Supplement dated November 21, 2000 to the currently effective Prospectus for
Classes A, B and C of each of the funds listed below
STOCK FUNDS
-----------
Kobrick Capital Fund Nvest Growth Fund
Kobrick Emerging Growth Fund Nvest International Equity Fund
Kobrick Growth Fund Nvest Star Advisers Fund
Nvest Balanced Fund Nvest Star Small Cap Fund
Nvest Bullseye Fund Nvest Star Value Fund
Nvest Capital Growth Fund Nvest Star Worldwide Fund
Nvest Equity Income Fund
Nvest Growth and Income Fund
BOND FUNDS
----------
Nvest Bond Income Fund
Nvest High Income Fund
Nvest Limited Term U.S. Government Fund
Nvest Short Term Corporate Income Fund
Nvest Strategic Income Fund
Effective December 1, 2000, a 1.00% maximum front-end sales charge will be
imposed on purchases for new accounts of Class C share of the funds.
Accordingly, the following changes apply to all prospectuses:
o The following disclosure in the shareholder fees table in the section
entitled "Fund Fees & Expenses" is revised to read as follows:
CLASS C
--------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) (1)(2) 1.00% (4)
--------------------------------------------------------------------------------
(1) A reduced sales charge on Class A and Class C shares applies in some cases.
See "Ways to Reduce or Eliminate Sales Charges" within the section entitled
"Fund Services."
(4) Accounts established prior to December 1, 2000 will not be subject to the
1.00% front-end sales charge for exchange or additional purchases of Class
C shares.
o The first bullet under Class C shares in the section entitled, "Investing
in the Funds" is revised to read as follows:
YOU PAY A SALES CHARGE WHEN YOU BUY FUND SHARES. THERE ARE SEVERAL WAYS TO
REDUCE THIS CHARGE. SEE THE SECTION ENTITLED "WAYS TO REDUCE OR ELIMINATE SALES
CHARGES."
o The first two sentences in the paragraph under the section entitled, "How
Sales Charges Are Calculated - Class C Shares" are revised to read as
follows:
"The offering price of Class C shares is their net asset value plus a front-end
sales charge of 1.00% (1.01% of your investment). Class C shares are also
subject to a CDSC of 1.00% on redemptions made within one year of the date of
purchase."
o In the section entitled, "Ways to Reduce or Eliminate Sales Charges" the
first subheading is changed to "Class A or C Shares". In addition, the
first sentence of each of the following subsections under this subheading
is revised to read as follows:
REDUCING SALES CHARGES
"There are several ways you can lower your sales charge for Class A shares
utilizing the chart on the previous page, including:"
ELIMINATING SALES CHARGES AND CDSC
"Class A shares may be offered without front-end sales charges or a CDSC, and
Class C shares may be offered without a front-end sales charge, to the following
individuals and institutions:"
In addition, the fourth bullet is revised to read as follows: "Selling brokers,
sales representatives or other intermediaries under arrangements with the
Distributor."
REPURCHASING FUND SHARES
"You may apply proceeds from redeeming Class A or Class C shares of the Funds
(without paying a front-end sales charge) to repurchase Class A or Class C
shares, respectively, of any Nvest Fund."
Please see reverse side
<PAGE>
o In addition, the Example tables for each Fund's Class C shares in the
section entitled, "Fund Fees & Expenses" are revised to read as follows:
<TABLE>
<CAPTION>
KOBRICK KOBRICK KOBRICK
CAPITAL FUND EMERGING GROWTH FUND GROWTH FUND
CLASS C CLASS C CLASS C
(1) (2) (1) (2) (1) (2)
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 428 $ 328 $ 428 $ 328 $ 418 $ 318
3 Years $ 860 $ 860 $ 924 $ 924 $ 925 $ 925
5 Years $ 1,417 $ 1,417 $ 1,546 $ 1,546 $ 1,557 $ 1,557
10 Years $ 2,934 $ 2,934 $ 3,217 $ 3,217 $ 3,254 $ 3,254
</TABLE>
<TABLE>
<CAPTION>
NVEST NVEST NVEST
BALANCED FUND BULLSEYE FUND CAPITAL GROWTH FUND
CLASS C CLASS C CLASS C
(1) (2) (1) (2) (1) (2)
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 411 $ 311 $ 454 $ 354 $ 417 $ 317
3 Years $ 752 $ 752 $ 1,091 $ 1,091 $ 770 $ 770
5 Years $ 1,218 $ 1,218 $ 1,848 $ 1,848 $ 1,248 $ 1,248
10 Years $ 2,505 $ 2,505 $ 3,836 $ 3,836 $ 2,567 $ 2,567
</TABLE>
<TABLE>
<CAPTION>
NVEST NVEST NVEST
EQUITY INCOME FUND GROWTH AND INCOME FUND GROWTH FUND
CLASS C CLASS C CLASS C
(1) (2) (1) (2) (1) (2)
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 428 $ 328 $ 399 $ 299 $ 390 $ 290
3 Years $ 933 $ 933 $ 715 $ 715 $ 687 $ 687
5 Years $ 1,562 $ 1,562 $ 1,156 $ 1,156 $ 1,109 $ 1,109
10 Years $ 3,253 $ 3,253 $ 2,379 $ 2,379 $ 2,284 $ 2,284
</TABLE>
<TABLE>
<CAPTION>
NVEST NVEST NVEST
INTERNATIONAL EQUITY FUND STAR ADVISERS FUND STAR SMALL CAP FUND
CLASS C CLASS C CLASS C
(1) (2) (1) (2) (1) (2)
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 505 $ 405 $ 440 $ 340 $ 485 $ 385
3 Years $ 1,034 $ 1,034 $ 840 $ 840 $ 974 $ 974
5 Years $ 1,687 $ 1,687 $ 1,366 $ 1,366 $ 1,587 $ 1,587
10 Years $ 3,431 $ 3,431 $ 2,803 $ 2,803 $ 3,239 $ 3,239
</TABLE>
<TABLE>
<CAPTION>
NVEST NVEST NVEST
STAR VALUE FUND STAR WORLDWIDE FUND BOND INCOME FUND
CLASS C CLASS C CLASS C
(1) (2) (1) (2) (1) (2)
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 411 $ 311 $ 485 $ 385 $ 375 $ 275
3 Years $ 752 $ 752 $ 974 $ 974 $ 641 $ 641
5 Years $ 1,218 $ 1,218 $ 1,587 $ 1,587 $ 1,031 $ 1,031
10 Years $ 2,505 $ 2,505 $ 3,239 $ 3,239 $ 2,123 $ 2,123
</TABLE>
<TABLE>
<CAPTION>
NVEST NVEST NVEST
HIGH INCOME FUND LIMITED TERM U.S. GOVERNMENT FUND SHORT TERM CORPORATE INCOME FUND
CLASS C CLASS C CLASS C
(1) (2) (1) (2) (1) (2)
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 406 $ 306 $ 401 $ 301 $ 367 $ 267
3 Years $ 736 $ 736 $ 721 $ 721 $ 687 $ 687
5 Years $ 1,192 $ 1,192 $ 1,166 $ 1,166 $ 1,131 $ 1,131
10 Years $ 2,453 $ 2,453 $ 2,400 $ 2,400 $ 2,364 $ 2,364
</TABLE>
NVEST
STRATEGIC INCOME FUND
CLASS C
(1) (2)
1 Year $ 399 $ 299
3 Years $ 715 $ 715
5 Years $ 1,156 $ 1,156
10 Years $ 2,379 $ 2,379
SP122-1100
<PAGE>
NVEST KOBRICK INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1999
As Revised November 21, 2000
Kobrick Capital Fund
Kobrick Emerging Growth Fund
Kobrick Growth Fund
This Statement of Additional Information (the "Statement") is not a prospectus.
This Statement relates to the Prospectus of Kobrick Capital Fund, Kobrick
Emerging Growth Fund and Kobrick Growth Fund Classes A, B, and C shares dated
November 1, 1999 as revised July 3, 2000 and the Prospectus of Classes A and Y
shares dated November 1, 1999 as revised August 31, 2000, each as may be
supplemented from time to time (the "Prospectus" or "Prospectuses") and should
be read in conjunction therewith. A copy of the Prospectuses can be obtained
from Nvest Funds Distributor, L.P. (the "Distributor"), 399 Boylston Street,
Boston, Massachusetts 02116.
The Nvest Kobrick Investment Trust's 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.
XK33-1100R
<PAGE>
Nvest Kobrick Investment Trust
101 Federal Street
Boston, Massachusetts 02110
Table of Contents
The Trust 3
Investment Limitations 3
Additional Information Concerning Certain Investment Techniques 5
Debt Instruments and Permitted Cash Investments 11
Quality Ratings of Corporate Bonds and Preferred Stocks 13
Trustees and Officers 15
The Investment Adviser 17
Distribution Agreement and 12b-1 Plans 18
Securities Transactions 23
Portfolio Turnover 24
How to Buy Shares 25
Net Asset Value and Public Offering Price 25
Reduced Sale Charges 26
Shareholder Services 29
Open Accounts 29
Automatic Investment Plans 29
Retirement Plans Offering Tax Benefits 29
Systematic Withdrawal Plans 30
Dividend Diversification Program 31
Exchange Privilege 31
Automatic Exchange Plan 33
Broker Trading Privileges 33
NvestPRO 33
Self-Servicing Your Account 34
Redemptions 36
Standard Performance Measures 38
Investment Performance of the Funds 40
Income Dividends, Capital Gain Distributions and Tax Status 42
Financial Statements 44
Appendix A - Publications That May Contain Fund Information 45
Appendix B - Advertising and Promotional Literature 46
2
<PAGE>
--------------------------------------------------------------------------------
THE TRUST
--------------------------------------------------------------------------------
Nvest 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 Capital Fund, the Kobrick
Emerging Growth Fund and the Kobrick 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.
3
<PAGE>
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
any 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 and commercial paper issued under Section 4(2) of 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.
4
<PAGE>
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.
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION CONCERNING CERTAIN INVESTMENT TECHNIQUES
--------------------------------------------------------------------------------
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. In addition, each Fund may purchase securities offered pursuant to
an initial public offering.
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
5
<PAGE>
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.
6
<PAGE>
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.
7
<PAGE>
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
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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.
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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.
ILLIQUID SECURITIES (RULE 144 AND SECTION 4(2) COMMERCIAL PAPER)
Illiquid securities are those which are not readily resalable, which may
include securities whose disposition is restricted by federal securities laws.
Rule 144A securities are privately offered securities that can be resold only to
certain qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933. Certain Funds may also purchase commercial paper issued
under Section 4(2) of the Securities Act of 1933. Investing in Rule 144A
securities and Section 4(2) commercial paper 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 these securities. Rule
144A securities and Section 4(2) commercial paper are treated as illiquid,
unless the Investment Advisor has determined, under guidelines established by
the Trust's Board of Trustees, that the particular issue of Rule 144A securities
is liquid. Also, a Fund may incur expenses, losses or delays in the process of
registering restricted securities prior to resale, which would have an adverse
effect on the Fund.
SHORT SALES
Each Fund may sell securities short against the box, that is: (1) enter
into short sales of securities that it currently owns or has the right to
acquire through the conversion or exchange of other securities that it owns
without additional consideration; and (2) enter into arrangements with the
broker-dealers through which such securities are sold short to receive income
with respect to the proceeds of short sales during the period the Fund's short
positions remain open. A Fund may make short sales of securities only if at all
times when a short position is open the Fund owns at least an equal amount of
such securities or securities convertible into or exchangeable for, without
payment of any further consideration, securities of the same issue as, and equal
in amount to, the securities sold short.
In a short sale against the box, a Fund does not deliver from its portfolio
the securities sold and does not receive immediately the proceeds from the short
sale. Instead, the Fund borrows the securities sold short from a broker-dealer
through which the short sale is executed, and the broker-dealer delivers such
securities, on behalf of the Fund, to the purchaser of such securities. Such
broker-dealer is entitled to retain the proceeds from the short sale until the
Fund delivers to such broker-dealer the securities sold short. In addition, the
Fund is required to pay to the broker-dealer the amount of any dividends paid on
shares sold short. Finally, to secure its obligation to deliver to such
broker-dealer the securities sold short, the Fund must deposit and continuously
maintain in a separate account with the Fund's custodian an equivalent amount of
the securities sold short or securities convertible into or exchangeable for
such securities without the payment of additional consideration. A Fund is said
to have a short position in the securities sold until it delivers to the
broker-dealer the securities sold, at which time the Fund receives the proceeds
of the sale. A Fund may close out a short position by purchasing on the open
market and delivering to the broker-dealer an equal amount of the securities
sold short, rather than by delivering portfolio securities.
Short sales may protect a Fund against risk of losses in the value of its
portfolio securities because any unrealized losses with respect to such
portfolio securities should be wholly or partially offset by a corresponding
gain in the short position. However, any
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potential gains in such portfolio securities should be wholly or partially
offset by a corresponding loss in the short position. The extent to which such
gains or losses are offset will depend upon the amount of securities sold short
relative to the amount the Fund owns, either directly or indirectly, and, in the
case where the Fund owns convertible securities, changes in the conversion
premium.
Short sale transactions involve certain risks. If the price of the security
sold short increases between the time of the short sale and the time the Fund
replaces the borrowed security, the Fund will incur a loss and if the price
declines during this period, the Fund will realize a short-term capital gain.
Any realized short-term capital gain will be decreased, and any incurred loss
increased, by the amount of transaction costs and any premium, dividend or
interest which the Fund may have to pay in connection with such short sale.
Certain provisions of the Internal Revenue Code of 1986, as amended, (the
"Code") may limit the degree to which a Fund is able to enter into short sales.
There is no limitation on the amount of each Fund's assets that, in the
aggregate, may be deposited as collateral for the obligation to replace
securities borrowed to effect short sales and allocated to segregated accounts
in connection with short sales. No Fund currently expects that more than 5% of
its total assets would be involved in short sales against the box.
INITIAL PUBLIC OFFERINGS
The Funds may purchase securities of companies that are offered pursuant to
an initial public offering ("IPO"). An IPO is a company's first offering of
stock to the public in the primary market typically to raise additional capital.
The Funds may purchase a "hot" IPO (also known as a "hot issue") which is an IPO
that is oversubscribed and, as a result, is an investment opportunity of limited
availability. As a consequence, the price at which these IPO shares open in the
secondary market may be significantly higher than the original IPO price. IPO
securities tend to involve greater risk due, in part, to public perception and
the lack of publicly available information and trading history. There is the
possibility of losses resulting from the difference between the issue price and
potential diminished value of the stock once traded in the secondary market.
Although the Funds will make diligent efforts to research a company prior to
purchasing IPO securities, including reviewing the company's prospectus, there
is no guarantee against significant losses. The Funds' investment in IPO
securities may have a significant impact on a Fund's performance and may result
in significant capital gains.
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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.
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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.
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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 Investors 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.
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QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS
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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.
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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.
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TRUSTEES AND OFFICERS
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The Funds are governed by a Board of Trustees, which is responsible for
generally overseeing the conduct of Fund business and for protecting the
interests of shareholders. The Trustees meet periodically throughout the year to
oversee the Funds' activities, review contractual arrangements with companies
that provide services to the Funds and review the Funds' performance.
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
Sherri A. Brown 33 Treasurer
Richard A. Goldman 39 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.
Sherri A. Brown, 101 Federal Street, Boston, MA 02110, serves as Treasurer of
the Trust. Her principal occupation currently is Chief Financial Officer of
Kobrick Funds LLC. Prior to becoming Chief Financial Officer in June 1999, she
was Director of Accounting at Vinik Asset Management Co. from November 1996 to
June 1999, an operations consultant with Deloitte & Touche LLP from February
1996 to November 1996 and a Vice President at Manchester Growth Fund L.P. from
June 1990 to February 1996.
Richard A. Goldman, 101 Federal Street, Boston, MA 02110, serves as 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.
The Audit Committee of the Trust is comprised of Messrs. Atlas and Paster,
both not interested persons of the Trust (as defined in the 1940 Act)
("Independent Trustees"), and considers matters relating to the scope and
results of the Funds' audits and serves as a forum in which the independent
accountants can raise any issues or problems identified in the audit with the
Board of Trustees. This Committee also reviews and monitors compliance with
stated investment objectives and policies and SEC and IRS regulations.
Each Independent 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
15
<PAGE>
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, 1999, 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 Compensation Pension or Retirement Estimated Annual Total Compensation From
Position From Registrant Benefits Accrued as Benefits Upon Registrant and Fund
Part of Fund Expenses Retirement 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>
As of September 30, 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.
As of September 30, 1999, the officers and Trustees of the Trust as a group
owned less than 1% of the outstanding shares of each Fund.
<TABLE>
<CAPTION>
FUND SHAREHOLDER AND ADDRESS OWNERSHIP PERCENTAGE
<S> <C> <C>
KOBRICK CAPITAL FUND
Cendant Corporation 41.60%
6 Sylvan Way
Parsippany, NJ 07054-3826
National Financial Services Corporation 18.20%
200 Liberty Street
1 World Financial Center
New York, NY 10281-1003
Charles Schwab & Co., Inc. 11.70%
101 Montgomery Street
San Francisco, CA 94104-4122
KOBRICK EMERGING GROWTH FUND
Cendant Corporation 61.80%
6 Sylvan Way
Parsippany, NJ 07054-3826
Charles Schwab & Co., Inc. 15.30%
101 Montgomery Street
San Francisco, CA 94104-4122
16
<PAGE>
National Financial Services Corporation 5.90%
200 Liberty Street
1 World Financial Center
New York, NY 10281-1003
KOBRICK GROWTH FUND
Cendant Corporation 80.57%
6 Sylvan Way
Parsippany, NJ 07054-3826
</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 is part of the investment management arm of France's
Caisse des Depots et Consignations ("CDC"), a major diversified financial
institution which, in turn, is wholly owned by the French Government. Nvest is
owned by CDC Asset Management - North America, which is wholly owned by CDC
Asset Management, a French entity that is part of CDC. Nvest has 18 affiliates
and divisions and $127 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
gross advisory fees payable to the predecessors 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 gross advisory fees payable to the predecessor to the
Investment Adviser (and to the Investment Adviser effective July 7, 1999) during
the Funds' fiscal year ended September 30, 1999, were $780,662, $381,071 and
$295,301 with respect to the Capital Fund, the Emerging Growth Fund and the
Growth Fund, respectively.
Effective November 1, 1999, the Investment Adviser has given a binding
undertaking to the Funds to reduce its management fees and, if necessary, to
bear certain expenses associated with the Funds, through at least January 31,
2001, to the extent necessary to limit the Funds' expenses to the annual rates
set forth below. As set forth in the Prospectus, the Adviser shall be permitted
to recover expenses it has borne after November 1, 1999 in later periods to the
extent that a Fund's expenses fall below the annual rates set forth below;
provided, however, that a Fund is not obligated to pay any such deferred fees
more than one year after the end of any fiscal year in which the fee was
deferred.
NAME OF FUND EXPENSE CAP
------------ -----------
Kobrick Capital Fund 1.50% for Class A shares
2.25% for Class B shares
2.25% for Class C shares
1.25% for Class Y shares
Kobrick Emerging Growth Fund 1.50% for Class A shares
2.25% for Class B shares
2.25% for Class C shares
1.25% for Class Y shares
Kobrick Growth Fund 1.40% for Class A shares
2.15% for Class B shares
2.15% for Class C shares
1.15% for Class Y shares
17
<PAGE>
Prior to November 1, 1999, only one class of each Fund existed and the
Investment Adviser and the predecessors to the Investment Adviser agreed to
reduce the management fee, and if necessary, to bear certain expenses associated
with the Funds, to the extent necessary to limit the expenses to an annual rate
of 1.75%, 1.75% and 1.40% for the Capital Fund, Emerging Growth Fund and the
Growth Fund, respectively. The amount of these voluntary waivers and
reimbursements from the predecessors to the Investment Adviser (and the
Investment Adviser effective July 7, 1999) were as follows:
<TABLE>
<CAPTION>
------------------------------------- ----------------------------------- -----------------------------------
Fiscal period ended 9/30/98 Fiscal year ended 9/30/99
------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
------------------------------------- ----------------------------------- -----------------------------------
Capital Fund $126,253 $17,427
------------------------------------- ----------------------------------- -----------------------------------
------------------------------------- ----------------------------------- -----------------------------------
Emerging Growth Fund $127,193 $126,146
------------------------------------- ----------------------------------- -----------------------------------
------------------------------------- ----------------------------------- -----------------------------------
Growth Fund $23,912 $206,885
------------------------------------- ----------------------------------- -----------------------------------
</TABLE>
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, Nvest Funds Distributor, 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 conducts a continuous offering and 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 Nvest Funds, described in more detail on page 32. Nvest owns the entire
limited partnership interest in the Distributor.
The Distributor is compensated under each agreement through receipt of
the sales charges on Class A and Class C 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 and
18
<PAGE>
Class C 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 each Fund to
pay the Distributor monthly fees out of its 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.
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. For Class A and, after the first year for
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.
This service fee will accrue to securities dealers of record immediately with
respect to reinvested income dividends and capital gain distributions of each
Fund's Class A and Class B shares.
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 affiliates 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 certain employees who are also employees of Nvest Companies
and 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 and its 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.
19
<PAGE>
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 initial 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 distribution expenses incurred during the Funds'
fiscal year ended September 30, 1999 were $195,165, $95,268 and $73,825 for the
Capital Fund, Emerging Growth Fund and Growth Fund, respectively.
The portion of the various fees and expenses for Classes A, B, and with
respect to certain Funds, Class 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 SALES MAXIMUM MAXIMUM MAXIMUM
CHARGE PAID BY REALLOWANCE FIRST YEAR FIRST YEAR
INVESTORS OR COMMISSION SERVICE FEE COMPENSATION
INVESTMENT (% OF OFFERING PRICE)(% OF OFFERING PRICE)(% OF NET INVESTMENT) (% OF OFFERING PRICE)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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%
</TABLE>
(1) For investments by Retirement Plans (Plans under Sections 401(a) or 401(k)
of the 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."
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:
20
<PAGE>
<TABLE>
<CAPTION>
MAXIMUM FRONT-END MAXIMUM FIRST YEAR
SALES CHARGE PAID MAXIMUM REALLOWANCE SERVICE FEE MAXIMUM FIRST YEAR
BY INVESTORS OR COMMISSION (% OF NET COMPENSATION
INVESTMENT (% OF OFFERING PRICE) (% OF OFFERING PRICE) INVESTMENT) (% OF OFFERING PRICE)
<S> <C> <C> <C> <C>
All amounts for Class B None 3.75% 0.25% 4.00%
All amounts for Class C 1.00% 2.00% 0.00% 2.00%
Class C amounts purchased at NAV (1) None 1.00% 0.00% 1.00%
</TABLE>
(1) 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".
Also refers to any Class C share accounts established prior to December 1,
2000.
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 or Class C 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
Nvest 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 or Class C shares, (ii) additional compensation with
respect to the sale of Classes 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 Nvest 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, 1999 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
21
<PAGE>
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 $19.70 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. Prior to October 25, 1999, the
Funds contracted with State Street Bank for these services. In addition, Nvest
Services Company performs certain accounting and administrative services for the
Funds including: (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. For the services
provided by Nvest Services Company to the Trust hereunder, the Trust shall pay
Nvest Services Company the greater of the following: (1) an annual fee payable
in equal monthly installments equal to $70,000 per outstanding Fund; or (2) a
monthly fee (accrued daily) based on the Funds' average daily net assets during
the calendar month, such fee being calculated at the annualized rates set forth
below:
ANNUALIZED FEE RATE
AVERAGE DAILY NET ASSETS AS A % OF AVERAGE DAILY NET ASSETS
------------------------ ----------------------------------
$0 - $100,000,000 0.070%
$100,000,000 - $400,000,000 0.050%
Over $400,000,000 0.030%
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 Nvest Funds Distributor, L.P. have entered into an agreement,
whereby Nvest Funds Distributor, L.P. is providing marketing and sales support
services for the following fee on certain assets:
ASSET RANGE (IN MILLIONS) FEES PAID TO NVEST FUNDS DISTRIBUTOR, L.P.
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
--------------------------------------------------------------------------------
$0 - 1,000 0.20%
1,000 - 2,000 0.35%
Over 2,000 0.30%
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 widespread or as affecting trading markets.
22
<PAGE>
--------------------------------------------------------------------------------
SECURITIES TRANSACTIONS
--------------------------------------------------------------------------------
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 Nvest Funds Distributor, 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.
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<PAGE>
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
years ended September 30, 1998 and 1999 were as set forth below:
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Kobrick Capital Fund $232,149 $1,031,352
Kobrick Emerging Growth Fund $183,965 $279,842
Kobrick Growth Fund $811 $320,297
</TABLE>
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
Messrs. Kobrick and Nance, in addition to serving as senior officers of the
Investment Adviser, are also the portfolio managers (Mr. Kobrick is also a
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, thereby decreasing the Funds' total return. 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%.
The
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<PAGE>
portfolio turnover rate for September 30, 1999 was significantly higher for each
of the Funds due to the unprecedented volatility in the stock market during the
period.
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 Nvest Funds (Kobrick Funds for Class Y shares), 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, 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 Nvest Funds Personal Access Line(R)
(800-225-5478, press 1) or Nvest Funds Web site (www.nvestfunds.com) to purchase
Fund Class A, B and C shares. You may call the Kobrick Funds (1-888-523-8631) to
purchase Fund Class Y 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
--------------------------------------------------------------------------------
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
25
<PAGE>
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 or a
Class C 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 or Y share of a Fund is the next-determined
net asset value.
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REDUCED SALES CHARGES
--------------------------------------------------------------------------------
The following special purchase plans are summarized in the Prospectuses. See
page 32 for a description of the Nvest 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
other Nvest 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 other
Nvest 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
Nvest 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 Nvest Funds over a defined 13-month
period will be large enough to qualify
26
<PAGE>
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 Nvest 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 Nvest 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 Nvest Funds (excluding shares of Nvest Cash Management Trust and
Nvest Tax Exempt Money Market Trust [the "Money Market Funds"] unless the shares
were purchased through an exchange of another Kobrick Fund or Nvest 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 Nvest 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 NVEST 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 Nvest 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 Nvest 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 AS OF OCTOBER 31, 1999 AND CLIENTS OF THE
INVESTMENT ADVISER. Accounts open as of October 31, 1999 that became Class A
shareholders of the relevant Fund and are not subject to applicable sales
charges and may exchange into Class A shares of another Fund or Nvest Fund
without the imposition of a sales charge. No front-end sales charge or
contingent deferred sales charge applies to investments of $25,000 or more in
Class A shares and no front-end sales charge applies to investments of $25,000
or more in Class C shares of the Funds by (1) clients of an adviser or
subadviser to any series of the Kobrick Funds or Nvest Funds; any director,
officer or partner of a client of an adviser or subadviser to any series of the
Kobrick Funds or Nvest 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 Nvest 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 Nvest Funds. Any investor eligible for this arrangement should
so indicate in writing at the time of the purchase.
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<PAGE>
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 Nvest Funds, Nvest Funds Distributor,
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 Nvest 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 Nvest Funds Distributor,
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 and there is no
front-end sales charge related to investments in Class C 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 ADVISORY ACCOUNTS. Class A or Class C 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. Class A or
Class C 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. Class C shares
may be purchased at net asset value by an investor who buys through a Merrill
Lynch omnibus account. However, a CDSC will apply if shares are sold within 12
months of purchase.
CERTAIN RETIREMENT PLANS. Class A or Class C 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. Class A or Class C 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 Nvest Kobrick
Investment Trust, a Massachusetts business trust. The Kobrick Funds are
distributed by Nvest Funds Distributor, L.P., which also serves as the principal
distributor for the Nvest 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 Nvest Funds, including participating in numerous shareholder services and
plans and having the ability to exchange into or out of any Nvest Fund (subject
to applicable restrictions). For purchasers of Class Y shares, certain services
may be different. Such purchasers should call Kobrick Funds at 1-888-523-8631.
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, Class C or Class Y
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
29
<PAGE>
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 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 and Class C 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. See "Redemptions" and "Tax Status" below for certain information as to
federal income taxes.
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 and Class C 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.
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DIVIDEND DIVERSIFICATION PROGRAM (CLASS A, B AND C SHARES)
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 Nvest 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 Nvest
Fund, you must obtain and carefully read a copy of that fund's Prospectus.
EXCHANGE PRIVILEGE
A shareholder may exchange the shares of any Kobrick Fund or Nvest Fund
(except for Class A shares of the Nvest 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 Nvest Fund (subject to the
investor eligibility requirements, if any, of the Kobrick Fund or Nvest 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. Shareholders may also exchange their shares in the Money Market Funds
for shares of the same class of any other Nvest Fund listed below, subject to
those funds' eligibility requirements and sales charges. Class C shares in
accounts of Nvest Cash Management Trust - Money Market Series established on or
after December 1, 2000 may exchange into Class C shares of an Nvest Fund subject
to its sales charge and CDSC schedule. Class C shares in accounts of Nvest Cash
Management Trust - Money Market Series established prior to December 1, 2000 or
that have been previously subject to a front-end sales charge may exchange into
Class C shares of a Nvest Fund without paying a front-end sales charge. 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 (1-888-523-8631 for Class Y shares) 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 Nvest
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 Nvest
Funds or Kobrick Funds which offers Class Y shares. To obtain a prospectus and
more information about Class Y shares, please call Kobrick Funds at
1-888-523-8631.
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 Nvest Funds and the Money Market Funds as set
forth in the respective Prospectuses are as follows:
STOCK FUNDS:
------------
NVEST 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.
NVEST CAPITAL GROWTH FUND seeks long-term growth of capital.
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NVEST VALUE FUND seeks a reasonable long-term investment return from a
combination of market appreciation and dividend income from equity securities.
NVEST BALANCED FUND seeks a reasonable long-term investment return from a
combination of long-term capital appreciation and moderate current income.
NVEST GROWTH AND INCOME FUND seeks opportunities for long-term growth of
capital and income.
NVEST 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.
NVEST STAR ADVISERS FUND seeks long-term growth of capital.
NVEST STAR WORLDWIDE FUND seeks long-term growth of capital.
NVEST STAR SMALL CAP FUND seeks capital appreciation.
NVEST EQUITY INCOME FUND seeks current income and capital growth.
NVEST BULLSEYE FUND seeks long-term growth of capital.
BOND FUNDS:
----------
NVEST 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.
NVEST LIMITED TERM U.S. GOVERNMENT FUND seeks a high current return
consistent with preservation of capital.
NVEST SHORT TERM CORPORATE INCOME FUND seeks a high level of current income
consistent with preservation of capital.
NVEST STRATEGIC INCOME FUND seeks high current income with a secondary
objective of capital growth.
NVEST BOND INCOME FUND seeks a high level of current income consistent with
what the Fund considers reasonable risk.
NVEST HIGH INCOME FUND seeks high current income plus the opportunity for
capital appreciation to produce a high total return.
NVEST 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.
NVEST 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.
NVEST 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)
-------------
NVEST CORE EQUITY FUND seeks long-term capital appreciation by investing
all or substantially all of its assets in The Oakmark Fund.
NVEST 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.
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NVEST SELECT FUND seeks long-term capital appreciation by investing all or
substantially all of its assets in The Oakmark Select Fund.
NVEST SMALL CAP VALUE FUND seeks long-term capital appreciation by
investing all or substantially all of its assets in The Oakmark Small Cap Fund.
Nvest 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.
Nvest 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:
------------------
Nvest Cash Management Trust - Money Market Series seeks maximum current
income consistent with preservation of capital and liquidity.
Nvest 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 Nvest Funds (including the
Kobrick Funds) and the Money Market Funds totaled over $7.5 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 Nvest Funds (including the Kobrick Funds) and
the Money Market 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") (CLASS A, B AND C SHARES)
Fund Shareholders who are clients of broker-dealers that have entered into
an agreement with Nvest 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 Nvest 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
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information on their Nvest 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 Nvest 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 NVEST FUNDS PERSONAL ACCESS LINE(R) AND WEB
SITE (CLASS A, B AND C SHARES)
Shareholders may access account information, including share balances and
recent account activity online, by visiting the Nvest Funds Web site at
www.nvestfunds.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. Nvest 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 Nvest 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 the Web site at www.nvestfunds.com.
Investor activity through these mediums are subject to the terms and conditions
outlined in the following NVEST FUNDS ONLINE AND TELEPHONIC CUSTOMER AGREEMENT.
This agreement is also posted on our Web site. The initiation of any activity
through the Nvest Funds Personal Access Line(R), or Web site at
www.nvestfunds.com by an investor shall indicate agreement with the following
terms and conditions:
NVEST 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 Nvest Funds Personal Access Line(R).
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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 Nvest 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.
Nvest 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 Nvest
Funds makes no warranty as to the correctness, completeness, or the accuracy of
any transmission. Similarly Nvest 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 Nvest 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 Nvest 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 Nvest Funds Personal Access
Line(R) or the Nvest Funds Internet site including telephone line costs, and
Internet service provider costs are solely your responsibility. Similarly Nvest
Funds makes no warranties concerning the availability of Internet services, or
network availability.
Nvest 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 Nvest Funds of your desire to do so.
Written notifications to Nvest Funds should be sent to:
Nvest 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
--------------------------------------------------------------------------------
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 (1-888-523-8631 for Class Y shares). 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
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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 Nvest 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 AND CLASS C SHARES ONLY)
The Prospectus describes redeeming shareholders' reinstatement privileges
for Class A and Class C 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 each Fund that
presents 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. Each Fund 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 Morningstar, Inc. or Lipper, Inc. as having similar investment
objectives or styles.
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.
The Funds may cite their ratings, recognition, or other mention by
Morningstar, Inc. ("Morningstar") or any other entity. Morningstar's rating
system is based on risk-adjusted total return performance and is expressed in a
star-rating format. The risk-adjusted number is computed by subtracting a fund's
risk score (which is a function of the fund's monthly returns less the 3-month
T-bill return) from the fund's load-adjusted total return score. This numerical
score is then translated into rating categories, with the top 10% labeled five
star, the next 22.5% labeled four star, the next 35% labeled three star, the
next 22.5% labeled two star, and the bottom 10% one star. A high rating reflects
either above-average returns or below-average risk or both. Each Fund may also
compare its performance or ranking against all funds tracked by Morningstar or
another independent service, including Lipper, Inc. ("Lipper").
38
<PAGE>
Lipper Indices and Averages are calculated and published by Lipper, an
independent service that monitors the performance of more than 1,000 funds. The
Funds may also use comparative performance as computed in a ranking by Lipper or
category averages and rankings provided by another independent service. Should
Lipper or another service reclassify a Fund to a different category or develop
(and place a Fund into) a new category, that Fund may compare its performance or
ranking against other funds in the newly assigned category, as published by the
service.
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 Advisory subsidiaries of Nvest
Companies, including their portfolio management responsibilities, portfolio
managers and their categories and background; their tenure, investment 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 Advisory organization and allude to or include
excerpts from articles appearing in the media regarding Nvest Companies, its
Advisory subsidiaries and their personnel. For additional information about the
Funds' advertising and promotional literature, see Appendix B.
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>
<CAPTION>
INVESTMENTS AT 8% RATE OF RETURN
5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS
------- -------- -------- -------- -------- --------
<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>
<CAPTION>
INVESTMENTS AT 10% RATE OF RETURN
5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS
------- -------- -------- -------- -------- --------
<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 they relate 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
39
<PAGE>
Funds. Articles, releases, advertising and literature may discuss the range of
services offered by the Trust, 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
Trust 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.
--------------------------------------------------------------------------------
INVESTMENT PERFORMANCE OF THE FUNDS
--------------------------------------------------------------------------------
PERFORMANCE RESULTS - PERCENT CHANGE*
For The Periods Ended 9/30/99
Capital Fund+
<TABLE>
<CAPTION>
Aggregate Average Annual
Total Return Total Return
--------------------------------------- -- -------------------------------
<S> <C> <C> <C>
Since Since
Class A shares: As a % of 1 Year 12/31/97** 12/31/97**
-------------------------- ------ ---------- ----------
Net Asset Value 60.7 72.1 36.4
Maximum Offering Price 51.5 62.2 31.8
Aggregate Average Annual
Total Return Total Return
Since Since
Class B shares: As a % of 1 Year 11/01/99** 11/01/99**
------------------------- ------ ----------- ----------
Net Asset Value 59.9 70.8 35.6
Redemption at End of Period 54.9 66.8 31.6
40
<PAGE>
Aggregate Average Annual
Total Return Total Return
Since Since
Class C shares: As a % of 1 Year 11/01/99** 11/01/99**
------------------------------------------------------------------------------------------------------------------------
Net Asset Value 59.9 70.8 35.6
Redemption at End of Period 58.9 70.8 35.6
Aggregate Aggregate Annual
Total Return Total Return
------------------------------------ --- -------------------------------
Since Since
Class Y shares: As a % of 1 Year 11/01/99** 11/01/99**
------------------------------------------------------------------------------------------------------------------------
Net Asset Value 60.9 72.5 36.6
EMERGING GROWTH FUND+
Aggregate Average Annual
Total Return Total Return
-------------------------------------- --- -------------------------------
Since Since
Class A shares: As a % of 1 Year 12/31/97** 12/31/97**
-------------------------------------------------------------------------------------------------------------
Net Asset Value 63.1 65.4 33.3
Maximum Offering Price 53.7 55.9 28.9
Aggregate Average Annual
Total Return Total Return
-------------------------------------- --- -------------------------------
Since Since
Class B shares: As a % of 1 Year 11/01/99** 11/01/99*
-------------------------------------------------------------------------------------------------------------
Net Asset Value 62.4 64.1 32.6
Redemption at End of Period 57.4 60.4 28.6
Aggregate Average Annual
Total Return Total Return
-------------------------------------- --- -------------------------------
Since Since
Class C shares: As a % of 1 Year 11/01/99** 11/01/99*
-------------------------------------------------------------------------------------------------------------
Net Asset Value 62.4 64.1 32.6
Redemption at End of Period 61.4 64.1 32.6
Aggregate Average Annual
Total Return Total Return
-------------------------------------- --- -------------------------------
Since Since
Class Y shares: As a % of 1 Year 11/01/99** 11/01/99*
-------------------------------------------------------------------------------------------------------------
Net Asset Value 63.4 65.8 33.6
41
<PAGE>
GROWTH FUND+
Aggregate Average Annual
Total Return Total Return
--------------------------------------- --- -------------------------------
Since Since
Class A shares: As a % of 1 Year 9/01/98** 9/01/98**
-----------------------------------------------------------------------------------------------------------------------
Net Asset Value 49.3 54.1 49.1
Maximum Offering Price 40.8 45.3 41.2
Aggregate Average Annual
Total Return Total Return
--------------------------------------- --- ------------------------------
Since Since
Class B shares: As a % of 1 Year 9/01/98** 9/01/98**
-----------------------------------------------------------------------------------------------------------------------
Net Asset Value 48.6 53.3 48.4
Redemption at End of Period 43.6 49.3 44.4
Aggregate Average Annual
Total Return Total Return
-------------------------------------- --- -------------------------------
Since Since
Class C shares: As a % of 1 Year 11/01/99** 11/01/99**
-----------------------------------------------------------------------------------------------------------------------
Net Asset Value 48.6 53.3 48.4
Redemption at End of Period 47.6 53.3 48.4
Aggregate Average Annual
Total Return Total Return
-------------------------------------- --- -------------------------------
Since Since
Class Y shares: As a % of 1 Year 11/01/99** 11/01/99**
-----------------------------------------------------------------------------------------------------------------------
Net Asset Value 49.6 54.4 49.4
</TABLE>
* Federal regulations require this example to be calculated using a $1,000
investment. The normal minimum initial investment in shares of the Funds is
$2,500, however. **Commencement of Fund operations or offering of specified
class of shares.
+ Until November 1, 1999 the Funds had only one class of shares and were
offered without a sales charge. Therefore performance results have been
restated to account for fees and expenses under the Funds' new multiple
class structure.
The foregoing data represent past performance only and are not a prediction as
to the future returns of any Fund. The investment return and principal value of
an investment in any Fund will fluctuate so that the investor's shares, when
redeemed, may be worth more or less than this original cost.
--------------------------------------------------------------------------------
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.
42
<PAGE>
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.
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, if any, 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.
43
<PAGE>
Redemptions and exchanges of each Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions.
Generally, if a shareholder redeems or exchanges shares that have been held for
more than one year, gain or loss realized will be recognized and 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 financial statements and the related report of independent
accountants included in the annual report of the Funds for the fiscal year ended
September 30, 1999 are incorporated by reference.. The Funds' annual and
semiannual reports are available upon request without charge. Shareholders may
request the annual or semiannual report by telephone at (800) 225-5478 or by
writing to the Funds at Nvest Funds Distributor, L.P., 399 Boylston Street,
Boston, Massachusetts 02116.
44
<PAGE>
APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
ABC and affiliates
Adam Smith's Money World
America On Line
Anchorage Daily News
Arizona Republic
Atlanta Constitution
Atlanta Journal
Austin American Statesman
B'nai B'rith Jewish Monthly
Baltimore Sun
Bank Investment Marketing
Barron's
Bergen County Record (NJ)
Bloomberg Business News
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 Business Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas City)
KOA-AM (Denver)
LA Times
Lear's
Leckey, Andrew (syndicated column)
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
45
<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 may include, but is not
limited to, discussions of the following information about both affiliated and
unaffiliated entities:
|X| Specific and general assessments and forecasts regarding U.S. and world
economies, and the economies of specific nations and their impact on the
Kobrick Funds and Nvest Funds;
|X| Specific and general investment emphasis, specialties, fields of expertise,
competencies, operations and functions;
|X| Specific and general investment philosophies, strategies, processes,
techniques and types of analysis;
|X| 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;
|X| The corporate histories, founding dates and names of founders of the
entities;
|X| Awards, honors and recognition given to the entities;
|X| The names of those with ownership interest and the percentage of ownership
interest;
|X| 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;
|X| Current capitalizations, levels of profitability and other financial and
statistical information;
|X| Identification of portfolio managers, researchers, economists, principals
and other staff members and employees;
|X| 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;
|X| Specific and general reference to past and present notable and renowned
individuals including reference to their field of expertise and/or specific
accomplishments;
|X| Current and historical statistics regarding:
-total dollar amount of assets managed
-Kobrick Funds' and Nvest 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;
|X| The general and specific strategies applied by the advisers in the
management of Kobrick Funds and Nvest 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
46
<PAGE>
-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
|X| Specific reference to 360 research (sm), 360 degree research(sm), Kobrick
360(degree) research(sm) and Kobrick 360 degree research(sm) as an approach
that involves meeting with companies' management, employees, customers,
competition and suppliers to determine whether what these people say aligns
with company strategies and objectives.
|X| Specific and general references to portfolio managers and funds that they
serve as portfolio manager of, other than Kobrick Funds and Nvest Funds,
and those families of funds. Any such references will indicate that Kobrick
Funds, Nvest 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 $127
billion of assets under management as of September 30, 1999. In addition,
promotional materials may include:
|X| Specific and general references to Nvest 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
Nvest 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 Nvest Funds' slogan
"Where The Best Minds Meet"(R) and that Nvest 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: Nvest 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.
47
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References may be included in Kobrick Funds or Nvest Funds' advertising
and promotional literature about its 401(k) and retirement plans. The
information may include, but is not limited to:
|X| 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 Nvest Funds may or may not have a
relationship.
|X| Specific and general references to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the Kobrick Funds or
Nvest 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.
|X| 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.
|X| Specific and general discussion of the benefits of 401(k) investment 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.
|X| Specific and general reference to the benefits of investing in mutual funds
for 401(k) and retirement plans, and the Kobrick Funds or Nvest Funds as a
401(k) or retirement plan funding vehicle.
|X| 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.
48
