 billion in assets under
management as of June 30, 1999.
In 1998, the Funds paid 1.00% of their respective average daily net assets to
the Adviser in advisory fees.
PORTFOLIO TRADES
In placing portfolio trades, the Adviser may use brokerage firms that market the
Fund's shares or are affiliated with Nvest Companies or the Adviser. In placing
trades, the Adviser will seek to obtain the best combination of price and
execution, which involves a number of judgmental factors. Such portfolio trades
are subject to applicable regulatory restrictions and related procedures adopted
by the Funds' Board of Trustees.
MEET THE FUNDS' PORTFOLIO MANAGERS
FREDERICK R. KOBRICK
Frederick Kobrick has managed Kobrick Capital Fund from its inception and
Kobrick Emerging Growth Fund from its inception until February 1, 1999 and
returned as its portfolio manager on April 9, 1999. Mr. Kobrick previously
managed the Kobrick Growth Fund from its inception until July 1, 1999. He has
been in the investment business for more than 28 years. For the 12 year period
immediately prior to becoming President of the predecessor to Kobrick Funds LLC
in 1997, he was an equity portfolio manager at State Street Research &
Management Company, where he served as Senior Vice President since 1989 and as a
member of the firm's Equity Investment Committee since 1985. He received an
M.B.A. from Harvard Business School and a B.A. from Boston University. Mr.
Kobrick is also a Chartered Financial Analyst. In addition to serving as senior
officer of the Adviser, Mr. Kobrick is also the portfolio manager and a
principal in private investment partnerships and may act in that capacity with
respect to other similar investment partnerships.
MICHAEL E. NANCE
Michael Nance has managed Kobrick Growth Fund since July 1999. Mr. Nance, Senior
Vice President of the Adviser, joined the company in June 1999. Prior to joining
the Adviser, he was a Senior Vice President at Putnam Investments, where he was
a co-manager of the Putnam Voyager Fund, as well as other institutional
accounts. Mr. Nance joined Putnam in 1994 as an Assistant Vice President and
equity analyst in the Global Equity Research Group. Mr. Nance received an M.B.A.
from the University of Chicago Graduate School of Business and a B.S. in
Industrial Engineering from Drexel University.
<PAGE>
Fund Services
- -------------
IT'S EASY TO OPEN AN ACCOUNT
TO OPEN AN ACCOUNT WITH KOBRICK FUNDS:
1. Read this Prospectus carefully.
2. Read the following eligibility and minimum investment requirements to
determine if you may purchase Class Y shares.
Class Y shares of the Funds may be purchased by the following entities at
the following investment minimums. A minimum initial investment is $1
million and $10,000 is the minimum subsequent investment for:
o Other mutual funds, endowments, foundations, bank trust departments or
trust companies.
There is no initial or subsequent investment minimum for:
o RETIREMENT PLANS (401(a), 401(k), 457 or 403(b) plans) that have total
investment assets of at least $10 million. Plan sponsor accounts can be
aggregated to meet this minimum.
o INSURANCE COMPANY ACCOUNTS of New England Financial, Metropolitan Life
Insurance Company ("MetLife") or their affiliates.
o SEPARATE ACCOUNTS of New England Financial, MetLife, or their
affiliates.
o CERTAIN INDIVIDUAL RETIREMENT ACCOUNTS if the amounts invested
represent rollover distributions from investments by any of the
Retirement Plans set forth above.
o NEW ENGLAND FINANCIAL DEFERRED COMPENSATION PLAN ACCOUNTS for agents,
general agents, directors and senior officers of New England Financial
and its insurance company subsidiaries.
o SERVICE ACCOUNTS through an omnibus account by investment advisers,
financial planners, broker-dealers or other intermediaries who have
entered into a service agreement with a Fund. A fee may be charged to
shareholders purchasing through a service account if they effect
transactions through such parties and should contact such parties
regarding information about such fees.
3. You should contact Kobrick Funds at 1-888-523-8631 before attempting to
purchase Fund shares.
4. Use the sections of this Prospectus that follow as your guide for purchasing
shares.
CERTIFICATES
You will not receive certificates representing Class Y shares.
<PAGE>
<TABLE>
Fund Services
-------------
BUYING SHARES
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
------------------ --------------------
THROUGH YOUR INVESTMENT DEALER
<S> <C> <C>
o Call your investment dealer for o Call your investment dealer for
information information
BY MAIL
o Make out a check in U.S. dollars for o Make out a check in U.S. dollars for
the investment amount, payable to the investment amount, payable to
"Kobrick Funds." Third party checks "Kobrick Funds." Third party checks
will generally not be accepted. will generally not be accepted.
o Mail the check with your completed o Fill out the detachable investment
application to Kobrick Funds, P.O. Box slip from an account statement. If no
8551, Boston, MA 02266-8551. slip is available, include with the
check a letter specifying the Fund
name, your class of shares, your
account number and the registered
account name(s). To make investing
even easier, you can order more
investment slips by calling
1-888-523-8631.
BY EXCHANGE
o Obtain a current prospectus for the o Call your investment dealer or Kobrick
Fund into which you are exchanging by Funds at 1-888-523-8631 to request an
calling your investment dealer or exchange.
Kobrick Funds at 1-888-523-8631. o See the section entitled "Exchanging
o Call your investment dealer or Kobrick Shares."
Funds to request an exchange.
o See the section entitled "Exchanging
Shares."
BY WIRE
o Call Kobrick Funds at 1-888-523-8631 o Instruct your bank to transfer funds
to obtain an account number and wire to State Street Bank & Trust Company,
transfer instructions. Your bank may ABA# 011000028, DDA# 99011538.
charge you for such a transfer. o Specify the Fund name, your account
number and the registered account
name(s). Your bank may charge you for
such a transfer.
THROUGH AUTOMATED CLEARING HOUSE (ACH)
o Ask your bank or credit union whether o Call Kobrick Funds at 1-888-523-8631
it is a member of the ACH system. to add shares to your account through
o Complete the "Telephone withdrawal and ACH.
Exchange" and "Bank Information" o If you have not signed up for the ACH
sections on your account application. system, please call Kobrick Funds for
o Mail your completed application to a Service Options Form. A signature
Kobrick Funds, P.O. Box 8551, Boston, guarantee may be required to add this
MA 02266-8551. privilege.
</TABLE>
<PAGE>
Fund Services
- -------------
SELLING SHARES
<TABLE>
TO SELL SOME OR ALL OF YOUR SHARES
Certain restrictions may apply. See section entitled "Restrictions on Buying, Selling and Exchanging Shares."
<S> <C>
THROUGH YOUR INVESTMENT DEALER
o Call your investment dealer for information.
BY MAIL
o Write a letter to request a redemption specifying the name of the Fund, your
class of shares, your account number, the exact registered account name(s), the
number of shares or the dollar amount to be redeemed and the method by which you
wish to receive your proceeds. Additional materials may be required. See the
section entitled "Selling Shares in Writing."
o The request must be signed by all of the owners of the shares including the
capacity in which they are signing, if appropriate.
o Mail your request to Kobrick Funds, P.O. Box 8551, Boston, MA 02266-8551.
o Your proceeds will be delivered by the method chosen in your letter. If you
choose to have your proceeds delivered by mail, they will generally be mailed to
you on the business day after the request is received in good order. You may also
choose to redeem by wire or through ACH (see below).
BY EXCHANGE
o Obtain a current prospectus for the Fund into which you are exchanging by calling
your investment dealer or Kobrick Funds at 1-888-523-8631.
o Call Kobrick Funds to request an exchange.
o See the section entitled "Exchanging Shares" for more details.
BY WIRE
o Fill out the "Telephone Withdrawal and Exchange" and "Bank Information" sections
on your account application.
o Call Kobrick Funds at 1-888-523-8631 or indicate in your redemption request
letter (see above) that you wish to have your proceeds wired to your bank.
o Proceeds will generally be wired on the next business day. A wire fee (currently
$5.00) will be deducted from the proceeds.
THROUGH AUTOMATED CLEARING HOUSE (ACH)
o Ask your bank or credit union whether it is a member of the ACH system.
o Complete the "Telephone Withdrawal and Exchange" and "Bank Information" sections
on your account application.
o If you have not signed up for the ACH system on your application, please call
Kobrick Funds at 1-888-523-8631 for a Service Options Form.
o Call Kobrick Funds to request a redemption through this system.
o Proceeds will generally arrive at your bank within three business days.
BY TELEPHONE
o You may receive your proceeds by mail, by wire or through ACH (see above).
o Call Kobrick Funds at 1-888-523-8631 to choose the method you wish to use to
redeem your shares.
</TABLE>
<PAGE>
Fund Services
-------------
SELLING SHARES IN WRITING
If you wish to redeem your shares in writing, all owners of the shares must sign
the redemption request in the exact names in which the shares are registered and
indicate any special capacity in which they are signing. In certain situations,
you will be required to make your request to sell shares in writing. In these
instances, a letter of instruction signed by the authorized owner is necessary.
In certain situations we also may require a signature guarantee or additional
documentation.
A signature guarantee protects you against fraudulent orders and is necessary
if:
o your address of record has been changed within the past 30 days;
o you are selling more than $100,000 worth of shares and you are requesting the
proceeds by check; or
o a proceeds check for any amount is mailed to an address other than the address
of record or not payable to the registered owner(s).
A notary public CANNOT provide a signature guarantee. A signature guarantee can
be obtained from one of the following sources:
o a financial representative or securities dealer;
o a federal savings bank, cooperative or other type of bank;
o a savings and loan or other thrift institution;
o a credit union; or
o a securities exchange or clearing agency.
<PAGE>
Fund Services
- -------------
EXCHANGING SHARES
You may exchange Class Y shares of your Kobrick Fund for Class Y shares of
another Kobrick Fund which offers Class Y shares, or another New England Fund
which offers Class Y shares or for Class A shares of the Money Market Funds.
Agents, general agents, directors and senior officers of NELICO and its
insurance company subsidiaries may, at the discretion of NELICO, elect to
exchange Class Y shares of any New England Fund in a NELICO Deferred
Compensation Account for Class A shares of any other New England Fund which does
not offer Class Y shares. Class A shares of any New England Fund in a NELICO
Deferred Compensation Account may also be exchanged for Class Y shares of any
New England Fund. All exchanges are subject to the eligibility requirements of
the Kobrick Fund, New England Fund or Money Market Fund into which you are
exchanging. The exchange privilege may be exercised only in those states where
shares of Kobrick Funds, New England Funds or Money Market Funds may be legally
sold. For federal income tax purposes, an exchange of Fund shares for shares of
another Kobrick Fund, New England Fund or Money Market Fund is treated as a sale
on which gain or loss may be recognized. Please refer to the Statement of
Additional Information (the "SAI") for more detailed information on exchanging
Fund shares.
RESTRICTIONS ON BUYING, SELLING AND EXCHANGING SHARES
PURCHASE AND EXCHANGE RESTRICTIONS
Although the Funds do not anticipate doing so, they reserve the right to suspend
or change the terms of purchasing or exchanging shares. Each Fund and the
Distributor reserve the right to refuse or limit any purchase or exchange order
by a particular purchaser (or group of related purchasers) if the transaction is
deemed harmful to the best interest of the Fund's other shareholders or would
disrupt the management of the Fund. The Funds and the Distributor reserve the
right to restrict purchases and exchanges for the accounts of "market timers" by
limiting the transaction to a maximum dollar amount. An account will be deemed
to be one of a market timer if: (i) more than two exchange purchases of a given
Fund are made for the account in a calendar quarter or (ii) the account makes
one or more exchange purchases of a given Fund in a calendar quarter in an
aggregate amount in excess of 1% of the Fund's total net assets.
SELLING RESTRICTIONS
The table below describes restrictions placed on selling shares of any Fund
described in this Prospectus:
<TABLE>
<CAPTION>
RESTRICTION SITUATION
<S> <C>
The Fund may suspend the right of redemption or postpone payment for more than 7 o When the New York Stock Exchange is
days: closed (other than a weekend/holiday)
o During an emergency
o Any other period permitted by the SEC
The Fund reserves the right to suspend account services or refuse transaction o With a notice of a dispute between
requests: registered owners
o With suspicion/evidence of a fraudulent
act
The Fund may pay the redemption price in whole or part by a distribution in kind o When it is detrimental for the Fund to
of readily marketable securities in lieu of cash or may take up to 7 days to pay sole discretion of the adviser or
a redemption request in order to raise capital: subadviser make cash payments as
determined in the
The Fund may withhold redemption proceeds until the check or funds have cleared: o When redemptions are made within 10
calendar days of purchase by check or ACH
of the shares being redeemed
Telephone redemptions are not accepted for tax-qualified retirement accounts.
</TABLE>
<PAGE>
Fund Services
-------------
HOW FUND SHARES ARE PRICED
"Net asset value" is the price of one share of the Fund without a sales charge,
and is calculated each business day using this formula:
TOTAL MARKET VALUE OF SECURITIES +
CASH AND OTHER ASSETS - LIABILITIES
NET ASSET VALUE = ---------------------------------------
NUMBER OF OUTSTANDING SHARES
The net asset value of Fund shares is determined according to this schedule:
o A share's net asset value is determined at the close of regular trading on
the New York Stock Exchange (the "Exchange") on the days the Exchange is open
for trading. This is normally 4:00 p.m. Eastern time.
o The price you pay for purchasing, redeeming or exchanging a share will be
based upon the net asset value next calculated after your order is received
"in good order" by State Street Bank and Trust Company, the Fund's custodian
(plus or minus applicable sales charges as described earlier in this
Prospectus).
o Requests received by the Distributor after the Exchange closes will be
processed based upon the net asset value determined at the close of regular
trading on the next day that the Exchange is open, with the exception that
those orders received by your investment dealer before the close of the
Exchange and received by the Distributor before 5:00 p.m. Eastern time* on
the same day will be based on the net asset value determined on that day.
o A Fund heavily invested in foreign securities may have net asset value
changes on days when you cannot buy or sell its shares.
* Under limited circumstances, the Distributor may enter into a contractual
agreement where it may accept orders after 5:00pm, but not later than 8:00pm
Generally, during times of substantial economic or market change, it may be
difficult to place your order by phone. During these times, you may deliver your
order in person to the Distributor or send your order by mail as described in
"Buying Shares" and "Selling Shares."
Generally, Fund securities are valued as follows:
o EQUITY SECURITIES -- most recent sales or quoted bid price as provided by a
pricing service.
o DEBT SECURITIES (OTHER THAN SHORT-TERM OBLIGATIONS) -- based upon pricing
service valuations.
o SHORT-TERM OBLIGATIONS (REMAINING MATURITY OF LESS THAN 60 DAYS) -- amortized
cost (which approximates market value).
o SECURITIES TRADED ON FOREIGN EXCHANGES -- most recent sale/bid price on the
non-U.S. exchange, unless an occurrence after the close of the exchange will
materially affect its value. In that case, it is given fair value as
determined by or under the direction of the Fund's Board of Trustees at the
close of regular trading on the Exchange.
o OPTIONS -- last sale price, or if not available, last offering price.
o FUTURES -- unrealized gain or loss on the contract using current settlement
price. When a settlement price is not used, futures contracts will be valued
at their fair value as determined by or under the direction of the Fund's
Board of Trustees.
o ALL OTHER SECURITIES -- fair market value as determined by the Adviser under
the direction of the Fund's Board of Trustees.
The effect of fair value pricing as described above under "Securities traded on
foreign exchanges" and "All other securities" is that securities may not be
priced on the basis of quotations from the primary market in which they are
traded but rather, may be priced by another method that the Fund's Board of
Trustees believes actually reflects fair value.
<PAGE>
Fund Services
- -------------
DIVIDENDS AND DISTRIBUTIONS
The Funds generally distribute most or all of their net investment income
annually (other than capital gains) in the form of dividends. Each Fund
distributes all net realized long- and short-term capital gains annually, after
applying any available capital loss carryovers. The Funds' Board of Trustees may
adopt a different schedule as long as payments are made at least annually.
Depending on your investment goals and priorities, you may choose to:
o receive distributions from dividends and interest in cash while reinvesting
distributions from capital gains in additional Class Y shares of the Fund, in
Class Y shares of another Kobrick Fund or in Class Y shares of a New England
Fund.
o receive all distributions in cash.
Unless you select one of the options set forth above, distributions will
automatically be reinvested in Class Y shares of the Fund.
For more information or to change your distribution option, contact Kobrick
Funds in writing or call 1-888-523-8631.
If you earn more than $10 annually in taxable income from a non-retirement plan
Fund, you will receive a Form 1099 to help you report the prior calendar year's
distributions on your federal income tax return. Be sure to keep the Form 1099
as a permanent record. A fee may be charged for any duplicate information
requested.
TAX CONSEQUENCES
Each Fund intends to meet all requirements of the Internal Revenue Code
necessary to qualify as a "regulated investment company" and thus does not
expect to pay any federal income tax on income and capital gains distributed to
shareholders.
Fund distributions paid to you either in cash or reinvested in additional shares
are generally taxable to you either as ordinary income or as capital gains.
Distributions derived from short-term capital gains or investment income are
generally taxable at ordinary income rates. If you are a corporation investing
in a Fund, a portion of these dividends may qualify for the dividends-received
deduction provided that you meet certain holding period requirements.
Distributions of gains from investments that a Fund owned for more than one year
that are designated by a Fund as capital gain dividends will generally be
taxable to a shareholder receiving such distributions as long-term capital gain,
regardless of how long the shareholder has held Fund shares.
An exchange of shares for shares of another Kobrick Fund, New England Fund or
Money Market Fund is treated as a sale, and any resulting gain or loss may be
subject to federal income tax. If you purchase shares of a Fund shortly before
it declares a capital gain distribution or a dividend, a portion of the purchase
price may be returned to you as a taxable distribution.
You should consult your tax adviser about any federal, state and local taxes
that may apply to the distributions you receive.
<PAGE>
Fund Services
-------------
COMPENSATION TO SECURITIES DEALERS
The Distributor may, at its expense, pay concessions to dealers which satisfy
certain criteria established from time to time by the Distributor relating to
increasing net sales of shares of the Kobrick Funds over prior periods, and
certain other factors. See the SAI for more details.
<PAGE>
Fund Performance
- ----------------
The financial highlights table is intended to help you understand each Fund's
financial performance since the Fund's commencement of operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the return that an investor would have earned on
an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information from the inception of each Fund to the period
ended September 30, 1998, has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report, along with each Fund's financial
statements, are included in the Statement of Additional Information, which is
available upon request. Also shown for each Fund are unaudited financial
highlights for the six months ended March 31, 1999.
KOBRICK CAPITAL FUND
CLASS A
SIX MONTHS FOR THE PERIOD
ENDED 12/31/97* TO
03/31/1999 09/30/1998
UNAUDITED) ---------------
----------
Net asset value, beginning of period $ 10.71 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment (loss) (0.05) (0.127)(c)
Net realized and unrealized gain 7.08 0.837
-------- --------
Total from investment operations 7.03 0.710
LESS DISTRIBUTIONS FROM AND IN EXCESS OF:
Net investment income -- --
Net realized gain -- --
-------- --------
Total distributions -- --
Net asset value, end of period $ 17.74 $ 10.71
======== ========
TOTAL RETURN (A) 65.64% 7.10%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period (000's) $ 93,151 $ 27,463
Ratios to average net assets:
Net expenses (b) 1.75% 1.75%
Gross expenses (b) 1.95% 2.21%
Net investment (loss) (b) (1.00)% (1.38)%
Portfolio turnover rate 250% 350%
* Commencement of operations
(a) Total Returns are historical and assume changes in share price and
reinvestments of dividends. Until November 1, 1999, the Fund had only one
class of shares and was offered without a sales charge. On November 1, 1999,
this class of shares became Class A shares and these returns have been
adjusted to reflect expenses and sales loads of the Fund's new multiple
class structure. Had certain expenses not been reduced during the periods
shown, total returns would have been lower. Periods of less than one year
are not annualized.
(b) Annualized for periods less than one year.
(c) Computed using the average shares method.
<PAGE>
Fund Performance
- ----------------
KOBRICK GROWTH FUND
CLASS A
SIX MONTHS FOR THE PERIOD
ENDED 12/31/98* TO
03/31/1999 09/30/1998
UNAUDITED) ---------------
----------
Net asset value, beginning of period $ 10.32 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment (loss) (0.01) (0.003) (c)
Net realized and unrealized gain 5.16 0.317
-------- --------
Total from investment operations 5.15 0.320
LESS DISTRIBUTIONS FROM AND IN EXCESS OF:
Net investment income -- --
Net realized gain -- --
-------- --------
Total distributions -- --
Net asset value, end of period $ 15.47 $ 10.32
======== ========
TOTAL RETURN (A) 49.93% 3.20%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period (000's) $ 42,463 $ 1,054
Ratios to average net assets:
Net expenses (b) 1.40% 1.40%
Gross expenses (b) 2.76% 11.11%
Net investment (loss) (b) (0.21)% 0.32%
Portfolio turnover rate 180% 11%
* Commencement of operations
(a) Total Returns are historical and assume changes in share price and
reinvestments of dividends. Until November 1, 1999, the Fund had only one
class of shares and was offered without a sales charge. On November 1, 1999,
this class of shares became Class A shares and these returns have been
adjusted to reflect expenses and sales loads of the Fund's new multiple
class structure. Had certain expenses not been reduced during the periods
shown, total returns would have been lower. Periods of less than one year
are not annualized.
(b) Annualized for periods less than one year.
(c) Computed using the average shares method.
<PAGE>
Fund Performance
- ----------------
KOBRICK EMERGING GROWTH FUND
CLASS A
SIX MONTHS FOR THE PERIOD
ENDED 12/31/97* TO
03/31/1999 09/30/1998
UNAUDITED) ---------------
----------
Net asset value, beginning of period $ 10.14 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment (loss) (0.07) (0.107) (c)
Net realized and unrealized gain 5.10 0.247 (d)
-------- --------
Total from investment operations 5.03 0.140
LESS DISTRIBUTIONS FROM AND IN EXCESS OF:
Net investment income -- --
Net realized gain -- --
-------- --------
Total distributions -- --
Net asset value, end of period $ 15.17 $ 10.14
======== ========
TOTAL RETURN (A) 49.70% 1.40%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, end of period (000's) $ 43,146 $ 18,330
Ratios to average net assets:
Net expenses (b) 1.75% 1.75%
Gross expenses (b) 2.29% 2.24%
Net investment (loss) (b) (1.40)% (1.16)%
Portfolio turnover rate 138% 287%
* Commencement of operations
(a) Total Returns are historical and assume changes in share price and
reinvestments of dividends. Until November 1, 1999, the Fund had only one
class of shares and was offered without a sales charge. On November 1, 1999,
this class of shares became Class A shares and these returns have been
adjusted to reflect expenses and sales loads of the Fund's new multiple
class structure. Had certain expenses not been reduced during the periods
shown, total returns would have been lower. Periods of less than one year
are not annualized.
(b) Annualized for periods less than one year.
(c) Computed using the average shares method.
(d) Amount shown for a share outstanding does not correspond with the net
realized and unrealized gain (loss) on investments due to the timing of
sales and repurchases of fund shares in relation to fluctuating market
values of the investments of the Fund.
<PAGE>
GLOSSARY OF TERMS
BID PRICE -- the price a prospective buyer is ready to pay. This term is used by
traders who maintain firm bid and offer prices in a given security by standing
ready to buy or sell security units at publicly quoted prices.
BOTTOM-UP APPROACH -- The search for outstanding performance by first
considering individual companies before considering the impact of industry and
economic trends.
CAPITAL GAIN DISTRIBUTIONS -- Payments to a Fund's shareholders of profits
earned from selling securities in a Fund's portfolio. Capital gain distributions
are usually paid once a year.
DERIVATIVE -- A financial instrument whose value and performance is based on the
value and performance of another security or financial instrument.
DIVERSIFICATION -- The strategy of investing in a wide range of companies or
industries to reduce the risk if an individual company or sector of the market
suffers losses.
EARNINGS GROWTH -- A pattern of increasing rate of growth in earnings per share
from one period to another, which usually causes a stock's price to rise.
GROWTH INVESTING -- An investment style that emphasizes companies with strong
earnings growth. Growth investing is generally considered more aggressive than
"value" investing.
INCOME DISTRIBUTIONS -- Payments to a Fund's shareholders resulting from the net
interest or dividend income earned by a Fund's portfolio.
MARKET CAPITALIZATION -- Market price multiplied by number of shares
outstanding. The capitalization figures used to distinguish small, medium and
large market capitalizations may vary depending upon the index being used and/or
the guidelines set by the portfolio manager.
NET ASSET VALUE (NAV) -- The market value of one share of a Fund on any given
day without a front-end sales charge or CDSC. It is determined by dividing a
Fund's total net assets by the number of shares outstanding.
QUALITATIVE ANALYSIS -- An analysis of the qualities possessed by a company,
including its management, products and competitive positions, to help determine
if the company can execute its strategy.
QUANTITATIVE ANALYSIS -- An analysis of a company's historic financial
statements and applicable ratios, including price/earnings to growth rate and
price to book value, to determine its prospects for future growth.
TARGET PRICE -- Price that an investor is hoping a stock he or she has just
bought will rise to within a specified period of time. An investor may buy XYZ
at $20, with a target price of $40 in one year's time, for instance.
TOTAL RETURN -- The change in value of an investment in a Fund over a specific
time period expressed as a percentage. Total returns assume all earnings are
reinvested in additional shares of a Fund.
VOLATILITY -- The general variability of a portfolio's value resulting from
price fluctuations of its investments. In most cases, the more diversified a
portfolio is, the less volatile it will be.
<PAGE>
If you would like more information about the Kobrick Funds, the following
documents are available free upon request:
ANNUAL AND SEMIANNUAL REPORTS -- Provide additional information about each
Fund's investments. Each report includes a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI) -- Provides more detailed information
about the Funds and their investment limitations and policies, has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference.
TO ORDER A FREE COPY OF A FUND'S ANNUAL OR SEMIANNUAL REPORT OR ITS SAI, CONTACT
YOUR FINANCIAL REPRESENTATIVE, OR THE FUNDS AT:
Kobrick Funds
P.O. Box 8551
Boston, Massachusetts 02266-8551
Telephone: 1-888-523-8631
Internet: www.kcfunds.com
Your financial representative or Kobrick Funds will also be happy to answer your
questions or to provide any additional information that you may require.
You can review the Funds' reports and SAIs at the Public Reference Room of the
Securities and Exchange Commission. Text-only copies are available free from the
Commission's Web site at: www.sec.gov.
Copies of these publications are also available for a fee by writing or calling
the Public Reference Room of the SEC, Washington, D.C. 20549-6009
Telephone: 800-SEC-0330
New England Funds, L.P., and other firms selling shares of Kobrick Funds are
members of the National Association of Securities Dealers, Inc. (NASD). As a
service to investors, the NASD has asked that we inform you of the availability
of a brochure on its Public Disclosure Program. The program provides access to
information about securities firms and their representatives. Investors may
obtain a copy by contacting the NASD at 800-289-9999 or by visiting their Web
site at www.NASDR.com.
KOBRICK FUNDS
Class Y Shares of:
Kobrick Capital Fund
Kobrick Growth Fund
Kobrick Emerging Growth Fund
Investment Company Act File No. 881-8436
<PAGE>
KOBRICK INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1999
Kobrick Growth Fund
Kobrick Capital Fund
Kobrick Emerging Growth Fund
This Statement of Additional Information (the "Statement") is not a prospectus.
This Statement relates to the Prospectuses of Kobrick Capital Fund, Kobrick
Growth Fund and Kobrick Emerging Growth Fund Classes A, B, and C shares and
Classes A and Y shares, each dated November 1, 1999 (the "Prospectus" or
"Prospectuses") and should be read in conjunction there with. A copy of the
Prospectuses can be obtained from New England Funds, L.P. (the "Distributor"),
399 Boylston Street, Boston, Massachusetts 02116.
The Kobrick Investment Trust's (the "Trust") financial statements and
accompanying notes are incorporated by reference into this Statement. The
Trust's annual and semiannual reports contain additional performance information
and are available upon request and without charge by calling 800-225-5478.
Kobrick Investment Trust
101 Federal Street
Boston, Massachusetts 02110
<PAGE>
Table of Contents
The Trust 3
- --------------------------------------------------------------------------------
Investment Limitations 3
- --------------------------------------------------------------------------------
Miscellaneous Investment Practices 5
- --------------------------------------------------------------------------------
Additional Information Concerning Certain Investment Techniques 5
- --------------------------------------------------------------------------------
Quality Ratings of Corporate Bonds and Preferred Stock 13
- --------------------------------------------------------------------------------
Trustees and Officers 14
- --------------------------------------------------------------------------------
The Investment Adviser 15
- --------------------------------------------------------------------------------
Distribution Agreement and 12b-1 Plans 16
- --------------------------------------------------------------------------------
Securities Transactions 20
- --------------------------------------------------------------------------------
Portfolio Turnover 22
- --------------------------------------------------------------------------------
How to Buy Shares 22
- --------------------------------------------------------------------------------
Net Asset Value and Public Offering Price 22
- --------------------------------------------------------------------------------
Reduced Sale Charges - Class A Shares Only 24
- --------------------------------------------------------------------------------
Shareholder Services 26
- --------------------------------------------------------------------------------
Open Accounts 26
-------------------------------------------------------------------------
Automatic Investment Plans 26
-------------------------------------------------------------------------
Retirement Plans Offering Tax Benefits 27
-------------------------------------------------------------------------
Systematic Withdrawal Plans 27
-------------------------------------------------------------------------
Dividend Diversification Program 28
-------------------------------------------------------------------------
Exchange Program 28
-------------------------------------------------------------------------
Automatic Exchange Plan 30
-------------------------------------------------------------------------
Broker Trading Privileges 30
-------------------------------------------------------------------------
NvestPRO 31
-------------------------------------------------------------------------
Self-Servicing Your Account 31
-------------------------------------------------------------------------
Redemptions 33
- --------------------------------------------------------------------------------
Standard Performance Measures 35
- --------------------------------------------------------------------------------
Income Dividends, Capital Gain Distributions and Tax Status 38
- --------------------------------------------------------------------------------
Financial Statements 40
- --------------------------------------------------------------------------------
Appendix A - Publications That May Contain Fund Information A-1
- --------------------------------------------------------------------------------
Appendix B - Advertising and Promotional Literature B-1
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
THE TRUST
- --------------------------------------------------------------------------------
Kobrick Investment Trust (the "Trust") was organized as a Massachusetts business
trust on October 10, 1997. The Trust currently offers three series of shares to
investors: the Kobrick Growth Fund, the Kobrick Capital Fund and the Kobrick
Emerging Growth Fund (referred to individually as a "Fund" and collectively as
the "Funds"). Each Fund has its own investment objective and policies. The Trust
is a diversified, open-end management investment company.
Each share of a Fund represents an equal proportionate interest in the
assets and liabilities belonging to that Fund with each other share of that Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of any Fund into a
greater or lesser number of shares of that Fund so long as the proportionate
beneficial interest in the assets belonging to that Fund and the rights of
shares of any other Fund are in no way affected. In case of any liquidation of a
Fund, the holders of shares of the Fund being liquidated will be entitled to
receive as a class a distribution out of the assets, net of the liabilities,
belonging to that Fund. Expenses attributable to any Fund are borne by that
Fund. Any general expenses of the Trust not readily identifiable as belonging to
a particular Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. Generally, the
Trustees allocate such expenses on the basis of relative net assets or number of
shareholders. No shareholder is liable to further calls or to assessment by the
Trust without his or her express consent.
Under Massachusetts law, under certain circumstances, shareholders of a
Massachusetts business trust could be deemed to have the same type of personal
liability for the obligations of the Trust as does a partner of a partnership.
However, numerous investment companies registered under the Investment Company
Act of 1940 have been formed as Massachusetts business trusts and the Trust is
not aware of any instance where such result has occurred. In addition, the
Master Trust Agreement disclaims shareholder liability for acts or obligations
of the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Master Trust Agreement also provides for the indemnification out
of the Trust property for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Moreover, it provides that
the Trust will, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust and satisfy any judgment
thereon. As a result, and particularly because the Trust assets are readily
marketable and ordinarily substantially exceed liabilities, management believes
that the risk of shareholder liability is slight and limited to circumstances in
which the Trust itself would be unable to meet its obligations. Management
believes that, in view of the above, the risk of personal liability is remote.
Under the Master Trust Agreement of the Trust, no annual or regular
meeting of shareholders is required. Thus, there will ordinarily be no
shareholder meetings unless required by the Investment Company Act of 1940.At
that time, a meeting of shareholders will be called. Under the Master Trust
Agreement, any Trustee may be removed by vote of two-thirds of the outstanding
Trust shares and holders of 10% or more of the outstanding shares of the Trust
can require that the Trustees call a meeting of shareholders for purposes of
voting on the removal of one or more Trustees. In connection with such meetings
called by shareholders, shareholders will be assisted in shareholder
communications to the extent required by applicable law.
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Trust has adopted certain fundamental investment limitations
designed to reduce the risk of an investment in the Funds. These limitations may
not be changed with respect to any Fund without the affirmative vote of a
majority of the outstanding shares of that Fund. The vote of a majority of the
outstanding voting shares of a Fund means the vote (A) of 67% or more of the
voting shares present at a meeting, if the holders of more than 50% of the
outstanding voting shares of the Trust are present or represented by proxy; or
(B) of more than 50% of the outstanding voting shares of the Trust, whichever is
less.
The limitations applicable to each Fund are:
1. Borrowing Money. The Fund will not borrow money, except (a) from a bank,
provided that immediately after such borrowing there is asset coverage of 300%
for all borrowings of the Fund; or (b) from a bank for temporary purposes only,
provided that, when made, such temporary borrowings are in an amount not
exceeding 5% of the Fund's total assets.
2. Pledging. The Fund will not mortgage, pledge, hypothecate or in any manner
transfer, as security for indebtedness, any security owned or held by the Fund
except as may be necessary in connection with borrowings described in limitation
(1) above. The Fund will not mortgage, pledge or hypothecate more than one-third
of its assets in connection with borrowings. Deposit of payment by the Fund of
initial or maintenance margin in connection with futures contracts and related
options is not considered a pledge or hypothecation of assets.
3. Margin Purchases. The Fund will not purchase any securities on "margin"
(except such short-term credits as are necessary for the clearance of
transactions). The deposit of funds in connection with transactions in options,
futures contracts, and options on such contracts will not be considered a
purchase on "margin."
4. Short Sales. The Fund will not make short sales of securities, or maintain a
short position, other than short sales "against the box."
5. Commodities. The Fund will not purchase or sell commodities or commodity
contracts including futures, or purchase or write put or call options on
commodities, except that the Fund may purchase or sell financial futures
contracts and related options.
6. Underwriting. The Fund will not act as underwriter of securities issued by
other persons. This limitation is not applicable to the extent that, in
connection with the disposition of portfolio securities, a Fund may be deemed an
underwriter under certain federal securities laws.
7. Real Estate. The Fund will not purchase, hold or deal in real estate or real
estate mortgage loans, including real estate limited partnership interests,
except that the Fund may purchase (a) securities of companies (other than
limited partnerships) which deal in real estate or (b) securities which are
secured by interests in real estate or by interests in mortgage loans including
securities secured by mortgage-backed securities.
8. Loans. The Fund will not make loans to other persons, except (a) by loaning
portfolio securities, or (b) by engaging in repurchase agreements. For purposes
of this limitation, the term "loans" shall not include the purchase of bonds,
debentures, commercial paper or corporate notes, and similar marketable
evidences of indebtedness.
9. Industry Concentration. The Fund will not invest more than 25% of its total
assets in any particular industry, except in the case of U.S. Government
securities.
10. Senior Securities. The Fund will not issue or sell any senior security as
defined by the Investment Company Act of 1940 except in so far as any borrowing
that the Fund may engage in may be deemed to be an issuance of a senior
security.
The Trust does not intend to pledge, mortgage or hypothecate the assets
of either Fund. The statements of intention in this paragraph reflect
nonfundamental policies which may be changed by the Board of Trustees without
shareholder approval.
Other current investment policies of each of the Funds, which are not
fundamental and which may be changed by action of the Board of Trustees without
shareholder approval, are as follows:
1. Illiquid Investments. The Fund will not purchase securities for which no
readily available market exists or engage in a repurchase agreement maturing in
more than seven days if, as a result thereof, more than 15% of the value of the
net assets of the Fund would be invested in such securities and the Fund will
not purchase restricted securities (excluding securities eligible for resale
under Rule 144A under the Securities Act of 1933) if, as a result thereof, more
than 10% of the value of the net assets of the Fund would be invested in such
securities.
2. Investing for Control. The Fund will not invest in companies for the purpose
of exercising control or management.
3. Issuer Concentration. The Fund will not purchase a security of any one issuer
if such purchase at the time thereof would cause (a) more than 10% of the Fund's
total assets to be invested in the securities of any one issuer or (b) cause
more than 10% of any class of securities of such issuer to be held by the Fund.
4. Other Investment Companies. The Fund will not invest more than 10% of its
total assets in securities of other investment companies. The Fund will not
invest more than 5% of its total assets in the securities of any single
investment company. The Fund will not hold more than 3% of the outstanding
voting stock of any single investment company.
With respect to the percentages adopted by the Trust as maximum
limitations on a Fund's investment policies and restrictions, an excess above
the fixed percentage (except for the percentage limitations relative to the
borrowing of money and the holding of illiquid securities) will not be a
violation of the policy or restriction unless the excess results immediately and
directly from the acquisition of any security or the action taken.
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ADDITIONAL INFORMATION CONCERNING CERTAIN INVESTMENT TECHNIQUES
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Among other investments described below, each Fund may buy and sell
futures contracts, options on securities, options on securities indices, options
on futures contracts, foreign investments, currencies, repurchase agreements,
reverse repurchase agreements, swap arrangements, "when issued" securities and
may enter into closing transactions with respect to each of the foregoing, and
invest in other derivatives and engage in securities lending under circumstances
in which such instruments and techniques are expected by Kobrick Funds LLC (the
"Investment Adviser") to aid in achieving the investment objective of the Funds.
Each Fund on occasion may also purchase instruments with characteristics of both
futures and securities (e.g., debt instruments with interest and principal
payments determined by reference to the value of a currency at a future time)
and which, therefore, possess the risks of both futures and securities
investments.
Futures Contracts
Futures contracts are publicly traded contracts to buy or sell
underlying assets, such as certain securities, currencies, or an index of
securities, at a future time at a specified price. A contract to buy establishes
a "long" position while a contract to sell establishes a "short" position.
The purchase of a futures contract on securities or an index of
securities normally enables a buyer to participate in the market movement of
underlying asset or index after paying a transaction charge and posting margin
in an amount equal to a small percentage of the value of the underlying asset or
index. Each Fund will initially be required to deposit with the Trust's
custodian or the broker effecting the futures transaction an amount of "initial
margin" in cash or U.S. Treasury obligations.
Initial margin in futures transactions is different from margin in
securities transactions in that the former does not involve the borrowing of
funds by the customer to finance the transaction. Rather, the initial margin is
like a performance bond or good faith deposit on the contract. Subsequent
payments (called "maintenance margin") to and from the broker will be made on a
daily basis as the price of the underlying assets fluctuates. This process is
known as "marking to market." For example, when a Fund has taken a long position
in a futures contract and the value of the underlying asset has risen, that
position will have increased in value and the applicable Fund will receive from
the broker a maintenance margin payment equal to the increase in value of the
underlying asset. Conversely, when a Fund has taken a long position in a futures
contract and the value of the underlying instrument has declined, the position
would be less valuable, and the applicable Fund would be required to make a
maintenance margin payment to the broker. At any time prior to expiration of the
futures contract, the Fund may elect to close the position by taking an opposite
position which will terminate the Fund's position in the futures contract. A
final determination of maintenance margin is then made, additional cash is
required to be paid by or released to the Fund, and the Fund realizes a loss or
a gain. While futures contracts with respect to securities do provide for the
delivery and acceptance of such securities, such delivery and acceptance are
seldom made.
Futures contracts will be executed primarily (a) to establish a short
position, and thus protect the Fund from experiencing the full impact of an
expected decline in market value of portfolio holdings without requiring the
sale of holdings, or (b) to establish a long position, and thus to participate
in an expected rise in market value of securities or currencies which the Fund
intends to purchase. Subject to the limitations described above, each Fund may
also enter into futures contracts for purposes of enhancing return. In
transactions establishing a long position in a futures contract, money market
instruments equal to the face value of the futures contract will be identified
by the Fund to the Trust's custodian for maintenance in a separate account to
insure that the use of such futures contracts is unleveraged. Similarly, a
representative portfolio of securities having a value equal to the aggregate
face value of the futures contract will be identified with respect to each short
position. Each Fund will employ any other appropriate method of cover which is
consistent with applicable regulatory and exchange requirements.
Options on securities
Each Fund may use options on securities to implement its investment
strategy. A call option on a security, for example, gives the purchaser of the
option the right to buy, and the writer the obligation to sell, the underlying
asset at the exercise price during the option period. Conversely, a put option
on a security gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying asset at the exercise price during the option
period.
Purchased options have defined risk, i.e., the premium paid for the
option, no matter how adversely the price of the underlying asset moves, while
affording an opportunity for gain corresponding to the increase or decrease in
the value of the optioned asset.
Written options have varying degrees of risk. An uncovered written call
option theoretically carries unlimited risk, as the market price of the
underlying asset could rise far above the exercise price before its expiration.
This risk is tempered when the call option is covered, i.e., when the option
writer owns the underlying asset. In this case, the writer runs the risk of the
lost opportunity to participate in the appreciation in value of the asset rather
than the risk of an out-of-pocket loss. A written put option has defined risk,
i.e., the difference between the agreed-upon price that a Fund must pay to the
buyer upon exercise of the put and the value, which could be zero, of the asset
at the time of exercise.
The obligation of the writer of an option continues until the writer
effects a closing purchase transaction or until the option expires. To secure
his obligation to deliver the underlying asset in the case of a call option, or
to pay for the underlying asset in the case of a put option, a covered writer is
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the applicable clearing corporation and exchanges.
Options on securities indices
Each Fund may engage in transactions in call and put options on
securities indices. For example, a Fund may purchase put options on indices of
securities in anticipation of or during a market decline to attempt to offset
the decrease in market value of its securities that might otherwise result.
Put options on indices of securities are similar to put options on the
securities themselves except that the delivery requirements are different.
Instead of giving the right to make delivery of a security at a specified price,
a put option on an index of securities gives the holder the right to receive an
amount of cash upon exercise of the option if the value of the underlying index
has fallen below the exercise price. The amount of cash received will be equal
to the difference between the closing price of the index and the exercise price
of the option expressed in dollars times a specified multiple. As with options
on securities, a Fund may offset its position in index options prior to
expiration by entering into a closing transaction on an exchange or it may let
the option expire unexercised.
A securities index assigns relative values to the securities included in
the index and the index options are based on a broad market index. Although
there are at present few available options on indices of fixed income
securities, other than tax-exempt securities, or futures and related options
based on such indices, such instruments may become available in the future. In
connection with the use of such options, a Fund may cover its position by
identifying a representative portfolio of securities having a value equal to the
aggregate face value of the option position taken. However, a Fund may employ
any appropriate method to cover its positions that is consistent with applicable
regulatory and exchange requirements.
Options on Futures Contracts
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option.
Options Strategy
A basic option strategy for protecting a Fund against a decline in
securities prices could involve (a) the purchase of a put - - thus "locking in"
the selling price of the underlying securities or securities indices -- or (b)
the writing of a call on securities or securities indices held by the Fund - -
thereby generating income (the premium paid by the buyer) by giving the holder
of such call the option to buy the underlying asset at a fixed price.The premium
will offset, in whole or in part, a decline in portfolio value; however, if
prices of the relevant securities or securities indices rose instead of falling,
the call might be exercised, thereby resulting in losing the ability to
participate in the appreciation of the underlying securities or securities
indices.
A basic option strategy when a rise in securities prices is anticipated
is the purchase of a call - - thus "locking in" the purchase price of the
underlying security or other asset. In transactions involving the purchase of
call options by a Fund, money market instruments equal to the aggregate exercise
price of the options will be identified by the Fund to the Trust's custodian to
insure that the use of such investments is unleveraged.
Each Fund may write options in connection with buy-and-write
transactions; that is, the Fund may purchase a security and concurrently write a
call option against that security. If the call option is exercised in such a
transaction, the Fund's maximum gain will be the premium received by it for
writing the option, adjusted upward or downward by the difference between the
Fund's purchase price of the security and the exercise price of the option. If
the option is not exercised and the price of the underlying security declines,
the amount of such decline will be offset in part, or entirely, by the premium
received.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the Fund's gain will be limited to the premium
received. If the market price of the underlying security declines or otherwise
is below the exercise price, the Fund's return will be the premium received from
writing the put option minus the amount by which the market price of the
security is below the exercise price.
Limitations and Risks of Options and Futures Activity
Each Fund will engage in transactions in futures contracts or options
primarily as a hedge against changes resulting from market conditions which
produce changes in the values of its securities or the securities which it
intends to purchase (e.g., to replace portfolio securities which will mature in
the near future) or subject to the limitations described below, to enhance
return. No Fund will purchase any futures contract or purchase any call option
if, immediately thereafter, more than one third of such Fund's net assets would
be represented by long futures contracts or call options. No Fund will write a
covered call or put option if, immediately thereafter, the aggregate value of
the assets (securities in the case of written calls and cash or cash equivalents
in the case of written puts) underlying all such options, determined as of the
dates such options were written, would exceed 25% of such Fund's net assets. In
addition, no Fund may establish a position in a commodity futures contract or
purchase or sell a commodity option contract for other than bona fide hedging
purposes if immediately thereafter the sum of the amount of initial margin
deposits and premiums required to establish such positions for such nonhedging
purposes would exceed 5% of the market value of such Fund's net assets.
Although effective hedging can generally capture the bulk of a desired
risk adjustment, no hedge is completely effective. A Fund's ability to hedge
effectively through transactions in futures and options depends on the degree to
which price movements in its holdings correlate with price movements of the
futures and options.
Some positions in futures and options may be closed out only on an
exchange which provides a secondary market therefor. There can be no assurance
that a liquid secondary market will exist for any particular futures contract or
option at any specific time. Thus, it may not be possible to close such an
option or futures position prior to maturity. The inability to close options and
futures positions also could have an adverse impact on the Fund's ability to
effectively hedge its securities and might in some cases require the Fund to
deposit cash to meet applicable margin requirements. The Funds will enter into
an option or futures position only if it appears to be a liquid investment.
Foreign Investments
The Funds reserve the right to invest without limitation in securities
of non-U.S. issuers directly, or indirectly in the form of American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs") or similar securities
representing interests in the securities of foreign issuers. Under current
policy, however, each Fund limits such investments, including ADRs and EDRs, to
a maximum of 35% of its total assets.
ADRs are receipts, typically issued by a U.S. bank or trust company,
which evidence ownership of underlying securities issued by a foreign
corporation or other entity. EDRs are receipts issued in Europe which evidence a
similar ownership arrangement. Generally, ADRs in registered form are designed
for use in U.S. securities markets and EDRs are designed for use in European
securities markets. The underlying securities are not always denominated in the
same currency as the ADRs or EDRs. Although investment in the form of ADRs or
EDRs facilitates trading in foreign securities, it does not mitigate all the
risks associated with investing in foreign securities.
ADRs are available through facilities which may be either "sponsored" or
"unsponsored." In a sponsored arrangement, the foreign issuer establishes the
facility, pays some or all of the depository's fees, and usually agrees to
provide shareholder communications. In an unsponsored arrangement, the foreign
issuer is not involved, and the ADR holders pay the fees of the depository.
Sponsored ADRs are generally more advantageous to the ADR holders and the issuer
than are unsponsored ADRs. More and higher fees are generally charged in an
unsponsored program compared to a sponsored facility. Only sponsored ADRs may be
listed on the New York or American Stock Exchanges. Unsponsored ADRs may prove
to be more risky, due to (a) the additional costs involved to the Funds; (b) the
relative illiquidity of the issue in U.S. markets; and (c) the possibility of
higher trading costs in the over-the-counter market as opposed to exchange based
trading. Each Fund will take these and other risk considerations into account
before making an investment in an unsponsored ADR.
To the extent a Fund invests in securities of issuers in less developed
countries or emerging foreign markets, it will be subject to a variety of
additional risks, including risks associated with political instability,
economies based on relatively few industries, lesser market liquidity, high
rates of inflation, significant price volatility of portfolio holdings and high
levels of external debt in the relevant country.
Although each Fund may invest in securities denominated in foreign
currencies, each Fund values its securities and other assets in U.S. dollars. As
a result, the net asset value of a Fund's shares may fluctuate with U.S. dollar
exchange rates as well as with price changes of the Fund's securities in the
various local markets and currencies. Thus, an increase in the value of the U.S.
dollar compared to the currencies in which a Fund makes its investments could
reduce the effect of increases and magnify the effect of decreases in the prices
of the Fund's securities in their local markets. Conversely, a decrease in the
value of the U.S. dollar will have the opposite effect of magnifying the effect
of increases and reducing the effect of decreases in the prices of a Fund's
securities in the local markets.
Currency Transactions
Each Fund's dealings in forward currency exchange contracts will be
limited to hedging involving either specific transactions or aggregate portfolio
positions. A forward currency contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are not commodities and are entered into
in the interbank market conducted directly between currency traders (usually
large commercial banks) and their customers. Although spot and forward contracts
will be used primarily to protect the Fund from adverse currency movements, they
also involve the risk that anticipated currency movements will not be accurately
predicted, which may result in losses to each Fund. This method of protecting
the value of a Fund's portfolio securities against a decline in the value of a
currency does not eliminate fluctuations in the underlying prices of the
securities. It simply establishes a rate of exchange that can be achieved at
some future point in time. Although such contracts tend to minimize the risk of
loss due to a decline in the value of hedged currency, they tend to limit any
potential gain that might result should the value of such currency increase.
Repurchase Agreements
Each Fund may enter into repurchase agreements. Repurchase agreements
occur when a Fund acquires a security and the seller, which may be either (i) a
primary dealer in U.S. Government securities or (ii) an FDIC-insured bank having
gross assets in excess of $500 million, simultaneously commits to repurchase it
at an agreed-upon price on an agreed-upon date within a specified number of days
(usually not more than seven) from the date of purchase. The repurchase price
reflects the purchase price plus an agreed-upon market rate of interest which is
unrelated to the coupon rate or maturity of the acquired security. A Fund will
only enter into repurchase agreements involving U.S. Government securities.
Repurchase agreements could involve certain risks in the event of default or
insolvency of the other party, including possible delays or restrictions upon
the Fund's ability to dispose of the underlying securities. Repurchase
agreements with maturities greater than seven days when combined with other
illiquid securities will be limited to 15% of each Fund's net assets.
Reverse Repurchase Agreements
Each Fund may enter into reverse repurchase agreements. However, a Fund
may not engage in reverse repurchase agreements in excess of 5% of the
applicable Fund's total assets. In a reverse repurchase agreement the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed-upon rate. The ability to use
reverse repurchase agreements may enable, but does not ensure the ability of, a
Fund to avoid selling portfolio instruments at a time when a sale may be deemed
to be disadvantageous. When effecting reverse repurchase agreements, assets of
the applicable Fund in a dollar amount sufficient to make payment of the
obligations to be purchased are segregated on the applicable Fund's records at
the trade date and maintained until the transaction is settled.
Swap Arrangements
Each Fund may enter into various forms of swap arrangements with
counterparties with respect to interest rates, currency rates, securities or
indices, including the purchase of caps, floors and collars as described below.
In an interest rate swap a Fund could agree for a specific period to pay a bank
or investment banker the floating rate of interest on a so-called notional
principal amount (i.e., an assumed figure selected by the parties for this
purpose) in exchange for agreement by the bank or investment banker to pay the
Fund a fixed rate of interest on the notional principal amount. In a currency
swap a Fund would agree with the other party to exchange cash flows based on the
relative differences in values of a notional amount of two (or more) currencies;
in an index swap, a Fund would agree to exchange cash flows on a notional amount
based on changes in the values of the selected indices. Purchase of a cap
entitles the purchaser to receive payments from the seller on a notional amount
to the extent that the selected index exceeds an agreed upon interest rate or
amount whereas purchase of a floor entitles the purchaser to receive such
payments to the extent the selected index falls below an agreed upon interest
rate or amount. A collar combines a cap and a floor.
Most swaps entered into by a Fund will be on a net basis; for example,
in an interest rate swap, amounts generated by application of the fixed rate and
the floating rate to the notional principal amount would first offset one
another, with the Fund either receiving or paying the difference between such
amounts. In order to be in a position to meet any obligations resulting from
swaps, the applicable Fund will set up a segregated custodial account to hold
appropriate liquid assets, including cash; for swaps entered into on a net
basis, assets will be segregated having a daily net asset value equal to any
excess of the applicable Fund's accrued obligations over the accrued obligations
of the other party, while for swaps on other than a net basis assets will be
segregated having a value equal to the total amount of the applicable Fund's
obligations.
These arrangements will be made primarily for hedging purposes, to
preserve the return on an investment or on a portion of the applicable Fund's
portfolio. However, a Fund may enter into such arrangements for income purposes
to the extent permitted by the Commodities Futures Trading Commission for
entities which are not commodity pool operators, such as the Fund. In entering a
swap arrangement, a Fund is dependent upon the creditworthiness and good faith
of the counterparty. Each Fund attempts to reduce the risks of nonperformance by
the counterparty by dealing only with established, reputable institutions. The
swap market is still relatively new and emerging; positions in swap arrangements
may become illiquid to the extent that nonstandard arrangements with one
counterparty are not readily transferable to another counterparty or if a market
for the transfer of swap positions does not develop. The use of interest rate
swaps is a highly specialized activity which involves investment techniques and
risks different from those associated with ordinary portfolio securities
transactions. If the Investment Adviser is incorrect in its forecasts of market
values, interest rates and other applicable factors, the investment performance
of the applicable Fund would diminish compared with what it would have been if
these investment techniques were not used. Moreover, even if the Investment
Adviser is correct in its forecast, there is a risk that the swap position may
correlate imperfectly with the price of the asset or liability being hedged.
When-issued Securities
Each Fund may purchase "when-issued" equity securities, which are traded
on a price basis prior to actual issuance. Such purchases will be made only to
achieve a Fund's investment objective and not for leverage. The when-issued
trading period generally lasts from a few days to months, or over a year or
more; during this period dividends on equity securities are not payable. No
dividend income accrues to the Fund prior to the time it takes delivery. A
frequent form of when-issued trading occurs when corporate securities to be
created by a merger of companies are traded prior to the actual consummation of
the merger. Such transactions may involve a risk of loss if the value of the
securities fall below the price committed to prior to the actual issuance. The
Trust's custodian will establish a segregated account for each Fund when it
purchases securities on a when- issued basis consisting of cash or liquid
securities equal to the amount of the when-issued commitments. Securities
transactions involving delayed deliveries or forward commitments are frequently
characterized as when-issued transactions and are similarly treated by each
Fund.
Securities Lending
Each Fund may seek additional income by lending portfolio securities to
qualified institutions having a value of up to 33 1/3% of each Fund's assets.
The Fund will receive cash or cash equivalent (e.g. Government obligations) as
collateral in an amount at least equal to 100% of the current market value of
the loaned securities plus accrued interest. The collateral will generally be
held in the form received, although cash may be invested in securities issued or
guaranteed by the U.S. Government and/or irrevocable stand-by letters of credit.
By reinvesting cash it receives in these transactions, a Fund could magnify any
gain or loss it realizes on the underlying investment. If the borrower fails to
return the securities and the collateral is insufficient to cover the loss, the
Fund could lose money.
Rule 144A Securities
Subject to the percentage limitation on illiquid securities noted above
under Investment Limitations, each Fund may buy or sell restricted securities in
accordance with Rule 144A under the Securities Act of 1933 ("Rule 144A
Securities").Securities may be resold pursuant to Rule 144A under certain
circumstances only to qualified institutional buyers as defined in the rule, and
the markets and trading practices for such securities are relatively new and
still developing; depending on the development of such markets, such Rule 144A
Securities may be deemed to be liquid as determined by or in accordance with
methods adopted by the Trustees. Under such methods the following factors are
considered, among others: the frequency of trades and quotes for the security,
the number of dealers and potential purchasers in the market, marketmaking
activity, and the nature of the security and marketplace trades. Investments in
Rule 144A Securities could have the effect of increasing the level of a Fund's
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing such securities. Also, a Fund may be adversely
impacted by the possible illiquidity and subjective valuation of such securities
in the absence of a market for them.
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DEBT INSTRUMENTS AND PERMITTED CASH INVESTMENTS
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As indicated in the Funds' Prospectus, a Fund may invest in long-term
and short-term debt securities. Certain debt securities and money market
instruments in which a Fund may invest are described below.
U.S. Government and Related Securities
U.S. Government securities are securities which are issued or guaranteed
as to principal or interest by the U.S. Government, a U.S. Government agency or
instrumentality, or certain mixed-ownership Government corporations as described
herein. The U.S. Government securities in which each Fund invests include, among
others: direct obligations of the U.S. Treasury, i.e., U.S. Treasury bills,
notes, certificates and bonds; obligations of U.S. Government agencies or
instrumentalities such as the Federal Home Loan Banks, the Federal Farm Credit
Banks, the Federal National Mortgage Association, the Government National
Mortgage Association and the Federal Home Loan Mortgage Corporation; and
obligations of mixed-ownership Government corporations such as Resolution
Funding Corporation.
U.S. Government securities which each Fund may buy are backed in a
variety of ways by the U.S. Government, its agencies or instrumentalities. Some
of these obligations, such as Government National Mortgage Association mortgage-
backed securities, are backed by the full faith and credit of the U.S. Treasury.
Other obligations, such as those of the Federal National Mortgage Association,
are backed by the discretionary authority of the U.S. Government to purchase
certain obligations of agencies or instrumentalities, although the U.S.
Government has no legal obligation to do so. Obligations such as those of the
Federal Home Loan Banks, the Federal Farm Credit Banks, the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation are backed
by the credit of the agency or instrumentality issuing the obligations. Certain
obligations of Resolution Funding Corporation, a mixed-ownership Government
corporation, are backed with respect to interest payments by the U.S. Treasury,
and with respect to principal payments by U.S. Treasury obligations held in a
segregated account with a Federal Reserve Bank. Except for certain mortgage-
related securities, each Fund will only invest in obligations issued by mixed-
ownership Government corporations where such securities are guaranteed as to
payment of principal or interest by the U.S. Government or a U.S. Government
agency or instrumentality, and any unguaranteed principal or interest is
otherwise supported by U.S. Government obligations held in a segregated account.
U.S. Government securities may be acquired by each Fund in the form of
separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury. The principal and interest components of
selected securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program.Under the
STRIPS program, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Obligations of Resolution Funding Corporation are similarly divided into
principal and interest components and maintained as such on the book entry
records of the Federal Reserve Banks.
In addition, each Fund may invest in custodial receipts that evidence
ownership of future interest payments, principal payments or both on certain
U.S. Treasury notes or bonds in connection with programs sponsored by banks and
brokerage firms. Such notes and bonds are held in custody by a bank on behalf of
the owners of the receipts. These custodial receipts are known by various names,
including "Treasury Receipts" ("TRs"), "Treasury Investment Growth Receipts"
("TIGRs") and "Certificates of Accrual on Treasury Securities" ("CATS") , and
may not be deemed U.S. Government securities. Each Fund may also invest from
time to time in collective investment vehicles, the assets of which consist
principally of U.S. Government securities or other assets substantially
collateralized or supported by such securities, such as Government trust
certificates.
Bank Money Investments
Bank money investments include but are not limited to certificates of
deposit, bankers' acceptances and time deposits. Certificates of deposit are
generally short-term (i.e., less than one year), interest-bearing negotiable
certificates issued by commercial banks or savings and loan associations against
funds deposited in the issuing institution. A banker's acceptance is a time
draft drawn on a commercial bank by a borrower, usually in connection with an
international commercial transaction (to finance the import, export, transfer or
storage of goods). A banker's acceptance may be obtained from a domestic or
foreign bank, including a U.S. branch or agency of a foreign bank. The borrower
is liable for payment as well as the bank, which unconditionally guarantees to
pay the draft at its face amount on the maturity date. Most acceptances have
maturities of six months or less and are traded in secondary markets prior to
maturity. Time deposits are nonnegotiable deposits for a fixed period of time at
a stated interest rate. The Funds will not invest in any such bank money
investment unless the investment is issued by a U.S. bank that is a member of
the Federal Deposit Insurance Corporation ("FDIC"), including any foreign branch
thereof, a U.S. branch or agency of a foreign bank, a foreign branch of a
foreign bank, or a savings bank or savings and loan association that is a member
of the FDIC and which at the date of investment has capital, surplus and
undivided profits (as of the date of its most recently published financial
statements) in excess of $50 million. The Funds will not invest in time deposits
maturing in more than seven days and will not invest more than 10% of the total
assets of the applicable Fund in time deposits maturing in two to seven days.
U.S. branches and agencies of foreign banks are offices of foreign banks
and are not separately incorporated entities. They are chartered and regulated
either federally or under state law. U.S. federal branches or agencies of
foreign banks are chartered and regulated by the Comptroller of the Currency,
while state branches and agencies are chartered and regulated by authorities of
the respective states or the District of Columbia. U.S. branches of foreign
banks may accept deposits and thus are eligible for FDIC insurance; however, not
all such branches elect FDIC insurance. Unlike U.S. branches of foreign banks,
U.S. agencies of foreign banks may not accept deposits and thus are not eligible
for FDIC insurance. Both branches and agencies can maintain credit balances,
which are funds received by the office incidental to or arising out of the
exercise of their banking powers and can exercise other commercial functions,
such as lending activities.
Short-Term Corporate Debt Instruments
Short-term corporate debt instruments include commercial paper to
finance short-term credit needs (i.e., short-term, unsecured promissory notes)
issued by corporations including but not limited to (a) domestic or foreign bank
holding companies or (b) their subsidiaries or affiliates where the debt
instrument is guaranteed by the bank holding company or an affiliated bank or
where the bank holding company or the affiliated bank is unconditionally liable
for the debt instrument. Commercial paper is usually sold on a discounted basis
and has a maturity at the time of issuance not exceeding nine months.
Commercial Paper Ratings
Commercial paper investments at the time of purchase will be rated
within the "A" major rating category by Standard & Poor's Ratings Group ("S&P")
or within the "Prime" major rating category by Moody's Investor's Service, Inc.
("Moody's"), or, if not rated, issued by companies having an outstanding long-
term unsecured debt issue rated at least within the "A" rating category by S&P
or by Moody's. The money market investments in corporate bonds and debentures
(which must have maturities at the date of settlement of one year or less) must
be rated at the time of purchase at least within the "A" rating category by S&P
or by Moody's.
Commercial paper rated within the "A" category (highest quality) by S&P
is issued by entities which have liquidity ratios which are adequate to meet
cash requirements. Long-term senior debt is rated within the "A" category or
better, although in some cases credits within the BBB category may be allowed.
The issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry. The reliability and quality of
management are unquestioned. The relative strength or weakness of the above
factors determines whether the issuer's commercial paper is rated A-l, A-2 or
A- 3.(Those A-l issues determined to possess overwhelming safety characteristics
are denoted with a plus (+) sign: A-l+.)
The rating Prime is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: evaluation of the management of the issuer; economic evaluation of
the issuer's industry or industries and an appraisal of speculative-type risks
which may be inherent in certain areas; evaluation of the issuer's products in
relation to competition and customer acceptance; liquidity; amount and quality
of long-term debt; trend of earnings over a period of 10 years; financial
management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet such obligations. These
factors are all considered in determining whether the commercial paper is rated
Prime-l, Prime-2 or Prime-3.
- --------------------------------------------------------------------------------
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS
- --------------------------------------------------------------------------------
Corporate Bonds
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group for corporate bonds in which the Funds may invest are as follows:
Moody's Investors Service, Inc.
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Standard & Poor's Ratings Group
AAA - Bonds rated AAA have the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
Preferred Stocks
The ratings of Moody's Investors Service, Inc. and Standard & Poor's Ratings
Group for preferred stocks in which the Funds may invest are as follows:
Moody's Investors Service, Inc.
aaa - An issue which is rated aaa is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.
aa - An issue which is rated aa is considered a high-grade preferred stock. This
rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
a - An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the "aaa"
and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa - An issue which is rated baa is considered to be medium grade, neither
highly protected nor poorly secured.Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
Standard & Poor's Ratings Group
AAA - This is the highest rating that may be assigned by Standard & Poor's to a
preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA - A preferred stock issue rated AA also qualifies as a high-quality fixed
income security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated AAA.
A - An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the diverse effects of
changes in circumstances and economic conditions.
BBB - An issue rated BBB is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The following is a list of the Trustees and executive officers of the
Trust. Each Trustee who is an "interested person" of the Trust, as defined by
the Investment Company Act of 1940, as amended (the "1940 Act") is indicated by
an asterisk.
NAME AGE POSITION HELD
*Frederick R. Kobrick 56 President/Trustee
Jay H. Atlas 54 Trustee
Samuel L. Hayes, III 64 Trustee
Joseph P. Paster 54 Trustee
Richard A. Goldman 39 Treasurer and Secretary
The principal occupations of the Trustees and executive officers of the Trust
during the past five years are set forth below:
*Frederick R. Kobrick, 101 Federal Street, Boston, MA 02110, serves as a Trustee
and President of the Trust. His principal occupation currently is President of
Kobrick Funds LLC. Prior to becoming President of the predecessor to Kobrick
Funds LLC in 1997, he served from 1985 as a senior vice president and portfolio
manager for State Street Research & Management Company. He is also currently a
principal in certain private investment partnerships.
Jay H. Atlas, 2540 Route 130, Cranbury, NJ 08512, serves as a Trustee of the
Trust. His principal occupation is as Chief Executive Officer, President and
Director of Ariel Corporation. During the past five years, and prior to joining
Ariel Corporation, he has provided consulting services as a sole proprietor to
information technology businesses and served as a Vice President and General
Manager of Sales and Marketing for Convex Computer Corporation and as Vice
President of Computervision Corporation.
Samuel L. Hayes, III, Harvard University, Graduate School of Business
Administration, Soldiers Field Road, Boston, MA 02163, serves as a Trustee of
the Trust. His principal occupation is as a Professor at the Harvard Business
School. Professor Hayes has taught at Harvard since 1972.
Joseph P. Paster, John Hancock Place, Post Office Box 111, Boston, MA 02117,
serves as a Trustee of the Trust. His principal occupation is as a Vice
President of John Hancock Mutual Life Insurance Company, where he has served in
various capacities since 1967.
Richard A. Goldman, 101 Federal Street, Boston, MA 02110, serves as Treasurer
and Secretary of the Trust. His principal occupation currently is Chief
Operating Officer of Kobrick Funds LLC. Prior to becoming Chief Operating
Officer of the predecessor to Kobrick Funds LLC in 1997, he was associated with
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C. from August 1989 until October
1997.
As of August 1, 1999, to the Trust's knowledge, the following persons
owned of record or beneficially 5% or more of the outstanding shares of the
indicated Funds set forth below. In addition, each person that has direct or
indirect beneficial ownership of more than 25% of the outstanding shares of the
indicated Funds set forth below may be deemed to control that Fund as defined in
the 1940 Act.
<TABLE>
<CAPTION>
FUND SHAREHOLDER AND ADDRESS OWNERSHIP PERCENTAGE
<S> <C> <C>
KOBRICK CAPITAL FUND
Cendant Corporation 39.75%
6 Sylvan Way
Parsippany NJ 07054-3826
National Financial Services 16.83%
Corporation
200 Liberty Street
1 World Financial Center
New York NY 10281-1003
Charles Schwab & Co., Inc. 11.81%
101 Montgomery Street
San Francisco CA 94104-4122
Banc of America Securities LLC 8.17%
600 Montgomery Street
San Francisco CA 94111-2702
KOBRICK GROWTH FUND
Cendant Corporation 80.57%
6 Sylvan Way
Parsippany NJ 07054-3826
KOBRICK EMERGING GROWTH FUND
Cendant Corporation 64.77%
6 Sylvan Way
Parsippany NJ 07054-3826
Charles Schwab & Co., Inc. 14.43%
101 Montgomery Street
San Francisco CA 94104-4122
National Financial Services 6.03%
Corporation
200 Liberty Street
1 World Financial Center
New York NY 10281-1003
</TABLE>
Each non-interested Trustee (Messrs. Atlas, Hayes and Paster) will
receive an annual retainer of $4,000 and a $500 fee from each Fund for each
Board meeting and committee meeting attended and will be reimbursed for travel
and other expenses incurred in the performance of his duties. No other
compensation or pension or retirement benefits will be paid to or accrued by any
other officer or Trustee as part of the expenses of the Funds.
Compensation Table
During the fiscal year ended September 30, 1998, the Trustees of the
Trust received the compensation shown in the following table for serving as
Trustee of the Trust.
<TABLE>
<CAPTION>
Name of Person, Aggregate Pension or Estimated Total
Position Compensation Retirement Annual Compensation
From Benefits Benefits Upon From Registrant
Registrant Accrued as Part Retirement and Fund
of Fund Expenses Complex Paid to
Directors
- --------------------- --------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Jay H. Atlas $10,000 -0- -0- $10,000
Trustee
Samuel L. Hayes, III $7,000 -0- -0- $7,000
Trustee
Joseph P. Paster $10,000 -0- -0- $10,000
Trustee
</TABLE>
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Kobrick Funds LLC (the "Investment Adviser") is the Trust's investment
adviser. The Investment Adviser is a wholly owned subsidiary of Nvest Companies,
L.P. ("Nvest"). Nvest has 18 affiliates and divisions and $___ billion in assets
under management (as of September 30, 1999). Under the terms of the Investment
Advisory Agreement between the Trust and the Investment Adviser, the Investment
Adviser manages the Funds' investments. On a monthly basis, each Fund pays the
Investment Adviser an annual advisory fee computed as 1.00% of the average of
the values of the net assets of the Fund as determined at the close of each
business day during the year. The advisory fees paid to the predecessor to the
Investment Adviser during the Funds' fiscal year ended September 30, 1998, were
$250,782 with respect to the Capital Fund, $239,480 with respect to the Emerging
Growth Fund and $856 with respect to the Growth Fund. Such advisory fees covered
services rendered to the Capital Fund and the Emerging Growth Fund for nine
months and to the Growth Fund for one month.
The Funds are responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of the
Funds, including such extraordinary or non-recurring expenses as may arise, such
as litigation to which the Trust may be a party. The operating expenses include
fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses related to the distribution of the Funds' shares (which
expenses will be paid from the 12b-1 fees under the 12b-1 Plans; see
"Distribution Agreement and 12b-1 Plans"), insurance expenses, taxes or
governmental fees, fees and expenses of the custodian, transfer agent,
administrator, and accounting and pricing agent of the Funds, fees and expenses
of members of the Board of Trustees who are not interested persons of the Trust,
the cost of preparing and distributing prospectuses, statements, reports and
other documents to shareholders, and expenses of shareholders' meetings and
proxy solicitations. The Funds may have an obligation to indemnify the Trust's
officers and Trustees with respect to such litigation, except in instances of
willful misfeasance, bad faith, gross negligence or reckless disregard by such
officers and Trustees in the performance of their duties. The compensation and
expenses of any officer, Trustee or employee of the Trust who is an officer,
director or employee of the Investment Adviser are paid by the Investment
Adviser.
The Investment Advisory Agreement provides that the Investment Adviser
shall furnish the Trust with suitable office space and facilities and such
management, investment advisory, statistical and research facilities and
services as may be required from time to time by the Trust and the Funds are
responsible for their other expenses and services. In view of the requirements
for management of the Funds' particular investment program, this fee is higher
than those charges for many other funds.
By its terms, the Trust's Investment Advisory Agreement will remain in
force until July 6, 2001 and from year to year thereafter, subject to annual
approval by (a) the Board of Trustees or (b) a vote of the majority of a Fund's
outstanding voting securities; provided that in either event continuance is also
approved by a majority of the Trustees who are not interested persons of the
Trust, by a vote cast in person at a meeting called for the purpose of voting on
such approval. The Trust's Investment Advisory Agreement may be terminated at
any time, on sixty days' written notice, without the payment of any penalty, by
the Board of Trustees, by a vote of the majority of a Fund's outstanding voting
securities, or by the Investment Adviser. The Investment Advisory Agreement
automatically terminates in the event of its assignment, as defined by the 1940
Act and the rules thereunder.
The name "Kobrick" is the property right of the Investment Adviser. The
Investment Adviser may use the name "Kobrick" in other connections and for other
purposes, including in the name of other investment companies. The Trust has
agreed to discontinue any use of the name "Kobrick" if the Investment Adviser
ceases to be employed as the Trust's Investment Adviser.
- --------------------------------------------------------------------------------
DISTRIBUTION AGREEMENT AND 12b-1 PLANS
- --------------------------------------------------------------------------------
Under an agreement with the Trust, New England Funds, L.P., (the
"Distributor"), 399 Boylston Street, Boston, Massachusetts 02116, acts as the
principal distributor of each class of shares of the Funds. Under this
agreement, the Distributor is not obligated to sell a specific number of shares.
The Distributor bears the cost of making information about the Funds available
through advertising and other means and the cost of printing and mailing
Prospectuses to persons other than shareholders. Each Fund pays the cost of
registering and qualifying its shares under state and federal securities laws
and the distribution of Prospectuses to existing shareholders. The Distributor
also serves as the principal distributor for the New England Funds, described in
more detail on page 28.
The Distributor is compensated under each agreement through receipt of
the sales charges on Class A shares described below under "Net Asset Value and
Public Offering Price" and is paid by the Funds the service and distribution
fees described in the Prospectus. The Distributor may, at its discretion,
reallow the entire sales charge imposed on the sale of Class A shares of each
Fund to investment dealers from time to time. The SEC is of the view that
dealers receiving all or substantially all of the sales charge may be deemed
underwriters of a Fund's shares.
The Trust has adopted Rule 12b-1 plans (the "Plans") for each Fund's
Class A, Class B, and Class C shares which, among other things, permit the Funds
to pay the Distributor monthly fees out of net assets. These fees consist of a
service fee and a distribution fee. Any such fees that are paid by the
Distributor to securities dealers are known as "trail commissions." Pursuant to
Rule 12b-1 under the 1940 Act, the Plans were approved by the shareholders of
each class of each Fund, and (together with the related Distribution Agreement)
by the Board of Trustees, including a majority of the trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operations of the Plans or the
Distribution Agreement (the "Independent Trustees").
Under the Plans, each Fund pays the Distributor a monthly service fee at
an annual rate not to exceed 0.25% of the Fund's average daily net assets
attributable to the Class A, Class B and Class C shares. In the case of the
Class B shares, the Distributor pays investment dealers the first year's service
fee at the time of sale, in the amount of up to 0.25% of the amount invested. In
the case of Class C shares, the Distributor retains the first year's service fee
of 0.25% assessed against such shares. After the first year for Class A, Class B
and Class C shares, the Distributor may pay up to the entire amount of this fee
to securities dealers who are dealers of record with respect to the Fund's
shares, on a quarterly basis, unless other arrangements are made between the
Distributor and the securities dealer, for providing personal services to
investors in shares of the Fund and/or the maintenance of shareholder accounts.
To the extent that the Distributor's reimbursable expenses in any year
exceed the maximum amount payable under the Plan for that year, such expenses
may be carried forward for reimbursement in future years in which the Plan
remains in effect.
Each Fund's Class B and Class C shares also pay the Distributor a
monthly distribution fee at an annual rate not to exceed 0.75% of the average
net assets of the respective Fund's Class B and Class C shares. The Distributor
retains the 0.75% distribution fee assessed against both Class B and Class C
shares during the first year of investment. After the first year for Class B
shares, the Distributor retains the annual distribution fee as compensation for
its services as distributor of such shares. After the first year for Class C
shares, the Distributor may pay up to the entire amount of this fee to
securities dealers who are dealers of record with respect to the Fund's shares,
as distribution fees in connection with the sale of the Fund's shares on a
quarterly basis, unless other arrangements are made between the Distributor and
the securities dealer.
Each Plan may be terminated by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding voting securities of the
relevant class of shares of the relevant Fund. Each Plan may be amended by vote
of the Trustees, including a majority of the Independent Trustees, cast in
person at a meeting called for that purpose. Any change in any Plan that would
materially increase the fees payable thereunder by the relevant class of shares
of the relevant Fund requires approval by vote of the holders of a majority of
such shares outstanding. The Trustees review quarterly a written report of such
costs and the purposes for which such costs have been incurred. For so long as a
Plan is in effect, selection and nomination of the Independent Trustees shall be
committed to the discretion of such Independent Trustees.
The Distributor has entered into selling agreements with investment
dealers, including New England Securities, an affiliate of the Distributor, for
the sale of the Funds' shares. The Distributor may, at its expense, pay an
amount not to exceed 0.50% of the amount invested to dealers who have selling
agreements with the Distributor. Class Y shares of the Funds may be offered by
registered representatives of New England Securities who are also employees of
New England Investment Associates, Inc. ("NEIA"), an indirect, wholly-owned
subsidiary of Nvest Companies. NEIA may receive compensation from the Investment
Adviser with respect to sales of Class Y shares.
The Distribution Agreement for any Fund may be terminated at any time on
60 days' written notice without payment of any penalty by the Distributor or by
vote of a majority of the outstanding voting securities of the relevant Fund or
by vote of a majority of the Independent Trustees.
The Distribution Agreements and the Plans will continue in effect for
successive one-year periods, provided that each such continuance is specifically
approved (i) by the vote of a majority of the Independent Trustees and (ii) by
the vote of a majority of the entire Board of Trustees cast in person at a
meeting called for that purpose or by a vote of a majority of the outstanding
securities of a Fund (or the relevant class, in the case of the Plans).
With the exception of the Distributor, New England Securities and their
direct and indirect parent companies, no interested person of the Trust or any
Trustee of the Trust had any direct or indirect financial interest in the
operation of the Plans or any related agreement.
Benefits to the Funds and their shareholders resulting from the Plans
are believed to include (1) enhanced shareholder service, (2) asset retention,
(3) enhanced bargaining position with third party service providers and
economies of scale arising from having higher asset levels and (4) portfolio
management opportunities arising from having an enhanced positive cash flow.
The distribution expenses incurred during the Fund's fiscal year ended
September 30, 1998 were $62,695 with respect to the Capital Fund, $59,870 with
respect to the Emerging Growth Fund and $214 with respect to the Growth Fund.
Such distribution expenses were incurred for Class A only as the other classes
had not yet been established. These expenses were incurred with respect to the
Capital Fund and the Emerging Growth Fund for nine months and to the Growth Fund
for one month.
The portion of the various fees and expenses for Class A, B, and with
respect to certain Funds, C shares that are paid (reallowed) to securities
dealers are shown below:
For Class A shares, the service fee is payable only to reimburse the
Distributor for amounts it pays in connection with providing personal services
to investors and/or maintaining shareholder accounts. [To the extent that the
Distributor's reimbursable expenses in any year exceed the maximum amount
payable for that year under the relevant service plan, these expenses may be
carried forward for reimbursement in future years as long as the plan remains in
effect.] The portion of the various fees and expenses for Class A shares of the
Funds that are paid to securities dealers are shown below:
<TABLE>
<CAPTION>
MAXIMUM MAXIMUM MAXIMUM MAXIMUM
SALES CHARGE REALLOWANCE OR FIRST YEAR FIRST YEAR
PAID BY INVESTORS COMMISSION SERVICE FEE COMPENSATION
INVESTMENT (% OF OFFERING PRICE) (% OF OFFERING PRICE) (% OF NET INVESTMENT) (% OF OFFERING PRICE)
- ---------- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 5.00% 0.25% 5.25%
$50,000 - $99,999 4.50% 4.00% 0.25% 4.25%
$100,000 - $249,999 3.50% 3.00% 0.25% 3.25%
$250,000 - $499,999 2.50% 2.15% 0.25% 2.40%
$500,000 - $999,999 2.00% 1.70% 0.25% 1.95%
INVESTMENTS OF $1 MILLION OR MORE
First $3 Million none 1.00%(2) 0.25% 1.25%
Excess over $3 Million (1) none 0.50%(2) 0.25% 0.75%
INVESTMENTS WITH NO SALES CHARGE(3) none 0.00% 0.25% 0.25%
(1) For investments by Retirement Plans (Plans under Sections 401(a) or 401(k) of the Internal Revenue Code with investments of $1
million or more that have 100 or more eligible employees), the Distributor may pay a 0.50% commission for investments in excess
of $3 million and up to $10 million. Those Plans with investments of over $10 million are eligible to purchase Class Y shares of
the funds, which are described in a separate prospectus.
(2) These commissions are not payable if the purchase represents the reinvestment of a redemption made during the previous 12
calendar months.
(3) Refers to any investments made by municipalities, financial institutions, trusts and affinity group members as described earlier
in the Prospectus under the section entitled "Ways to Reduce or Eliminate Sales Charges."
</TABLE>
The Class B and Class C service fees are payable regardless of the
amount of the Distributor's related expenses. The portion of the various fees
and expenses for Class B and Class C shares of the Funds that are paid to
securities dealers are shown below:
<TABLE>
<CAPTION>
MAXIMUM REALLOWANCE MAXIMUM FIRST YEAR MAXIMUM FIRST YEAR
OR COMMISSION SERVICE FEE COMPENSATION
INVESTMENT (% OF OFFERING PRICE) (% OF NET INVESTMENT) (% OF OFFERING PRICE)
- ---------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
All amounts for Class B 3.75% 0.25% 4.00%
All amounts for Class C 1.00% 0.00% 1.00%
</TABLE>
Each Fund receives the net asset value next determined after an order is
received on sales of each class of shares. The sales charge is allocated between
the investment dealer and the Distributor. The Distributor receives the
Contingent Deferred Sales Charge (the "CDSC"). Proceeds from the CDSC on Class A
and Class C shares are paid to the Distributor and are used by the Distributor
to defray the expenses for services the Distributor provides the Trusts.
Proceeds from the CDSC on Class B shares are paid to the Distributor and are
remitted to FEP Capital, L.P. to compensate FEP Capital, L.P. for financing the
sale of Class B shares pursuant to certain Class B financing and servicing
agreements between the Distributor and FEP Capital, L.P. The Distributor may, at
its discretion, pay (reallow) the entire sales charge imposed on the sale of
Class A shares to investment dealers from time to time.
For new amounts invested at net asset value by an eligible governmental
authority, the Distributor may, at its expense, pay investment dealers a
commission of 0.025% of the average daily net assets of an account at the end of
each calendar quarter for up to one year. These commissions are not payable if
the purchase represents the reinvestment of redemption proceeds from any other
New England Fund or if the account is registered in street name.
The Distributor may, at its expense, provide additional concessions to
dealers who sell shares of the Funds, including: (i) full reallowance of the
sales charge of Class A shares, (ii) additional compensation with respect to the
sale of Class A, B and C shares and (iii) financial assistance programs to firms
who sell or arrange for the sale of Fund shares including, but not limited to,
remuneration for: the firm's internal sales contests and incentive programs,
marketing and sales fees, expenses related to advertising or promotional
activity and events, and shareholder record keeping or miscellaneous
administrative services. Payment for travel, lodging and related expenses may be
provided for attendance at New England Funds' seminars and conferences, e.g.,
due diligence meetings held for training and educational purposes. The payment
of these concessions and any other compensation offered will conform with state
and federal laws and the rules of any self-regulatory organization, such as the
National Association of Securities Dealers, Inc. The participation of such firms
in financial assistance programs is at the discretion of the firm.
Custodial Arrangements
State Street Bank and Trust Company ("State Street Bank"), 225 Franklin
Street, Boston, Massachusetts 02110, is the Trust's custodian. As such, State
Street Bank holds in safekeeping certificated securities and cash belonging to
each Fund and, in such capacity, is the registered owner of securities in
book-entry form belonging to each Fund. Upon instruction, State Street Bank
receives and delivers cash and securities of each Fund in connection with Fund
transactions and collects all dividends and other distributions made with
respect to Fund portfolio securities. State Street Bank also maintains certain
accounts and records of the Trusts and calculates the total net asset value,
total net income and net asset value per share of each Fund on a daily basis.
Independent Accountants
The Trust's independent accountant is PricewaterhouseCoopers LLP, 160
Federal Street, Boston, Massachusetts 02110. The independent accountants conduct
an annual audit of the Trust financial statements, assist in the preparation of
federal and state income tax returns and consult with the Trust as to matters of
accounting and federal and state income taxation. The information concerning
financial highlights in the Prospectuses, and financial statements contained in
the Funds' annual reports for the year ended September 30, 1998 and incorporated
by reference into this Statement, have been so included in reliance on the
reports of the Trust's independent accountants, given on the authority of such
firms as experts in auditing and accounting.
Other Arrangements
Pursuant to a contract between the Funds and Nvest Services Company,
Nvest Services Company acts as shareholder servicing and transfer agent for the
Funds and is responsible for services in connection with the establishment,
maintenance and recording of shareholder accounts, including all related tax and
other reporting requirements and the implementation of investment and redemption
arrangements offered in connection with the sale of the Funds' shares. The Funds
pay an annual per-account fee to Nvest Services Company for these services in
the amount of $____ for Capital, Growth and Emerging Growth Funds. Nvest
Services Company has subcontracted with State Street Bank for it to provide,
through its subsidiary, Boston Financial Data Services, Inc. ("BFDS"),
transaction processing, mail and other services. For these services, Nvest
Services Company pays BFDS a monthly per account fee of $____ for Capital,
Growth and Emerging Growth Funds.
In addition, Nvest Services Company performs certain accounting and
administrative services for the Funds. Each Fund reimburses Nvest Services
Company for all or part of Nvest Services Company's expenses of providing these
services which include the following: (i) expenses for personnel performing
bookkeeping, accounting, internal auditing and financial reporting functions and
clerical functions relating to the Fund, (ii) expenses for services required in
connection with the preparation of registration statements and prospectuses,
registration of shares in various states, shareholder reports and notices, proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities and reports and questionnaires for SEC compliance, and (iii)
registration, filing and other fees in connection with requirements of
regulatory authorities.
Nvest Services Company, Inc. will also do business as Nvest Services
Company, Nvest Services Co. and New England Funds Service Company.
Marketing and Sales Support
Kobrick and New England Funds, L.P. have entered into an agreement,
whereby New England Funds L.P. is providing marketing and sales support services
for the following fee:
ASSET RANGE (IN MILLIONS) FEES PAID TO NEW ENGLAND FUNDS, L.P. (BPS)
- ------------------------- ------------------------------------------
$0 - 1,000 20.0
1,000 - 2,000 35.0
Over 2,000 30.0
YEAR 2000
The investment management services provided to each Fund by the
Investment Adviser and the services provided to shareholders by Nvest Services
Company, Inc. depend on the smooth functioning of their computer systems. Many
computer software systems in use today cannot recognize the year 2000, but
revert to 1900 or some other date, due to the manner in which dates were encoded
and calculated. That failure could have a negative impact on a Fund's
operations, including the handling of securities trades, pricing and account
services. The Investment Adviser, and Nvest Services Company, Inc. have advised
each Fund that they have been reviewing all of their computer systems and
actively working on necessary changes to their systems to prepare for the year
2000 and expect that their systems will be compliant before that date. In
addition, the Investment Adviser has been advised by the Fund's custodian,
transfer agent and accounting service agent that they are also in the process of
modifying their systems with the same goal. There can, however, be no assurance
that the Investment Adviser, Nvest Services Company, Inc. or any other service
provider will be successful, or that interaction with other non-complying
computer systems will not impair Fund services at that time. In addition, the
ability of issuers to make timely payments of interest and principal or to
continue their operations or services may be impaired by then adequate
preparation of their computer systems for the year 2000. This may adversely
affect the market values of securities of specific issuers or of securities
generally if the inadequacy of preparation is perceived as wide-spread or as
affecting trading markets.
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SECURITIES TRANSACTIONS
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The Investment Adviser's policy is to seek for its clients, including
the Funds, what in the Investment Adviser's judgment will be the best overall
execution of purchase or sale orders and the most favorable net prices in
securities transactions consistent with its judgment as to the business
qualifications of the various broker or dealer firms with whom the Investment
Adviser may do business, and the Investment Adviser may not necessarily choose
the broker offering the lowest available commission rate. Decisions with respect
to the market where the transaction is to be completed, to the form of
transaction (whether principal or agency)and to the allocation of orders among
brokers or dealers are made in accordance with this policy. In selecting brokers
or dealers to effect portfolio transactions, consideration is given to their
proven integrity and financial responsibility, their demonstrated execution
experience and capabilities both generally and with respect to particular
markets or securities, the competitiveness of their commission rates in agency
transactions (and their net prices in principal transactions), their willingness
to commit capital, and their clearance and settlement capability. The Investment
Adviser makes every effort to keep informed of commission rate structures and
prevalent bid/ask spread characteristics of the markets and securities in which
transactions for the Funds occur. Against this background, the Investment
Adviser evaluates the reasonableness of a commission or a net price with respect
to a particular transaction by considering such factors as difficulty of
execution or security positioning by the executing firm. The Investment Adviser
may or may not solicit competitive bids based on its judgment of the expected
benefit or harm to the execution process for that transaction.
When it appears that a number of firms could satisfy the required
standards in respect of a particular transaction, consideration may also be
given to services other than execution services which certain of such firms have
provided in the past or may provide in the future. Negotiated commission rates
and prices, however, are based upon the Investment Adviser's judgment of the
rate which reflects the execution requirements of the transaction without regard
to whether the broker provides services in addition to execution. Among such
other services are the supplying of supplemental investment research; general
economic, political and business information; analytical and statistical data;
relevant market information, quotation equipment and services; reports and
information about specific companies, industries and securities; purchase and
sale recommendations for stocks and bonds; portfolio strategy services;
historical statistical information; market data services providing information
on specific issues and prices; financial publications; proxy voting data and
analysis services; technical analysis of various aspects of the securities
markets, including technical charts; computer hardware used for brokerage and
research purposes; computer software and databases, including those used for
portfolio analysis and modeling; and portfolio evaluation services and relative
performance of accounts.
Certain nonexecution services provided by broker-dealers may in turn be
obtained by the broker-dealers from third parties who are paid for such services
by the broker-dealers.
The Investment Adviser regularly reviews and evaluates the services
furnished by broker-dealers. Some services may be used for research and
investment decision-making purposes, and also for marketing or administrative
purposes. Under these circumstances, the Investment Adviser allocates the cost
of such services to determine the appropriate proportion of the cost which is
allocable to purposes other than research or investment decision-making and is
therefore paid directly by the Investment Adviser. Some research and execution
services may benefit the Investment Adviser's clients as a whole, while others
may benefit a specific segment of clients. Not all such services will
necessarily be used exclusively in connection with the accounts which pay the
commissions to the broker-dealer producing the services.
The Investment Adviser has no fixed agreements or understanding with any
broker-dealer as to the amount of brokerage business which that firm may expect
to receive for services supplied to the Investment Adviser or otherwise. There
may be, however, understandings with certain firms that in order for such firms
to be able to continuously supply certain services, they need to receive
allocation of a specified amount of brokerage business. These understandings are
honored to the extent possible in accordance with the Investment Adviser's
obligation to best execution and the policies set forth above.
To the extent permitted by applicable law, and in all instances subject
to the foregoing policy of best execution, the Investment Adviser may allocate
brokerage transactions in a manner that takes into account the sale of shares of
one or more Funds distributed by New England Funds, L.P. In addition, the
Investment Adviser may allocate brokerage transactions to broker-dealers
(including affiliates of the Distributor) that have entered into arrangements in
which the broker-dealer allocates a portion of commissions paid by a Fund toward
the reduction of that Fund's expenses, subject to the requirement that the
Investment Adviser will seek best execution.
It is not the Investment Adviser's policy to intentionally pay a firm a
brokerage commission higher that that which another firm would charge for
handling the same transaction in recognition of services (other than execution
services), provided, however, that the Investment Adviser is aware that this is
an area where differences of opinion as to fact and circumstances may exist, and
in such circumstances, if any, the Investment Adviser relies on the provisions
of Section 28(e) of the Securities Act of 1934, to the extent applicable.
The aggregate brokerage commissions paid by each Fund during the fiscal
year ended September 30, 1998 was as set forth below:
Kobrick Capital Fund $
Kobrick Emerging Growth Fund $
Kobrick Growth Fund $
Code of Ethics
The Trust and the Investment Adviser have each adopted a Code of Ethics
under Rule 17j-1 of the 1940 Act. The Code significantly restricts the personal
investing activities of certain officers and investment personnel of the
Investment Adviser, including having to preclear any personal securities (with
limited exceptions, such as U.S. Government obligations). The preclearance
requirement and associated procedures are designed to identify any substantive
prohibition or limitation applicable to the proposed investment. In addition,
certain officers and investment personnel may not purchase or sell any security
which, at that time, is being purchased or sold (as the case may be), or to the
knowledge of such person, is being considered for purchase or sale, by any of
the Funds. The substantive restrictions applicable to certain officers and
investment personnel of the Investment Adviser include a ban on acquiring any
securities in an initial public offering. Furthermore, the Code provides for
trading "blackout periods" which prohibit trading by certain officers and
investment personnel of the Investment Adviser within periods of trading by any
of the Funds in the same (or equivalent) security.
Grouping of Securities Transactions
Mr. Kobrick, in addition to serving as the senior officer of the
Investment Adviser, is also the principal in private investment partnerships,
and may act in that capacity with respect to other similar investment
partnerships. One or more of such accounts, may from time to time, purchase or
sell securities or have securities under consideration for purchase or sale that
are also being sold or purchased or considered for sale or purchase by the
Funds. In those instances where securities transactions are carried on at the
same time on behalf of any or all of the Funds and such other accounts,
transactions in such securities for such accounts may be grouped with securities
transactions carried out on behalf of the Funds. The practice of grouping orders
of various accounts will be followed to get the benefit of best prices or
commission rates. In certain cases where the aggregate order may be executed in
a series of transactions at various prices the transactions will be allocated as
to amount and price in a manner considered equitable to each account so that
each receives, to the extent practicable, the average price for such
transactions. Transactions will not be grouped unless it is the judgment of the
Investment Adviser that such aggregation is consistent with its duty to seek
best execution (which includes the duty to seek best price) for the Funds and in
each case the books and records of the Funds and any such other account will
separately reflect, for each account, the orders of which are aggregated and the
securities held by and bought and sold for that account.
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PORTFOLIO TURNOVER
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A Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities, excluding securities having maturity
dates at acquisition of one year or less, for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Funds. The Investment Adviser anticipates that the portfolio turnover rate for
the Growth Fund normally will be in the range of 100% - 200% and for each of the
Capital Fund and the Emerging Growth Fund the portfolio turnover normally will
be in the range of 150% - 300% .
Generally, each Fund intends to invest for long-term purposes. However, the rate
of portfolio turnover will depend upon market and other conditions, and it will
not be a limiting factor when the Investment Adviser believes that portfolio
changes are appropriate.
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HOW TO BUY SHARES
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The procedures for purchasing shares of the Funds are summarized in the
Prospectuses. All purchases made by check should be in U.S. dollars and made
payable to New England Funds, or, in the case of a retirement account, the
custodian or trustee. Banks may charge a fee for transmitting funds by wire.
With respect to shares purchased by federal funds, shareholders should bear in
mind that wire transfers may take two or more hours to complete.
For purchase of Fund shares by mail, the settlement date is the first
business day after receipt of the check by the transfer agent so long as it is
received by the close of regular trading of the New York Stock Exchange on a day
when the Exchange is open; otherwise the settlement date is the following
business day. For telephone orders, the settlement date is the third business
day after the order is made.
Shares may also be purchased either in writing, by phone or, in the case
of Class A, B and C shares, by electronic funds transfer using Automated
Clearing House ("ACH"), or by exchange as described in the Prospectuses through
firms that are members of the National Association of Securities Dealers, Inc.
and that have selling agreements with the Distributor. You may also use New
England Funds Personal Access Line(TM) (800-225-5478, press 1) or New England
Funds Web site (www.mutualfunds.com) to purchase Fund shares. For more
information, see the section entitled "Shareholder Services" in this Statement.
The Distributor may at its discretion accept a telephone order for the
purchase of $5,000 or more of a Fund's Class A, B and C shares. Payment must be
received by the Distributor within three business days following the transaction
date or the order will be subject to cancellation. Telephone orders must be
placed through the Distributor or your investment dealer.
If you wish transactions in your account to be effected by another
person under a power of attorney from you, special rules as summarized in the
Prospectus may apply.
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NET ASSET VALUE AND PUBLIC OFFERING PRICE
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The method for determining the public offering price and net asset value
per share is summarized in the Prospectus.
The total net asset value of each class of shares of a Fund (the excess
of the assets of such Fund attributable to such class over the liabilities
attributable to such class) is determined as of the close of regular trading
(normally 4:00 p.m. Eastern time) on each day that the New York Stock Exchange
(the "NYSE") is open for trading. The observed holidays that the NYSE is
expected to be closed are New Year's Day, Martin Luther King Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
Securities listed on a national securities exchange or on the NASDAQ
National Market System are valued at their last sale price, or, if there is no
reported sale during the day, the closing bid price. Unlisted securities traded
in the over-the-counter market are valued at the last reported sale price, or,
if a last sale price is not readily available, at the last reported bid price
quoted by brokers that make a market in the securities. Securities traded in
more than one market are valued using the most representative market. Short-term
investments with maturities less than 60 days are valued at amortized cost which
approximates market value. Options, interest rate futures and options thereon
that are traded on exchanges are valued at their last sale price as of the close
of such exchanges. Securities for which current market quotations are not
readily available and all other assets are taken at fair value as determined in
good faith by the Board of Trustees, although the actual calculations may be
made by persons acting pursuant to the direction of the board.
Generally, trading in foreign government securities and other
fixed-income securities, as well as trading in equity securities in markets
outside the United States, is substantially completed each day at various times
prior to the close of the NYSE. Securities traded on a non-U.S. exchange will be
valued at their last sale price (or the last reported bid price, if there is no
reported sale during the day), on the exchange on which they principally trade,
as of the close of regular trading on such exchange except for securities traded
on the London Stock Exchange ("British Equities"). British Equities will be
valued at the mean between the last bid and last asked prices on the London
Stock Exchange. The value of other securities principally traded outside the
United States will be computed as of the completion of substantial trading for
the day on the markets on which such securities principally trade. Securities
principally traded outside the United States will generally be valued several
hours before the close of regular trading on the NYSE, generally 4:00 p.m.
Eastern time, when the Funds compute the net asset value of their shares.
Occasionally, events affecting the value of securities principally traded
outside the United States may occur between the completion of substantial
trading of such securities for the day and the close of the NYSE, which events
will not be reflected in the computation of a Fund's net asset value. If events
materially affecting the value of a Fund's securities occur during such period,
then these securities will be valued at their fair value as determined in good
faith by or in accordance with procedures approved by the Trusts' trustees. The
effect of fair value pricing is that securities may not be priced on the basis
of quotations from the primary market in which they are traded but rather, may
be priced by another method that the Board of Trustees believes accurately
reflects fair value.
Trading in some of the portfolio securities of the Funds may take place
in various markets outside the United States on days and at times other than
when the NYSE is open for trading. Therefore, the calculation of these Funds'
net asset value does not take place at the same time as the prices of many of
its portfolio securities are determined, and the value of the Fund's portfolio
may change on days when the Fund is not open for business and its shares may not
be purchased or redeemed.
The per share net asset value of a class of a Fund's shares is computed
by dividing the number of shares outstanding into the total net asset value
attributable to such class. The public offering price of a Class A share of a
Fund is the net asset value per share next-determined after a properly completed
purchase order is accepted by Nvest Services Company or State Street Bank, plus
a sales charge as set forth in the Fund's Prospectus. The public offering price
of a Class B, C or Y share of a Fund is the next-determined net asset value.
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REDUCED SALES CHARGES
CLASS A SHARES ONLY
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The following special purchase plans are summarized in the Prospectuses. See
page 28 for a description of the New England Funds.
CUMULATIVE PURCHASE DISCOUNT. A Fund shareholder may make an initial or
an additional purchase of Class A shares and be entitled to a discount on the
sales charge payable on that purchase. This discount will be available if the
shareholder's "total investment" in the Fund reaches the breakpoint for a
reduced sales charge in the table under "How Sales Charges are Calculated-Class
A shares" in the Prospectus. The total investment is determined by adding the
amount of the additional purchase, including sales charge, to the current public
offering price of all series and classes of shares of the Kobrick Funds and the
New England Funds held by the shareholder in one or more accounts. If the total
investment exceeds the breakpoint, the lower sales charge applies to the entire
additional investment even though some portion of that additional investment is
below the breakpoint to which a reduced sales charge applies. For example, if a
shareholder who already owns shares of one or more Kobrick Funds or of the New
England Funds with a value at the current public offering price of $30,000 makes
an additional purchase of $20,000 of Class A shares of another Kobrick Fund or
New England Fund, the reduced sales charge of 4.5% of the public offering price
will apply to the entire amount of the additional investment.
LETTER OF INTENT. A Letter of Intent (a "Letter"), which can be effected
at any time, is a privilege available to investors which reduces the sales
charge on investments in Class A shares. Ordinarily, reduced sales charges are
available for single purchases of Class A shares only when they reach certain
breakpoints (e.g., $50,000, $100,000, etc.). By signing a Letter, a shareholder
indicates an intention to invest enough money in Class A shares within 13 months
to reach a breakpoint. If the shareholder's intended aggregate purchases of all
series and classes of the Kobrick Funds or New England Funds over a defined
13-month period will be large enough to qualify for a reduced sales charge, the
shareholder may invest the smaller individual amounts at the public offering
price calculated using the sales load applicable to the 13-month aggregate
investment.
A Letter is a non-binding commitment, the amount of which may be
increased, decreased or canceled at any time. The effective date of a Letter is
the date it is received in good order by the Distributor, or, if communicated by
a telephone exchange or order, at the date of telephoning provided a signed
Letter, in good order, reaches the Distributor within five business days.
A reduced sales charge is available for aggregate purchases of all
series and classes of shares of the Kobrick Funds or New England Funds pursuant
to a written Letter effected within 90 days after any purchase. In the event the
account was established prior to 90 days before the effective date of the
Letter, the account will be credited with the Rights of Accumulation ("ROA")
towards the breakpoint level that will be reached upon the completion of the 13
months' purchases. The ROA credit is the value of all shares held as of the
effective dates of the Letter based on the "public offering price computed on
such date."
The cumulative purchase discount, described above, permits the aggregate
value at the current public offering price of Class A shares of any accounts
with the Kobrick Funds or New England Funds held by a shareholder to be added to
the dollar amount of the intended investment under a Letter, provided the
shareholder lists them on the account application.
State Street Bank will hold in escrow shares with a value at the current
public offering price of 5% of the aggregate amount of the intended investment.
The amount in escrow will be released when the commitment stated in the Letter
is completed. If the shareholder does not purchase shares in the amount
indicated in the Letter, the shareholder agrees to remit to State Street Bank
the difference between the sales charge actually paid and that which would have
been paid had the Letter not been in effect, and authorizes State Street Bank to
redeem escrowed shares in the amount necessary to make up the difference in
sales charges. Reinvested dividends and distributions are not included in
determining whether the Letter has been completed.
COMBINING ACCOUNTS. Purchases of all series and classes of the Kobrick
Funds or the New England Funds (excluding shares of New England Cash Management
Trust and New England Tax Exempt Money Market Trust [the "Money Market Funds]
unless the shares were purchased through an exchange of another Kobrick Fund or
New England Fund) by or for an investor, the investor's spouse, parents,
children, siblings, in-laws, grandparents or grandchildren and any other account
of the investor, including sole proprietorships, in any Fund or New England Fund
may be treated as purchases by a single individual for purposes of determining
the availability of a reduced sales charge. Purchases for a single trust estate
or a single fiduciary account may also be treated as purchases by a single
individual for this purpose, as may purchases on behalf of a participant in a
tax-qualified retirement plan and other employee benefit plans, provided that
the investor is the sole participant in the plan. Any other group of individuals
acceptable to the Distributor may also combine accounts for such purpose. The
values of all accounts are combined to determine the sales charge.
COMBINING WITH OTHER SERIES AND CLASSES OF THE KOBRICK AND NEW ENGLAND
FUNDS. A shareholder's total investment for purposes of the cumulative purchase
discount includes the value at the current public offering price of any shares
of series and classes of the Kobrick Funds or New England Funds that the
shareholder owns (which excludes shares of the Money Market Funds unless such
shares were purchased by exchanging shares of any other Kobrick Fund or New
England Fund). Shares owned by persons described in the preceding paragraph may
also be included.
UNIT HOLDERS OF UNIT INVESTMENT TRUSTS. Unit investment trust
distributions may be invested in Class A shares of any Fund at a reduced sales
charge of 1.50% of the public offering price (or 1.52% of the net amount
invested); for large purchases on which a sales charge of less than 1.50% would
ordinarily apply, such lower charge also applies to investments of unit
investment trust distributions.
KOBRICK FUND SHAREHOLDERS PRIOR TO NOVEMBER 1, 1999 AND CLIENTS OF THE
INVESTMENT ADVISER. Accounts opened prior to November 1, 1999 became Class A
shareholders and are not subject to applicable sales charges and may exchange
into Class A shares of New England Funds on a load-waived basis. No front-end
sales charge or contingent deferred sales charge applies to investments of
$25,000 or more in Class A shares of the Funds by (1) clients of an adviser or
subadviser to any series of the Kobrick Funds or New England Funds; any
director, officer or partner of a client of an adviser or subadviser to any
series of the Kobrick Funds or New England Funds; and the spouse, parents,
children, siblings, in-laws, grandparents or grandchildren of the foregoing; (2)
any individual who is a participant in a Keogh or IRA Plan under a prototype of
an adviser or subadviser to any series of the Kobrick Funds or New England Funds
if at least one participant in the plan qualifies under category (1) above; and
(3) an individual who invests through an IRA and is a participant in an employee
benefit plan that is a client of an adviser or subadviser to any series of the
Kobrick Funds or New England Funds. Any investor eligible for this arrangement
should so indicate in writing at the time of the purchase.
OFFERING TO EMPLOYEES OF METLIFE AND ASSOCIATED ENTITIES. There is no
front-end sales charge, CDSC or initial investment minimum related to
investments in Class A shares of the Kobrick Funds by any of the advisers or
subadvisers of the Kobrick Funds or the New England Funds, New England Funds,
L.P. or any other company affiliated with New England Financial or Metropolitan
Life Insurance Company ("MetLife"); current and former directors and Trustees of
the Kobrick Funds or New England Funds; agents and general agents of New England
Financial or MetLife and their insurance company subsidiaries; current and
retired employees of such agents and general agents; registered representatives
of broker-dealers who have selling arrangements with New England Funds, L.P.;
the spouse, parents, children, siblings, in-laws, grandparents or grandchildren
of the persons listed above and any trust, pension, profit sharing or other
benefit plans for any of the foregoing persons and any separate account of New
England Financial or MetLife or any insurance company affiliated with New
England Financial or MetLife.
ELIGIBLE GOVERNMENTAL AUTHORITIES. There is no sales charge or
contingent deferred sales charge related to investments in Class A shares of any
Fund by any state, county or city or any instrumentality, department, authority
or agency thereof that has determined that a Fund is a legally permissible
investment and that is prohibited by applicable investment laws from paying a
sales charge or commission in connection with the purchase of shares of any
registered investment company.
INVESTMENT ADVISERY ACCOUNTS. Shares of any Fund may be purchased at net
asset value by investment advisers, financial planners or other intermediaries
who place trades for their own accounts or the accounts of their clients and who
charge a management, consulting or other fee for their services; clients of such
investment advisers, financial planners or other intermediaries who place trades
for their own accounts if the accounts are linked to the master account of such
investment adviser, financial planner or other intermediary on the books and
records of the broker or agent; and retirement and deferred compensation plans
and trusts used to fund those plans, including, but not limited to, those
defined in Sections 401(a), 403(b), 401(k) and 457 of the Code and "rabbi
trusts." Investors may be charged a fee if they effect transactions through a
broker or agent.
CERTAIN BROKER-DEALERS AND FINANCIAL SERVICES ORGANIZATIONS. Shares of
any Fund also may be purchased at net asset value through certain broker-dealers
and/or financial services organizations without any transaction fee. Such
organizations may also receive compensation based upon the average value of the
Fund shares held by their customers. This compensation may be paid by Kobrick
out of its own assets, and/or be paid indirectly by the Fund in the form of
servicing, distribution or transfer agent fees.
CERTAIN RETIREMENT PLANS. Shares of the Funds are available at net asset
value for investments by participant-directed 401(a) and 401(k) plans that have
100 or more eligible employees or by retirement plans whose third party
administrator or dealer has entered into a service agreement with the
Distributor to perform certain administrative services, subject to certain
operational and minimum size requirements specified from time to time by the
Distributor. This compensation may be paid indirectly by the Fund in the form of
service and/or distribution fees.
BANK TRUST DEPARTMENTS OR TRUST COMPANIES. Shares of the Funds are
available at net asset value for investments by non-discretionary and
non-retirement accounts of bank trust departments or trust companies, but are
unavailable if the trust department or institution is part of an organization
not principally engaged in banking or trust activities.
SHAREHOLDERS OF REICH AND TANG GOVERNMENT SECURITIES TRUST. Shareholders
of Reich and Tang Government Securities Trust may exchange their shares of that
fund for Class A shares of the Funds at net asset value and without imposition
of a sales charge.
The reduction or elimination of the sales charges in connection with
special purchase plans described above reflects the absence or reduction of
expenses associated with such sales.
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SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
The Kobrick Funds are organized as separate series of the Kobrick
Investment Trust, a Massachusetts business trust. The Kobrick Funds are
distributed by New England Funds, L.P., which also serves as the principal
distributor for the New England Funds. As a shareholder of one or more of the
Kobrick Funds, you are entitled to the same benefits and privileges as a
shareholder of the New England Funds, including participating in numerous
shareholder services and plans and having the ability to exchange into or out of
any New England Fund (subject to applicable restrictions).
Open Accounts
A shareholder's investment is automatically credited to an open account
maintained for the shareholder by State Street Bank. Following each transaction
in the account, a shareholder will receive a confirmation statement disclosing
the current balance of shares owned and the details of recent transactions in
the account. After the close of each calendar year, State Street Bank will send
each shareholder a statement providing federal tax information on dividends and
distributions paid to the shareholder during the year. This statement should be
retained as a permanent record. Nvest Services Company may charge a fee for
providing duplicate information.
The open account system provides for full and fractional shares
expressed to three decimal places and, by making the issuance and delivery of
stock certificates unnecessary, eliminates problems of handling and safekeeping,
and the cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates. Certificates will not be issued for Class B or Class C shares.
The costs of maintaining the open account system are paid by the Funds
and no direct charges are made to shareholders. Although the Funds have no
present intention of making such direct charges to shareholders, they each
reserve the right to do so. Shareholders will receive prior notice before any
such charges are made.
Automatic Investment Plans (Class A, B and C Shares)
Subject to each Fund's investor eligibility requirements, investors may
automatically invest in additional shares of a Fund on a monthly basis by
authorizing the Distributor to draw checks on an investor's bank account. The
checks are drawn under the Investment Builder Program, a program designed to
facilitate such periodic payments, and are forwarded to Nvest Services Company
for investment in the Fund. A plan may be opened with an initial investment of
$100 or more and thereafter regular monthly checks of $100 or more will be drawn
on the investor's account. The reduced minimum initial investment pursuant to an
automatic investment plan is referred to in the Prospectus. An Investment
Builder application must be completed to open an automatic investment plan. An
application may be found in the Prospectus or may be obtained by calling the
Distributor at 800-225-5478 or your investment dealer.
This program is voluntary and may be terminated at any time by the
Kobrick Funds upon notice to existing plan participants.
The Investment Builder Program plan may be discontinued at any time by
the investor by written notice to Nvest Services Company, which must be received
at least five business days prior to any payment date. The plan may be
discontinued by State Street Bank at any time without prior notice if any check
is not paid upon presentation; or by written notice to you at least thirty days
prior to any payment date. State Street Bank is under no obligation to notify
shareholders as to the nonpayment of any check.
Retirement Plans Offering Tax Benefits (Class A, B and C Shares)
The federal tax laws provide for a variety of retirement plans offering
tax benefits. These plans may be funded with shares of the Funds or with certain
other investments. The plans include H.R. 10 (Keogh) plans for self-employed
individuals and partnerships, individual retirement accounts (IRAs), corporate
pension trust and profit sharing plans, including 401(k) plans, and retirement
plans for public school systems and certain tax exempt organizations, i.e.,
403(b) plans.
The reduced minimum initial investment available to retirement plans
offering tax benefits is referred to in the Prospectus. For these plans, initial
investments in a Fund must be at least $250 for each participant in corporate
pension and profit sharing plans and Keogh plans, at least $500 for IRAs and at
least $100 for any subsequent investments. There is a special initial and
subsequent investment minimum of $25 for payroll deduction investment programs
for 401(k), SARSEP, SEP, SIMPLE Plans, 403(b) and certain other retirement
plans. Income dividends and capital gain distributions must be reinvested
(unless the investor is over age 59 1/2 or disabled). Plan documents and further
information can be obtained from the Distributor.
An investor should consult a competent tax or other adviser as to the
suitability of a Fund's shares as a vehicle for funding a plan, in whole or in
part, under the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and as to the eligibility requirements for a specific plan and its
state as well as federal tax aspects.
Certain retirement plans may also be eligible to purchase Class Y
shares. See the Prospectus relating to Class Y shares.
Systematic Withdrawal Plans (Class A, B and C Shares)
An investor owning a Fund's shares having a value of $5,000 or more at
the current public offering price may establish a Systematic Withdrawal Plan
providing for periodic payments of a fixed or variable amount. An investor may
terminate the plan at any time. A form for use in establishing such a plan is
available from the servicing agent or your investment dealer. Withdrawals may be
paid to a person other than the shareholder if a signature guarantee is
provided. Please consult your investment dealer or the Distributor.
A shareholder under a Systematic Withdrawal Plan may elect to receive
payments monthly, quarterly, semiannually or annually for a fixed amount of not
less than $50 or a variable amount based on (1) the market value of a stated
number of shares, (2) a specified percentage of the account's market value or
(3) a specified number of years for liquidating the account (e.g., a 20-year
program of 240 monthly payments would be liquidated at a monthly rate of 1/240,
1/239, 1/238, etc.). The initial payment under a variable payment option may be
$50 or more.
In the case of shares subject to a CDSC, the amount or percentage you
specify may not, on an annualized basis, exceed 10% of the value, as of the time
you make the election, of your account with the Fund with respect to which you
are electing the Plan. Withdrawals of Class B shares of a Fund under the Plan
will be treated as redemptions of shares purchased through the reinvestment of
Fund distributions, or, to the extent such shares in your account are
insufficient to cover Plan payments, as redemptions from the earliest purchased
shares of such Fund in your account. No CDSC applies to a redemption pursuant to
the Plan.
All shares under the Plan must be held in an open (uncertificated)
account. Income dividends and capital gain distributions will be reinvested
(without a sales charge in the case of Class A shares) at net asset value
determined on the record date.
Since withdrawal payments represent proceeds from the liquidation of
shares, withdrawals may reduce and possibly exhaust the value of the account,
particularly in the event of a decline in net asset value. Accordingly, a
shareholder should consider whether a Systematic Withdrawal Plan and the
specified amounts to be withdrawn are appropriate in the circumstances. The
Funds and the Distributor make no recommendations or representations in this
regard. It may be appropriate for a shareholder to consult a tax adviser before
establishing such a plan. The Funds may modify or terminate this program at any
time.
It may be disadvantageous for a shareholder to purchase on a regular
basis additional Fund shares with a sales charge while redeeming shares under a
Systematic Withdrawal Plan. Accordingly, the Funds and the Distributor do not
recommend additional investments in Class A shares by a shareholder who has a
withdrawal plan in effect and who would be subject to a sales load on such
additional investments.
Because of statutory restrictions this plan is not available to pension
or profit-sharing plans, IRAs or 403(b) plans that have State Street Bank as
trustee.
Dividend Diversification Program
You may also establish a Dividend Diversification Program, which allows
you to have all dividends and any other distributions automatically invested in
shares of the same class of another New England Fund, subject to the investor
eligibility requirements of that other Fund and to state securities law
requirements. Shares will be purchased at the selected Fund's net asset value
(without a sales charge or CDSC) on the dividend record date. A dividend
diversification account must be in the same registration (shareholder name) as
the distributing Fund account and, if a new account in the purchased Fund is
being established, the purchased Fund's minimum investment requirements must be
met. Before establishing a Dividend Diversification Program into any other New
England Fund, you must obtain and carefully read a copy of that Fund's
Prospectus.
Exchange Privilege [TO BE REVIEWED/REVISED]
A shareholder may exchange the shares of any Kobrick Fund or New England
Fund (except for Class A shares of the New England Intermediate Term Tax Free
Fund of California only if such shares have been held for at least six months)
for shares of the same class of any other Kobrick Fund or New England Fund
(subject to the investor eligibility requirements, if any, of the Kobrick Fund
or New England Fund into which the exchange is being made) on the basis of
relative net asset values at the time of the exchange without any sales charge.
An exchange of shares in one fund for shares of another fund is a taxable event
on which gain or loss may be recognized. When an exchange is made from the Class
A, Class B or Class C shares of one fund to the same class of shares of another
fund, the shares received by the shareholder in the exchange will have the same
age characteristics as the shares exchanged. The age of the shares determines
the expiration of the CDSC and, for the Class B shares, the conversion date. If
you own Class A, Class B or Class C shares, you may also elect to exchange your
shares of any fund for shares of the same class of the Money Market Funds. On
all exchanges of Class A or C shares subject to a CDSC and Class B shares into
the Money Market Funds, the exchange stops the aging period relating to the
CDSC, and, for Class B shares only, conversion to Class A shares. The aging
period resumes only when an exchange is made back into Class A, B, or C shares
of a Fund. In addition, you may also exchange Class A shares of the Money Market
Funds that have not previously paid a sales charge to Class B or Class C shares
of any Kobrick Fund or New England Fund. If you own Class Y shares, you may
exchange those shares for Class Y shares of other funds or for Class A shares of
the Money Market Funds. These options are summarized in the Prospectus. An
exchange may be effected, provided that neither the registered name nor address
of the accounts are different and provided that a certificate representing the
shares being exchanged has not been issued to the shareholder, by (1) a
telephone request to the Kobrick Funds or Nvest Services Company at 800-225-5478
or (2) a written exchange request to the Fund or Nvest Services Company, P.O.
Box 8551, Boston, MA 02266-8551. You must acknowledge receipt of a current
Prospectus for a fund before an exchange for that fund can be effected. The
minimum amount for an exchange is $1,000.
Agents, general agents, directors and senior officers of New England
Financial and its insurance company subsidiaries may, at the discretion of New
England Financial, elect to exchange Class A shares of any series of the New
England Funds or Kobrick Funds acquired in connection with deferred compensation
plans offered by New England Financial for Class Y shares of any series of the
New England Funds or Kobrick Funds which offers Class Y shares. To obtain a
prospectus and more information about Class Y shares, please call the
Distributor toll free at 800-225-5478.
Except as otherwise permitted by SEC rule, shareholders will receive at
least 60 days advance notice of any material change to the exchange privilege.
The investment objectives of the New England Funds and the Money Market Funds as
set forth in the respective Prospectuses are as follows:
STOCK FUNDS:
NEW ENGLAND GROWTH FUND seeks long-term growth of capital through
investments in equity securities of companies whose earnings are expected to
grow at a faster rate than the United States economy.
NEW ENGLAND CAPITAL GROWTH FUND seeks long-term growth of capital.
NEW ENGLAND VALUE FUND seeks a reasonable long-term investment return
from a combination of market appreciation and dividend income from equity
securities.
NEW ENGLAND BALANCED FUND seeks a reasonable long-term investment return
from a combination of long-term capital appreciation and moderate current
income.
NEW ENGLAND GROWTH AND INCOME FUND (FORMERLY NEW ENGLAND GROWTH
OPPORTUNITIES FUND) seeks opportunities for long-term growth of capital and
income.
NEW ENGLAND INTERNATIONAL EQUITY FUND seeks total return from long-term
growth of capital and dividend income primarily through investment in a
diversified portfolio of marketable international equity securities.
NEW ENGLAND STAR ADVISERS FUND seeks long-term growth of capital.
NEW ENGLAND STAR WORLDWIDE FUND seeks long-term growth of capital.
NEW ENGLAND STAR SMALL CAP FUND seeks capital appreciation.
NEW ENGLAND EQUITY INCOME FUND seeks current income and capital growth.
NEW ENGLAND BULLSEYE FUND seeks long-term growth of capital.
BOND FUNDS:
NEW ENGLAND GOVERNMENT SECURITIES FUND seeks a high level of current
income consistent with safety of principal by investing in U.S. government
securities and engaging in transactions involving related options, futures and
options on futures.
NEW ENGLAND LIMITED TERM U.S. GOVERNMENT FUND seeks a high current
return consistent with preservation of capital.
NEW ENGLAND SHORT TERM CORPORATE INCOME FUND seeks a high level of
current income consistent with preservation of capital.
NEW ENGLAND STRATEGIC INCOME FUND seeks high current income with a
secondary objective of capital growth.
NEW ENGLAND BOND INCOME FUND seeks a high level of current income
consistent with what the Fund considers reasonable risk.
NEW ENGLAND HIGH INCOME FUND seeks high current income plus the
opportunity for capital appreciation to produce a high total return.
NEW ENGLAND MUNICIPAL INCOME FUND seeks as high a level of current
income exempt from federal income taxes as is consistent with reasonable risk
and protection of shareholders' capital.
NEW ENGLAND MASSACHUSETTS TAX FREE INCOME FUND seeks as high a level of
current income exempt from federal income tax and Massachusetts personal income
taxes as the Fund's subadviser believes is consistent with preservation of
capital.
NEW ENGLAND INTERMEDIATE TERM TAX FREE FUND OF CALIFORNIA seeks as high
a level of current income exempt from federal income tax and its state personal
income tax as is consistent with preservation of capital.
ACCESS SHARES: (NOT CURRENTLY OFFERED FOR SALE)
NEW ENGLAND CORE EQUITY FUND seeks long-term capital appreciation by
investing all or substantially all of its assets in The Oakmark Fund.
NEW ENGLAND STOCK AND BOND FUND seeks high current income as well as
preservation and growth of capital by investing all or substantially all of its
assets in The Oakmark Equity and Income Fund.
NEW ENGLAND SELECT FUND seeks long-term capital appreciation by
investing all or substantially all of its assets in The Oakmark Select Fund.
NEW ENGLAND SMALL CAP VALUE FUND seeks long-term capital appreciation by
investing all or substantially all of its assets in The Oakmark Small Cap Fund.
NEW ENGLAND SMALL CAP GROWTH FUND seeks long-term capital growth by
investing all or substantially all of its assets in the Loomis Sayles Small Cap
Growth Fund.
NEW ENGLAND TOTAL RETURN BOND FUND seeks high total investment return
through a combination of current income and capital appreciation by investing
all or substantially all of its assets in the Loomis Sayles Bond Fund.
MONEY MARKET FUNDS:
NEW ENGLAND CASH MANAGEMENT TRUST - MONEY MARKET SERIES seeks maximum
current income consistent with preservation of capital and liquidity.
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST - seeks current income exempt
from federal income taxes consistent with preservation of capital and liquidity.
As of September 30, 1999, the net assets of the New England Funds (including the
Kobrick Funds) and the Money Market Funds totaled over billion.
Automatic Exchange Plan (Class A, B and C Shares)
As described in the Prospectus following the caption "Additional
Investor Services," a shareholder may establish an Automatic Exchange Plan under
which shares of a Fund are automatically exchanged each month for shares of the
same class of one or more of the other funds. Registration on all accounts must
be identical. The exchanges are made on the 15th of each month or the first
business day thereafter if the 15th is not a business day until the account is
exhausted or until Nvest Services Company is notified in writing to terminate
the plan. Exchanges may be made in amounts of $100 or more. The Service Options
Form is available from Nvest Services Company or your financial representative
to establish an Automatic Exchange Plan.
Broker Trading Privileges
The Distributor may, from time to time, enter into agreements with one
or more brokers or other intermediaries to accept purchase and redemption orders
for Fund shares until the close of regular trading on the NYSE (normally, 4:00
p.m. Eastern Time on each day that the Exchange is open for trading); such
purchase and redemption orders will be deemed to have been received by the Fund
when the authorized broker or intermediary accepts such orders; and such orders
will be priced using that Fund's net asset value next computed after the orders
are placed with and accepted by such brokers or intermediaries. Any purchase and
redemption orders received by a broker or intermediary under these agreements
will be transmitted daily to the Distributor no later than the time specified in
such agreement; but, in any event, no later than 6:00 a.m. following the day
that such purchase or redemption orders are received by the broker or
intermediary.
Nvest Portfolio Reporting Option ("NvestPRO")
Fund Shareholders who are clients of broker-dealers that have entered
into an agreement with New England Funds and the Distributor, and have total net
assets of $50,000 or more may be eligible to receive NvestPRO Quarterly Reports
in addition to their standard New England Funds quarterly statements. Eligible
clients are defined as clients with a portfolio of regular and IRA accounts that
are assigned to the same social security number having a minimum account value
of: (i) $50,000 in the case of a new account or (ii) $100,000 in the case of an
existing account. NvestPRO Quarterly Reports include graphic performance
illustrations and are designed to provide investors with individualized
performance information on their New England Funds holdings. Individualized
performance illustrated in the NvestPRO reports is determined from the first
date of participation in the NvestPRO product, not the account open date.
Clients who elect to participate in the NvestPRO program are also
offered access to an asset allocation questionnaire that is designed to assist
them and their registered representative in choosing an initial portfolio of New
England Funds based on their financial profile, objectives, and risk tolerance.
This is not an actively managed asset allocation program as described in Rule
3a-4 of the 1940 Act. The Distributor will charge a fee for this product
(currently $35 annually per portfolio), and has the right to determine account
minimums for participation in the product.
Self-Servicing Your Account with New England Funds Personal Access Line(TM)
and Web site
Shareholders may access account information, including share balances
and recent account activity online, by visiting our Web site at
www.mutualfunds.com. Transactions may also be processed online for certain
accounts (restrictions may apply). Such transactions include purchases,
redemptions and exchanges, and shareholders are automatically eligible for these
features. New England Funds has taken measures to ensure the security of
shareholder accounts, including the encryption of data and the use of personal
identification (PIN) numbers. In addition, you may restrict these privileges
from your account by calling New England Funds at 800-225-5478, or writing to us
at P.O. Box 8551, Boston, MA 02116. More information regarding these features
may be found on our Web site at www.mutualfunds.com.
Investor activity through these mediums are subject to the terms and conditions
outlined in the following NEW ENGLAND FUNDS ONLINE AND TELEPHONIC CUSTOMER
AGREEMENT. This agreement is also posted on our Web site. The initiation of any
activity through the New England Funds Personal Access Line(TM), or Web site at
www.mutualfunds.Com by an investor shall indicate agreement with the following
terms and conditions:
NEW ENGLAND FUNDS ONLINE AND TELEPHONIC CUSTOMER AGREEMENT
NOTE: ACCESSING OR REQUESTING ACCOUNT INFORMATION OR TRANSACTIONS THROUGH THIS
SITE CONSTITUTES AND SHALL BE DEEMED TO BE AN ACCEPTANCE OF THE FOLLOWING TERMS
AND CONDITIONS.
The accuracy, completeness and timeliness of all mutual fund information
provided is the sole responsibility of the mutual fund company which provides
the information. No party which provides a connection between this web site and
a mutual fund or its transfer agency system can verify or ensure the receipt of
any information transmitted to or from a mutual fund or its transfer agent, or
the acceptance by, or completion of any transaction with, a mutual fund.
The online acknowledgments or other messages which appear on your screen for
transactions entered do not mean that the transactions have been received,
accepted or rejected by the mutual fund. These acknowledgments are only an
indication that the transactional information entered by you has either been
transmitted to the mutual fund, or that it cannot be transmitted. It is the
responsibility of the mutual fund to confirm to you that it has received the
information and accepted or rejected a transaction. It is the responsibility of
the mutual fund to deliver to you a current prospectus, confirmation statement
and any other documents or information required by applicable law.
NO TRANSACTION SHALL BE DEEMED ACCEPTED UNTIL YOU RECEIVE A WRITTEN CONFIRMATION
FROM THE FUND COMPANY.
You are responsible for reviewing all mutual fund account statements received by
you in the mail in order to verify the accuracy of all mutual fund account
information provided in the statement and transactions entered through this
site. You are also responsible for promptly notifying the mutual fund of any
errors or inaccuracies relating to information contained in, or omitted from
your mutual fund account statements, including errors or inaccuracies arising
from the transactions conducted through this site.
TRANSACTIONS ARE SUBJECT TO ALL REQUIREMENTS, RESTRICTIONS AND FEES AS SET FORTH
IN THE PROSPECTUS OF THE SELECTED FUND.
THE CONDITIONS SET FORTH IN THIS AGREEMENT EXTEND NOT ONLY TO TRANSACTIONS
TRANSMITTED VIA THE INTERNET BUT TO TELEPHONIC TRANSACTIONS INITIATED THROUGH
THE NEW ENGLAND FUNDS PERSONAL ACCESS LINE(TM) (PAL).
You are responsible for the confidentiality and use of your personal
identification numbers, account numbers, social security numbers and any other
personal information required to access the site or transmit telephonically. Any
individual that possesses the information required to pass through all security
measures will be presumed to be you. All transactions submitted by an individual
presumed to be you will be solely your responsibility.
You agree that New England Funds does not have the responsibility to inquire as
to the legitimacy or propriety of any instructions received from you or any
person believed to be you, and is not responsible or liable for any losses that
may occur from acting on such instructions.
New England Funds is not responsible for incorrect data received via the
Internet or telephonically from you or any person believed to be you.
Transactions submitted over the Internet and telephonically are solely your
responsibility and New England Funds makes no warranty as to the correctness,
completeness, or the accuracy of any transmission. Similarly New England Funds
bears no responsibility for the performance of any computer hardware, software,
or the performance of any ancillary equipment and services such as telephone
lines, modems, or Internet service providers.
The processing of transactions over this site or telephonically will involve the
transmission of personal data including social security numbers, account numbers
and personal identification numbers. While New England Funds has taken
reasonable security precautions including data encryption designed to protect
the integrity of data transmitted to and from the areas of our Web site that
relate to the processing of transactions, we disclaim any liability for the
interception of such data.
You agree to immediately notify New England Funds if any of the following
occurs:
1. You do not receive confirmation of a transaction submitted via the Internet
or telephonically within five (5) business days.
2. You receive confirmation of a transaction of which you have no knowledge and
was not initiated or authorized by you.
3. You transmit a transaction for which you do not receive a confirmation
number.
4. You have reason to believe that others may have gained access to your
personal identification number (PIN) or other personal data.
5. You notice an unexplained discrepancy in account balances or other changes
to your account, including address changes, and banking instructions on any
confirmations or statements.
Any costs incurred in connection with the use of the New England Funds Personal
Access Line(TM) or the New England Funds Internet site including telephone line
costs, and Internet service provider costs are solely your responsibility.
Similarly New England Funds makes no warranties concerning the availability of
Internet services, or network availability.
New England Funds reserves the right to suspend, terminate or modify the
Internet capabilities offered to shareholders without notice.
YOU HAVE THE ABILITY TO RESTRICT INTERNET AND TELEPHONIC ACCESS TO YOUR ACCOUNTS
BY NOTIFYING NEW ENGLAND FUNDS OF YOUR DESIRE TO DO SO.
Written notifications to New England Funds should be sent to:
New England Funds
P O Box 8551
Boston, MA 02266-8551
Notification may also be made by calling 800-225-5478 during normal business
hours.
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REDEMPTIONS
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The procedures for redemption of shares of a Fund are summarized in the
Prospectus. As described in the Prospectus, a CDSC may be imposed on certain
purchases of Class A, Class B and Class C shares. For purposes of the CDSC, an
exchange of shares from one fund to another fund is not considered a redemption
or a purchase. For federal tax purposes, however, such an exchange is considered
a sale and a purchase and, therefore, would be considered a taxable event on
which you may recognize a gain or loss. In determining whether a CDSC is
applicable to a redemption of Class A, Class B or Class C shares, the
calculation will be determined in the manner that results in the lowest rate
being charged. Therefore, for Class B shares it will be assumed that the
redemption is first of any Class A shares in the shareholder's Fund account,
second of shares held for over six years, third of shares issued in connection
with dividend reinvestment and fourth of shares held longest during the six-year
period. For Class C shares and Class A shares subject to CDSC, it will be
assumed that the redemption is first of any shares that have been in the
shareholder's Fund account for over a year, and second of any shares that have
been in the shareholder's Fund account for under a year. The charge will not be
applied to dollar amounts representing an increase in the net asset value of
shares since the time of purchase or reinvested distributions associated with
such shares. Unless you request otherwise at the time of redemption, the CDSC is
deducted from the redemption, not the amount remaining in the account.
To illustrate, assume an investor purchased 100 Class B shares at $10
per share (at a cost of $1,000) and in the second year after purchase, the net
asset value per share is $12 and, during such time, the investor has acquired 10
additional shares under dividend reinvestment. If at such time the investor
makes his or her first redemption of 50 shares (proceeds of $600), 10 shares
will not be subject to the CDSC because of dividend reinvestment. With respect
to the remaining 40 shares, the CDSC is applied only to the original cost of $10
per share and not to the increase in the net asset value of $2 per share.
Therefore, $400 of the $600 redemption proceeds will be charged at a rate of 4%
(the applicable rate in the second year after purchase).
Signatures on redemption requests must be guaranteed by an "Eligible
Guarantor Institution," as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934. However, a signature guarantee will not be required if the proceeds
of the redemption do not exceed $100,000 and the proceeds check is made payable
to the registered owner(s) and mailed to the record address.
If you select the telephone redemption service in the manner described
in the next paragraph, shares of a Fund may be redeemed by calling toll free
800-225-5478. A wire fee, currently $5.00, will be deducted from the proceeds.
Telephone redemption requests must be received by the close of regular trading
on the NYSE. Requests made after that time or on a day when the NYSE is not open
for business cannot be accepted and a new request on a later day will be
necessary. The proceeds of a telephone withdrawal will normally be sent on the
first business day following receipt of a proper redemption request.
In order to redeem shares by telephone, a shareholder must either select
this service when completing the Fund application or must do so subsequently on
the Service Options Form, available from Nvest Services Company or your
investment dealer. When selecting the service, a shareholder must designate a
bank account to which the redemption proceeds should be sent. Any change in the
bank account so designated may be made by furnishing to Nvest Services Company
or your investment dealer a completed Service Options Form with a signature
guarantee. Whenever the Service Options Form is used, the shareholder's
signature must be guaranteed as described above. Telephone redemptions may only
be made if the designated bank is a member of the Federal Reserve System or has
a correspondent bank that is a member of the System. If the account is with a
savings bank, it must have only one correspondent bank that is a member of the
System.
The redemption price will be the net asset value per share (less any
applicable CDSC) next determined after the redemption request and any necessary
special documentation are received by State Street Bank or your investment
dealer in proper form. Payment normally will be made by State Street Bank on
behalf of the Fund within seven days thereafter. However, in the event of a
request to redeem shares for which the Fund has not yet received good payment,
the Funds reserve the right to withhold payments of redemption proceeds if the
purchase of shares was made by a check which was deposited less than fifteen
days prior to the redemption request (unless the Fund is aware that the check
has cleared).
The CDSC may be waived on redemptions made from IRA accounts due to
attainment of age 59 1/2 for IRA shareholders who established accounts prior to
January 3, 1995. The CDSC may also be waived on redemptions made from IRA
accounts due to death, disability, return of excess contribution, required
minimum distributions at age 70 1/2 (waivers apply only to amounts necessary to
meet the required minimum amount), certain withdrawals pursuant to a systematic
withdrawal plan, not to exceed 10% annually of the value of the account, and
redemptions made from the account to pay custodial fees.
The CDSC may be waived on redemptions made from 403(b)(7) custodial
accounts due to attainment of age 59 1/2 for shareholders who established
custodial accounts prior to January 3, 1995.
The CDSC may also be waived on redemptions necessary to pay plan
participants or beneficiaries from qualified retirement plans under Section 401
of the Code, including profit sharing plans, money purchase plans, 401(k) and
custodial accounts under Section 403(b)(7) of the Code. Distributions necessary
to pay plan participants and beneficiaries include payment made due to death,
disability, separation from service, normal or early retirement as defined in
the plan document, loans from the plan and hardship withdrawals, return of
excess contributions, required minimum distributions at age 70 1/2 (waivers only
apply to amounts necessary to meet the required minimum amount), certain
withdrawals pursuant to a systematic withdrawal plan, not to exceed 10% annually
of the value of your account, and redemptions made from qualified retirement
accounts or Section 403(b)(7) custodial accounts necessary to pay custodial
fees.
A CDSC will apply in the event of plan level transfers, including
transfers due to changes in investment where assets are transferred outside of
Kobrick Funds or New England Funds, including IRA and 403(b)(7)
participant-directed transfers of assets to other custodians (except for the
reasons given above) or qualified transfers of assets due to trustee-directed
movement of plan assets due to merger, acquisition or addition of additional
funds to the plan.
The Funds will normally redeem shares for cash; however, the Funds
reserve the right to pay the redemption price wholly or partly in kind if the
relevant Trust's Board of Trustees determines it to be advisable and in the
interest of the remaining shareholders of a Fund. The redemptions in kind will
be selected by the Fund's Investment Adviser in light of the Fund's objective
and will not generally represent a pro rata distribution of each security held
in the Fund's portfolio. If portfolio securities are distributed in lieu of
cash, the shareholder will normally incur brokerage commissions upon subsequent
disposition of any such securities. However, the Funds have elected to be
governed by Rule 18f-1 under the 1940 Act, pursuant to which the Funds are
obligated to redeem shares solely in cash for any shareholder during any 90-day
period up to the lesser of $250,000 or 1% of the total net asset value of the
relevant Fund at the beginning of such period. The Funds do not currently intend
to impose any redemption charge (other than the CDSC imposed by the Funds'
distributor), although it reserves the right to charge a fee not exceeding 1% of
the redemption price. A redemption constitutes a sale of shares for federal
income tax purposes on which the investor may realize a long- or short-term
capital gain or loss. See also "Income Dividends, Capital Gain Distributions and
Tax Status," below.
The Funds may also close your account and send you the proceeds if the
balance in your account falls below a minimum amount set by each Trust's Board
of Trustees (currently $1,000 for all accounts except Keogh, pension and profit
sharing plans, automatic investment plans and accounts that have fallen below
the minimum solely because of fluctuations in the net asset value per share).
Shareholders who are affected by this policy will be notified of the Fund's
intention to close the account and will have 60 days immediately following the
notice to bring the account up to the minimum.
Reinstatement Privilege (Class A shares only)
The Prospectus describes redeeming shareholders' reinstatement
privileges for Class A shares. Written notice and the investment check from
persons wishing to exercise this reinstatement privilege must be received by
your investment dealer within 120 days after the date of the redemption. The
reinstatement or exchange will be made at net asset value next determined after
receipt of the notice and the investment check and will be limited to the amount
of the redemption proceeds or to the nearest full share if fractional shares are
not purchased.
Even though an account is reinstated, the redemption will constitute a
sale for federal income tax purposes. Investors who reinstate their accounts by
purchasing shares of the Funds should consult with their tax advisers with
respect to the effect of the "wash sale" rule if a loss is realized at the time
of the redemption.
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STANDARD PERFORMANCE MEASURES
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Calculation of Total Return. Total return is a measure of the change in
value of an investment in a Fund over the period covered, which assumes that any
dividends or capital gains distributions are automatically reinvested in shares
of the same class of that Fund rather than paid to the investor in cash. Each
Fund may show each class's average annual total return for the one-year,
five-year and ten-year periods (or for the life of the class, if shorter)
through the end of the most recent calendar quarter. The formula for total
return used by the Funds is prescribed by the SEC and includes three steps: (1)
adding to the total number of shares of the particular class that would be
purchased by a hypothetical $10,000 investment in the Fund (with or without
giving effect to the deduction of sales charge or CDSC, if applicable) all
additional shares that would have been purchased if all dividends and
distributions paid or distributed during the period had been automatically
reinvested; (2) calculating the value of the hypothetical initial investment as
of the end of the period by multiplying the total of shares owned at the end of
the period by the net asset value per share of the relevant class on the last
trading day of the period; (3) dividing this account value for the hypothetical
investor by the amount of the initial investment, and annualizing the result for
periods of less than one year. Total return may be stated with or without giving
effect to any expense limitations in effect for a Fund. For those funds that
present returns reflecting an expense limitation or waiver, its total return
would have been lower if no limitation or waiver were in effect.
Performance Comparisons
Total Return. Total returns will generally be higher for Class A shares
than for Class B and Class C shares of the same Fund, because of the higher
levels of expenses borne by the Class B and Class C shares. Because of its lower
operating expenses, Class Y shares of each Fund can be expected to achieve a
higher total return than the same Fund's Class A, Class B and Class C shares.
The Funds may from time to time include their total return in advertisements or
in information furnished to present or prospective shareholders. The Funds may
from time to time include in advertisements its total return and the ranking of
those performance figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services as having similar investment
objectives.
Total return may also be used to compare the performance of the Fund
against certain widely acknowledged standards or indices for stock and bond
market performance or against the U.S. Bureau of Labor Statistics' Consumer
Price Index.
The Standard & Poor's Composite Index of 500 Stocks (the "S&P 500") is a
market capitalization-weighted and unmanaged index showing the changes in the
aggregate market value of 500 stocks relative to the base period 1941-43. The
S&P 500 is composed almost entirely of common stocks of companies listed on the
NYSE, although the common stocks of a few companies listed on the American Stock
Exchange or traded over-the-counter are included.
The Standard & Poor's Composite Index of 400 Stocks (the "S&P 400") is a
market capitalization-weighted and unmanaged index that includes approximately
10% of the capitalization of U.S. equity securities. This index is comprised of
stocks in the middle capitalization range. Any midcap stocks already included in
the S&P 500 are excluded from this index.
The Dow Jones Industrial Average is a market value-weighted and
unmanaged index of 30 large industrial stocks traded on the NYSE.
The Consumer Price Index, published by the U.S. Bureau of Labor
Statistics, is a statistical measure of changes, over time, in the prices of
goods and services in major expenditure groups.
Lipper, Inc. is an independent service that monitors the performance of
over 10,000 mutual funds, and calculates total return for the funds grouped by
investment objective. Lipper's Mutual Fund Performance Analysis, Small Cap
Company Analysis and Mutual Fund Indices measure total return and average
current yield for the mutual fund industry. Rankings of individual mutual fund
performance over specified time periods assume reinvestment of all
distributions, exclusive of sales charges.
The Russell 3000 Index is a market capitalization-weighted index which
comprises 3,000 of the largest capitalized U.S. companies whose common stock is
traded in the United States on the NYSE, the American Stock Exchange and NASDAQ.
The Russell 2000 Index represents the smallest 2,000 companies within the
Russell 3000 Index as measured by market capitalization. The Russell 1000 Index
represents the largest 1,000 companies within the Russell 3000 Index. The
Russell 1000 Growth Index is an unmanaged subset of stocks from the larger
Russell 1000 Index, selected for their greater growth orientation. The Russell
1000 Value Index is an unmanaged subset of stocks from the larger Russell 1000
Index, selected for their greater value orientation.
Articles and releases, developed by the Funds and other parties, about
the Funds regarding performance, rankings, statistics and analyses of the
individual Funds' and the fund group's asset levels and sales volumes, numbers
of shareholders by Fund or in the aggregate for the Funds, statistics and
analyses of industry sales volumes and asset levels, and other characteristics
may appear in advertising, promotional literature, publications, including, but
not limited to, those publications listed in Appendix B to this Statement, and
on various computer networks, for example, the Internet. In particular, some or
all of these publications may publish their own rankings or performance reviews
of mutual funds, including, but not limited to, Lipper Analytical Services and
Morningstar. References to these rankings or reviews or reprints of such
articles may be used in the Funds' advertising and promotional literature. Such
advertising and promotional material may refer to Nvest Companies, its
structure, goals and objectives and the Advisery subsidiaries of Nvest
Companies, including their portfolio management responsibilities, portfolio
managers and their categories and background; their tenure, styles and
strategies and their shared commitment to fundamental investment principles and
may identify specific clients, as well as discuss the types of institutional
investors who have selected the advisers to manage their investment portfolios
and the reasons for that selection. The references may discuss the independent,
entrepreneurial nature of each Advisery organization and allude to or include
excerpts from articles appearing in the media regarding Nvest Companies, its
Advisery subsidiaries and their personnel. For additional information about the
Funds' advertising and promotional literature, see Appendix C.
The Funds may use the accumulation charts below in their advertisements
to demonstrate the benefits of monthly savings at an 8% and 10% rate of return,
respectively.
<TABLE>
INVESTMENTS AT 8% RATE OF RETURN
<CAPTION>
5 YRS. 10 15 20 25 30
------ -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$50 3,698 9,208 17,417 29,647 47,868 75,015
75 5,548 13,812 26,126 44,471 71,802 112,522
100 7,396 18,417 34,835 59,295 95,737 150,029
150 11,095 27,625 52,252 88,942 143,605 225,044
200 14,793 36,833 69,669 118,589 191,473 300,059
500 36,983 92,083 174,173 296,474 478,683 750,148
</TABLE>
<TABLE>
INVESTMENTS AT 10% RATE OF RETURN
<CAPTION>
5 YRS. 10 15 20 25 30
------ -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$50 3,904 10,328 20,896 38,285 66,895 113,966
75 5,856 15,491 31,344 57,427 100,342 170,949
100 7,808 20,655 41,792 76,570 133,789 227,933
150 11,712 30,983 62,689 114,855 200,684 341,899
200 15,616 41,310 83,585 153,139 267,578 455,865
500 39,041 103,276 208,962 382,848 668,945 1,139,663
</TABLE>
The Funds' advertising and sales literature may refer to historical,
current and prospective political, social, economic and financial trends and
developments that affect domestic and international investment as it relates to
any of the Funds. The Funds' advertising and sales literature may include
historical and current performance and total returns of investment alternatives
to the Funds. Articles, releases, advertising and literature may discuss the
range of services offered by the Trusts, the Distributor, and the transfer agent
of the Funds, with respect to investing in shares of the Funds and customer
service. Such materials may discuss the multiple classes of shares available
through the Trusts and their features and benefits, including the details of the
pricing structure.
The Distributor may make reference in its advertising and sales
literature to awards, citations and honors bestowed on it by industry
organizations and other observers and raters including, but not limited to,
Dalbar's Quality Tested Service Seal and Key Honors Award. Such reference may
explain the criteria for the award, indicate the nature and significance of the
honor and provide statistical and other information about the award and the
Distributor's selection including, but not limited to, the scores and categories
in which the Distributor excelled, the names of funds and fund companies that
have previously won the award and comparative information and data about those
against whom the Distributor competed for the award, honor or citation.
The Distributor may publish, allude to or incorporate in its advertising
and sales literature testimonials from shareholders, clients, brokers who sell
or own shares, broker-dealers, industry organizations and officials and other
members of the public, including, but not limited to, Fund performance, features
and attributes, or service and assistance provided by departments within the
organization, employees or associates of the Distributor.
Advertising and sales literature may also refer to the beta coefficient
of the Funds. A beta coefficient is a measure of systematic or undiversifiable
risk of a stock. A beta coefficient of more than 1 means that the company's
stock has shown more volatility than the market index (e.g., the S&P 500) to
which it is being related. If the beta is less than 1, it is less volatile than
the market average to which it is being compared. If it equals 1, its risk is
the same as the market index. High variability in stock price may indicate
greater business risk, instability in operations and low quality of earnings.
The beta coefficients of the Funds may be compared to the beta coefficients of
other funds.
The Funds may enter into arrangements with banks exempted from
broker-dealer registration under the Securities Exchange Act of 1934.
Advertising and sales literature developed to publicize such arrangements will
explain the relationship of the bank to the Funds and the Distributor as well as
the services provided by the bank relative to the Funds. The material may
identify the bank by name and discuss the history of the bank including, but not
limited to, the type of bank, its asset size, the nature of its business and
services and its status and standing in the industry.
In addition, sales literature may be published concerning topics of
general investor interest for the benefit of registered representatives and the
Funds' prospective shareholders. These materials may include, but are not
limited to, discussions of college planning, retirement planning and reasons for
investing and historical examples of the investment performance of various
classes of securities, securities markets and indices.
- --------------------------------------------------------------------------------
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
- --------------------------------------------------------------------------------
As described in the Prospectus, it is the policy of each Fund to pay its
shareholders, as dividends, substantially all net investment income and to
distribute annually all net realized long-term capital gains, if any, after
offsetting any capital loss carryovers.
Ordinary income dividends and capital gain distributions are payable in
full and fractional shares of the relevant class of the particular Fund based
upon the net asset value determined as of the close of the NYSE on the record
date for each dividend or distribution. Shareholders, however, may elect to
receive their ordinary income dividends or capital gain distributions, or both,
in cash. The election may be made at any time by submitting a written request
directly to the Funds. In order for a change to be in effect for any dividend or
distribution, it must be received by the Funds on or before the record date for
such dividend or distribution.
If you elect to receive your dividends in cash and the dividend checks
sent to you are returned "undeliverable" to the Fund or remain uncashed for six
months, your cash election will automatically be changed and your future
dividends will be reinvested. No interest will accrue on amounts represented by
uncashed dividend or redemption checks.
As required by federal law, detailed federal tax information will be
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year.
Each Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order to qualify, each Fund must, among other
things, (i) derive at least 90% of its gross income in each taxable year from
dividends, interest, payments with respect to certain securities loans, gains
from the sale of securities or foreign currencies, or other income (including,
but not limited to, gains from options, futures or forward contracts) derived
with respect to its business of investing in such stock, securities or
currencies; (ii) distribute at least 90% of its dividend, interest and certain
other taxable income each year; and (iii) diversify its holdings so that at the
end of each fiscal quarter, (a) at least 50% of the value of its total assets
consists of cash, U.S. government securities, securities of other regulated
investment companies, and other securities limited generally, with respect to
any one issuer, to no more than 5% of the value of the Fund's total assets and
10% of the outstanding voting securities of such issuer, and (b) not more than
25% of the value of its assets is invested in the securities (other than those
of the U.S. government or other regulated investment companies) of any one
issuer or of two or more issuers which the Fund controls and which are engaged
in the same, similar or related trades or businesses. So long as it qualifies
for treatment as a regulated investment company, a Fund will not be subject to
federal income tax on income paid to its shareholders in the form of dividends
or capital gains distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any,
of each Fund's "required distribution" over its actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 (or December 31, if
the Fund is so permitted to elect and so elects) plus undistributed amounts from
prior years. Each Fund intends to make distributions sufficient to avoid
imposition of the excise tax. Distributions declared and payable by a Fund
during October, November or December to shareholders of record on a date in any
such month and paid by the Fund during the following January will be treated for
federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.
Fund distributions paid to you either in cash or reinvested in
additional shares are generally taxable to you either as ordinary income or as
capital gains. Distributions derived from short-term capital gains or investment
income are generally taxable at ordinary income rates. If you are a corporation
investing in a Fund, a portion of these dividends may qualify for the
dividends-received deduction provided that you meet certain holding period
requirements. Distributions of net long-term capital gains (i.e., the excess of
net gains from capital assets held for more than one year over net losses from
capital assets held for not more than one year) that are designated by a Fund as
capital gain dividends will generally be taxable to a shareholder receiving such
distributions as long-term capital gain (generally taxed at a 20% tax rate for
noncorporate shareholders) regardless of how long the shareholder has held Fund
shares. To avoid an excise tax, each Fund intends to distribute dividends prior
to calendar year-end. Some dividends paid in January may be taxable as if they
were received in the previous December.
A loss on the sale of shares held for six months or less will be
disallowed for federal income tax purposes to the extent of exempt-interest
dividends received with respect to such shares and thereafter treated as a
long-term capital loss to the extent of any long-term capital gain dividend paid
to the shareholder with respect to such shares.
Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when a Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.
Under the Code, the interest on so-called "private activity" bonds is an
item of tax preference, which, depending on the shareholder's particular tax
situation, might subject the shareholder to an alternative minimum tax with a
maximum rate of 28%. The interest on tax exempt bonds issued after certain dates
in 1986 is retroactively taxable from the date of issuance if the issuer does
not comply with certain requirements concerning the use of bond proceeds and the
application of earnings on bond proceeds.
Each Fund's transactions, if any, in foreign currencies are likely to
result in a difference between the Fund's book income and taxable income. This
difference may cause a portion of the Fund's income distributions to constitute
a return of capital or capital gain for tax purposes or require the Fund to make
distributions exceeding book income to avoid excise tax liability and to qualify
as a regulated investment company.
A Fund's transactions in foreign currency-denominated debt securities
and its hedging activities will likely produce a difference between its book
income and its taxable income. This difference may cause a part or all of a
Fund's income distributions to constitute returns of capital for tax purposes or
require the Fund to make distributions exceeding book income to avoid federal
income tax liability.
Redemptions and exchanges of each Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions.
Currently, if shares have been held for more than one year, gain or loss
realized will be taxed at long-term federal tax rates (generally 20% for
noncorporate shareholders), provided the shareholder holds the shares as a
capital asset. Furthermore, no loss will be allowed on the sale of Fund shares
to the extent the shareholder acquired other shares of the same Fund within 30
days prior to the sale of the loss shares or 30 days after such sale.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and related regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative actions.
Dividends and distributions also may be subject to state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.
Each Fund is required to withhold 31% of all income dividends and
capital gains distributions it pays to you if you do not provide a correct,
certified taxpayer identification number, if a Fund is notified that you have
underreported income in the past or if you fail to certify to a Fund that you
are not subject to such withholding. If you are a tax-exempt shareholder,
however, these backup withholding rules will not apply so long as you furnish
the Fund with an appropriate certification.
The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited Statements of Assets and Liabilities, Statements of
Operations and Statements of Changes in Net Assets, Financial Highlights and
Schedule of Investments for the Capital Fund, the Emerging Growth Fund and the
Growth Fund as of September 30, 1998 and these unaudited statements as of March
31,1999 are included in this Statement of Additional Information.
<PAGE>
APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
ABC and affiliates
Adam Smith's Money World
America On Line
Anchorage Daily News
Atlanta Constitution
Atlanta Journal
Arizona Republic
Austin American Statesman
Baltimore Sun
Bank Investment Marketing
Barron's
Bergen County Record (NJ)
Bloomberg Business News
B'nai B'rith Jewish Monthly
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
Cincinnati Post
CNBC
CNN
Columbus Dispatch
CompuServe
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghues Money Fund Report
Dorfman, Dan (syndicated column)
Dow Jones News Service
Economist
FACS of the Week
Fee Adviser
Financial News Network
Financial Planning
Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World
Fitch Insights
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Fund Decoder
Global Finance
(the) Guarantor
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Individual Investor
Institutional Investor
International Herald Tribune
Internet
Investment Adviser
Investment Company Institute
Investment Dealers Digest
Investment Profiles
Investment Vision
Investor's Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas City)
KOA-AM (Denver)
LA Times
Leckey, Andrew (syndicated column)
Lear's
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
Mutual Funds Magazine
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Adviser
Stockbroker's Register
Strategic Insight
Tampa Tribune Time
Tobias, Andrew (syndicated column)
Toledo Blade
UPI
US News and World Report
USA Today
USA TV Network
Value Line
Wall St. Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
WEEI
WHDH
Worcester Telegram
World Wide Web
Worth Magazine
WRKO
<PAGE>
APPENDIX B
ADVERTISING AND PROMOTIONAL LITERATURE
References may be included in the Funds' advertising and promotional
literature to Nvest Companies and its affiliates.
The Funds' advertising and promotional material will include, but is not
limited to, discussions of the following information about both affiliated and
unaffiliated entities:
o Specific and general assessments and forecasts regarding U.S. and world
economies, and the economies of specific nations and their impact on the New
England Funds;
o Specific and general investment emphasis, specialties, fields of expertise,
competencies, operations and functions;
o Specific and general investment philosophies, strategies, processes,
techniques and types of analysis;
o Specific and general sources of information, economic models, forecasts and
data services utilized, consulted or considered in the course of providing
advisory or other services;
o The corporate histories, founding dates and names of founders of the
entities;
o Awards, honors and recognition given to the entities;
o The names of those with ownership interest and the percentage of ownership
interest;
o The industries and sectors from which clients are drawn and specific client
names and background information on current individual, corporate and
institutional clients, including pension and profit sharing plans;
o Current capitalizations, levels of profitability and other financial and
statistical information;
o Identification of portfolio managers, researchers, economists, principals and
other staff members and employees;
o The specific credentials of the above individuals, including, but not limited
to, previous employment, current and past positions, titles and duties
performed, industry experience, educational background and degrees, awards
and honors;
o Specific and general reference to past and present notable and renowned
individuals including reference to their field of expertise and/or specific
accomplishments;
o Current and historical statistics regarding:
- total dollar amount of assets managed
- New England Funds' assets managed in total and by fund -the growth of
assets
- asset types managed
- numbers of principal parties and employees, and the length of their
tenure, including officers, portfolio managers, researchers, economists,
technicians and support staff
- the above individuals' total and average number of years of industry
experience and the total and average length of their service to the
adviser or sub-adviser;
o The general and specific strategies applied by the advisers in the management
of New England Funds portfolios including, but not limited to:
- the pursuit of growth, value, income oriented, risk management or other
strategies
- the manner and degree to which the strategy is pursued
- whether the strategy is conservative, moderate or extreme and an
explanation of other features and attributes
- the types and characteristics of investments sought and specific
portfolio holdings
- the actual or potential impact and result from strategy implementation
- through its own areas of expertise and operations, the value added by
sub-advisers to the management process
- the disciplines it employs
- the systems utilized in management, the features and characteristics of
those systems and the intended results from such computer analysis, and
o Specific and general references to portfolio managers and funds that they
serve as portfolio manager of, other than New England Funds, and those
families of funds. Any such references will indicate that New England Funds
and the other funds of the managers differ as to performance, objectives,
investment restrictions and limitations, portfolio composition, asset size
and other characteristics, including fees and expenses. References may also
be made to industry rankings and ratings of the Funds and other funds managed
by the Funds' adviser, including, but not limited to, those provided by
Morningstar, Lipper Analytical Services, Forbes and Worth.
In addition, communications and materials developed by the Funds will
make reference to the following information about Nvest Companies and its
affiliates:
Nvest Companies is part of an affiliated group including Nvest, L.P. a
publicly traded company listed on the NYSE. Nvest Companies has 18 principal
subsidiary or affiliated asset management firms, which collectively had more
than $ ---- billion of assets under management as of September 30, 1999. In
addition, promotional materials may include:
o Specific and general references to New England Funds multi-manager approach
through Nvest Companies affiliates and outside firms including, but not
limited to, the following:
- that each adviser/manager operates independently on a day-to-day basis
and maintains an image and identity separate from Nvest Companies and the
other Investment Advisers
- other fund companies are limited to a "one size fits all" approach but
New England Funds draws upon the talents of multiple managers whose
expertise best matches the fund objective
- in this and other contexts reference may be made to New England Funds'
slogan "Where The Best Minds Meet"(R) and that New England Funds' ability
to match the talent to the task is one more reason it is becoming known
as "Where The Best Minds Meet."
Nvest Advisor Services ("NAS") and Nvest Retirement Services ("NRS"),
divisions of Nvest Companies, may be referenced in Fund advertising and
promotional literature concerning the marketing services it provides to Nvest
Companies affiliated fund groups including: New England Funds, Loomis Sayles
Funds, Jurika & Voyles, Back Bay Advisors, Oakmark Funds, Delafield Fund and
Kobrick Funds.
NAS and NRS will provide marketing support to Nvest Companies affiliated
fund groups targeting financial advisers, financial intermediaries and
institutional clients who may transact purchases and other fund-related business
directly with these fund groups. Communications will contain information
including, but not limited to: descriptions of clients and the marketplaces to
which it directs its efforts; the mission and goals of NAS and NRS and the types
of services it provides which may include: seminars; its 1-800 number, web site,
Internet or other electronic facilities; qualitative information about the
funds' investment methodologies; information about specific strategies and
management techniques; performance data and features of the funds; institutional
oriented research and portfolio manager insight and commentary. Additional
information contained in advertising and promotional literature may include:
rankings and ratings of the funds including, but not limited to, those of
Morningstar and Lipper Analytical Services; statistics about the advisers', fund
groups' or a specific fund's assets under management; the histories of the
advisers and biographical references to portfolio managers and other staff
including, but not limited to, background, credentials, honors, awards and
recognition received by the advisers and their personnel; and commentary about
the advisers, their funds and their personnel from third-party sources including
newspapers, magazines, periodicals, radio, television or other electronic media.
References may be included in Kobrick Funds or New England Funds'
advertising and promotional literature about its 401(k) and retirement plans.
The information may include, but is not limited to:
o Specific and general references to industry statistics regarding 401(k) and
retirement plans including historical information, industry trends and
forecasts regarding the growth of assets, numbers of plans, funding vehicles,
participants, sponsors and other demographic data relating to plans,
participants and sponsors, third party and other administrators, benefits
consultants and other organizations involved in 401(k) and retirement
programs with whom New England Funds may or may not have a relationship.
o Specific and general references to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the Kobrick Funds or New
England Funds as a 401(k) or retirement plan funding vehicle produced by,
including, but not limited to, Investment Company Institute and other
industry authorities, research organizations and publications.
o Specific and general discussion of economic, legislative, and other
environmental factors affecting 401(k) and retirement plans, including, but
not limited to, statistics, detailed explanations or broad summaries of:
- past, present and prospective tax regulation, Internal Revenue Service
requirements and rules, including, but not limited to, reporting
standards, minimum distribution notices, Form 5500, Form 1099R and other
relevant forms and documents, Department of Labor rules and standards and
other regulations. This includes past, current and future initiatives,
interpretive releases and positions of regulatory authorities about the
past, current or future eligibility, availability, operations,
administration, structure, features, provisions or benefits of 401(k) and
retirement plans;
- information about the history, status and future trends of Social
Security and similar government benefit programs including, but not
limited to, eligibility and participation, availability, operations and
administration, structure and design, features, provisions, benefits and
costs; and
- current and prospective ERISA regulation and requirements.
o Specific and general discussion of the benefits of 401(k) investment and
retirement plans, and, in particular, the New England Funds 401(k) and
retirement plans, to the participant and plan sponsor, including
explanations, statistics and other data, about:
- increased employee retention
- reinforcement or creation of morale
- deductibility of contributions for participants
- deductibility of expenses for employers
- tax deferred growth, including illustrations and charts
- loan features and exchanges among accounts
- educational services materials and efforts, including, but not limited
to, videos, slides, presentation materials, brochures, an investment
calculator, payroll stuffers, quarterly publications, releases and
information on a periodic basis and the availability of wholesalers and
other personnel.
o Specific and general reference to the benefits of investing in mutual funds
for 401(k) and retirement plans, and the Kobrick Funds or New England Funds
as a 401(k) or retirement plan funding vehicle.
o Specific and general reference to the role of the investment dealer and the
benefits and features of working with a financial professional including:
- access to expertise on investments
- assistance in interpreting past, present and future market trends and
economic events
- providing information to clients including participants during enrollment
and on an ongoing basis after participation
- promoting and understanding the benefits of investing, including mutual
fund diversification and professional management.
<PAGE>
KOBRICK INVESTMENT TRUST
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) Amended and Restated Master Trust Agreement*
(b) Bylaws*
(c) Inapplicable
(d) Form of Advisory Agreement*
(e) (i) Form of Distribution Agreement with Funds Distributor, Inc.*
(ii) Form of Distribution Agreement with New England Funds, L.P.**
(iii) Form of Selling Agreement with Funds Distributor, Inc.*
(iv) Form of Selling Agreement with New England Funds, L.P.**
(f) Inapplicable
(g) Revised Form of Custodian Agreement with State Street Bank and Trust
Company*
(h) (i) Form of Administration Agreement with State Street Bank and
Trust Company*
(ii) Form of Administration Agreement with Nvest Services Co.,
Inc.**
(iii) Form of Transfer Agency and Service Agreement with State
Street Bank and Trust Company*
(iv) Form of Transfer Agency and Service Agreement with Nvest
Services Co., Inc.**
(i) Opinion and Consent of Counsel**
(j) Consent of Independent Public Accountants**
(k) Inapplicable
(l) Inapplicable
(m) (i) Form of Plan of Distribution Pursuant to Rule 12b-1 for Class
A shares*
(ii) Form of Plan of Distribution Pursuant to Rule 12b-1 for
Class B and C shares**
(n) Inapplicable
(o) Rule 18f-3 Plan**
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*Previously filed
** To be Filed by Amendment
Item 24. Persons Controlled by or Under Common Control with the Fund
Inapplicable
Item 25. Indemnification
Article VI of the Registrant's Agreement and Declaration of Trust provides for
indemnification of officers and Trustees as follows:
Section 6.4 Indemnification of Trustees, Officers, etc.
Subject to and except as otherwise provided in the Securities Exchange Act of
1933, as amended, and the 1940 Act, the Trust shall indemnify each of its
Trustees and officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise (hereinafter referred to as
a "Covered Person")) against all liabilities, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and counsel fees,
incurred by any Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which such Covered Person may be
or may have been involved as a party or otherwise or with which such person may
be or may have been threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer, director or trustee, except with
respect to any matter as to which it has been determined that such Covered
Person had acted with willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office (such conduct referred to hereafter as "Disabling Conduct"). A
determination that the Covered Person is entitled to indemnification may be made
by (i) a final decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not liable by
reason of Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for insufficiency of evidence
of Disabling Conduct, or (iii) a reasonable determination, based upon a review
of the facts, that the indemnitee was not liable by reason of Disabling Conduct
by (a) a vote of a majority of a quorum of Trustees who are neither "interested
persons" of the Trust as defined in section 2(a) (19) of the 1940 Act nor
parties to the proceeding, or (b) an independent legal counsel in a written
opinion. Expenses, including accountants' and counsel fees so incurred by any
such Covered Person (but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), may be paid from time to time by the Trust
in advance of the final disposition of any such action, suit or proceeding,
provided that the Covered Person shall have undertaken to repay the amounts so
paid to the Trust if it is ultimately determined that indemnification of such
expenses is not authorized under this Article VI and (i) the Covered Person
shall have provided security for such undertaking, (ii) the Trust shall be
insured against losses arising by reason of any lawful advances, or (iii) a
majority of a quorum of the disinterested Trustees who are not a party to the
proceeding, or an independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the Covered Person
ultimately will be found entitled to indemnification.
Section 6.5 Compromise Payment.
As to any matter disposed of by a compromise payment by any such Covered Person
referred to in Section 6.4, pursuant to a consent decree or otherwise, no such
indemnification either for said payment or for any other expenses shall be
provided unless such indemnification shall be approved (a) by a majority of the
disinterested Trustees who are not parties to the proceeding or (b) by an
independent legal counsel in a written opinion. Approval by the Trustees
pursuant to clause (a) or by independent legal counsel pursuant to clause (b)
shall not prevent the recovery from any Covered Person of any amount paid to
such Covered Person in accordance with any of such clauses as indemnification if
such Covered Person is subsequently adjudicated by a court of competent
jurisdiction to have been liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office.
Section 6.6 Indemnification Not Exclusive, etc.
The right of indemnification provided by this Article VI shall not be exclusive
of or affect any other rights to which any such Covered Person may be entitled.
As used in this Article VI, "Covered Person" shall include such person's heirs,
executors and administrators, an "interested Covered Person" is one against whom
the action, suit or other proceeding in question or another action, suit or
other proceeding on the same or similar grounds is then or has been pending or
threatened, and a "disinterested" person is a person against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending or threatened.
Nothing contained in this Article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of any such
person."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue. The Registrant expects to maintain a standard mutual fund and
investment advisory professional and directors and officers liability policy.
The policy will provide coverage to the Registrant, its Trustees and officers,
and Kobrick Funds LLC (the "Investment Manager"). Coverage under the policy will
include losses by reason of any act, error, omission, misstatement, misleading
statement, neglect or breach of duty.
The Advisory Agreement with the Investment Manager provides that the Investment
Manager shall not be liable for any action taken, omitted or suffered to be
taken by it in its reasonable judgment, in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it by the
Advisory Agreement, or in accordance with (or in the absence of) specific
directions or instructions from the Trust, provided, however, that such acts or
omissions shall not have resulted from the Investment Manager's willful
misfeasance, bad faith or gross negligence, a violation of the standard of care
established by and applicable to the Investment Manager in its actions under the
Advisory Agreement or breach of its duty or of its obligations under the
Advisory Agreement.
Item 26. Business and Other Connections of the Investment Adviser
(a) The Investment Adviser is a limited liability company formed as an
investment management firm. On July 7, 1999, the Investment Adviser succeeded to
the business of the prior investment manager to the Registrant, also known as
Kobrick Funds LLC (the "Prior Adviser"), as a result of the transfer of
substantially all of the assets and liabilities of the Prior Adviser. Following
the close of business on December 31, 1998, the Prior Adviser succeeded to the
business of Kobrick-Cendant Funds, Inc., which was formed in October 1997,
pursuant to a reorganization.
(b) The managers and officers of the Investment Adviser and any other business,
profession, vocation or employment of a substantial nature engaged in at any
time during the past two years:
(i) Frederick R. Kobrick - President and Chief Executive Officer of the
Investment Adviser and its predecessors and President and Trustee of the
Registrant since October 1997; Portfolio Manager and Senior Vice President of
State Street Research and Management Company from March 1985 to August 1997. He
is also currently a principal in certain private investment partnerships.
(ii) Richard A. Goldman - Chief Operating Officer and a Manager of the
Investment Adviser and Secretary of the Registrant since October 1997 and
Treasurer and Secretary of the Registrant since ____, Member, Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C. from April 1996 to October 1997 and
Associate, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. from August 1989
to March 1996.
(iii) Neal G. Litvak - Manager of the Investment Adviser since July 1999.
Executive Vice President, Research Marketing, Nvest Companies, L.P. since
February 1997.
(iv) Sherry A. Umberfield - Manager of the Investment Adviser since July
1999. Executive Vice President, Corporate Development, Nvest Companies, L.P.
(formerly Nvest L.P.) since September 1993.
Item 27. Principal Underwriters
(a) Funds Distributor, Inc. (the "Distributor") acts as principal underwriter
for the following investment companies other than the Registrant:
American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Global Funds, Inc.
Dresdner RCM Investment Funds, Inc.
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Merrimac Series
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
National Investors Cash Management Fund, Inc.
Nomura Pacific Basin Fund, Inc.
Orbitex Group of Funds
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
SoGen Funds, Inc.
SoGen Variable Funds, Inc.
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.
Funds Distributor, Inc. is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National Association of
Securities Dealers. Funds Distributor, Inc. is located at 60 State Street, Suite
1300, Boston, Massachusetts 02109. Funds Distributor, Inc. is an indirect
wholly-owned subsidiary of Boston Institutional Group, Inc., a holding company
all of whose outstanding shares are owned by key employees.
(b) The following is a list of the executive officers, directors and partners
of Funds Distributor, Inc., none of whom hold any positions or offices with the
Registrant:
Director, President and Chief Executive Officer Marie E. Connolly
Executive Vice President George A. Rio
Executive Vice President Donald R. Roberson
Executive Vice President William S. Nichols
Senior Vice President, General Margaret W. Chambers
Counsel, Chief Compliance Officer,
Secretary and Clerk
Director, Senior Vice President, Treasurer,
and Chief Financial Officer Joseph F. Tower, III
Senior Vice President Paula R. David
Senior Vice President Gary S. MacDonald
Senior Vice President Judith K. Benson
Chairman and Director William J. Nutt
(c) Inapplicable.
Item 28. Location of Accounts and Records
Accounts, books and other documents required to be maintained by Section 31(a)
of the Investment Company Act of 1940 and the Rules promulgated thereunder will
be maintained by the Registrant at its offices located at 101 Federal Street,
Boston, Massachusetts 02110 as well as at the offices of the Registrant's
transfer agent located at Two Heritage Drive, Quincy, MA 02171.
Item 29. Management Services Not Discussed in Parts A or B
Inapplicable
Item 30. Undertakings
The Registrant undertakes to call a meeting of shareholders, if requested to
do so by holders of at least 10% of the Fund's outstanding shares, for the
purpose of voting upon the question of removal of a trustee or trustees and to
assist in communications with other shareholders as required by Section 16(c) of
the Investment Company Act of 1940.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed below on its behalf by the undersigned, thereunto duly authorized,
in the City of Boston and Commonwealth of Massachusetts, on the 30th day of
August 1999.
KOBRICK INVESTMENT TRUST
By: \s\ Frederick R. Kobrick
-------------------------
Frederick R. Kobrick
President
Pursuant to the requirements of the Securities Act, this registration statement
has been signed below by the following persons in the capacities and on the date
indicated.
Signature Title Date
\s\ Frederick R. Kobrick President and Trustee August 30, 1999
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Frederick R. Kobrick
\s\ Richard A. Goldman Treasurer and Trustee August 30, 1999
- -----------------------------
Richard A. Goldman
Jay H. Atlas* Trustee August 30, 1999
- -----------------------------
Jay H. Atlas
Samuel L. Hayes, III* Trustee August 30, 1999
- -----------------------------
Samuel L. Hayes, III
Joseph P. Paster* Trustee August 30, 1999
- -----------------------------
Joseph P. Paster
*By \s\ Frederick R. Kobrick
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Frederick R. Kobrick
Attorney-in-fact
