NVEST COMPANIES TRUST I, 497, 2000-09-06

NVEST COMPANIES TRUST I
497, 2000-09-06

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AEW

[AEW LOGO GOES HERE]

AEW Real Estate Securities Fund

AEW Management and Advisors, L.P.
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Prospectus

September 1, 2000

What's Inside

Goals, Strategies & Risks
Page 2
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-----------------------------------

Fund Fees & Expenses
Page 3
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-----------------------------------

Management Team
Page 5
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-----------------------------------

Fund Services
Page 7
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-----------------------------------

The Securities and
Exchange Commission (the
"SEC") has not approved
the Fund's shares or
determined whether this
Prospectus is accurate
or complete. Anyone who
tells you otherwise is
committing a crime.

For information about the
Fund's services or for
assistance in opening an
account, call the Fund's
Transfer Agent at
877-637-REIT. For
general information
about the Fund, call AEW
at 617-261-9535

AEW Fund
399 Boylston Street, Boston, Massachusetts 02110
877-637-REIT

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TABLE OF CONTENTS

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GOALS, STRATEGIES & RISKS
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AEW Real Estate Securities Fund...............................................2

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FUND FEES & EXPENSES
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Fund Fees & Expenses..........................................................3

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MORE ABOUT RISK
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More About Risk...............................................................4

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MANAGEMENT TEAM
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Meet the Fund's Investment Adviser............................................5
Meet the Fund's Portfolio Manager.............................................5
Adviser's Past Performance....................................................6

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FUND SERVICES
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It's Easy to Open an Account..................................................7
Buying Shares.................................................................8
Selling Shares................................................................8
Selling Shares in Writing.....................................................9
Restrictions on Buying and Selling Shares.....................................10
How Fund Shares Are Priced....................................................11
Dividends and Distributions...................................................12
Tax Consequences..............................................................12
Glossary of Terms.............................................................13

To learn more about the possible risks of investing in the Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Fund may engage. Please read this section carefully
before you invest.

Fund shares are not bank deposits and are not guaranteed, endorsed or insured by
the Federal Deposit Insurance Corporation or any other government agency, and
are subject to investment risks, including possible loss of the principal
invested.

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GOALS, STRATEGIES & RISKS
-------------------------

AEW REAL ESTATE SECURITIES FUND

ADVISER: AEW Management and Advisors, L.P. ("AEW")
MANAGER: Matthew A. Troxell, CFA
CATEGORY: All-Cap Equity
FUND FOCUS
Stability* Income Growth
| |
High | X |
-------------------------
Mod. X | | X
-------------------------
Low | |
| |

* of net asset value relative to
the Fund's asset class

INVESTMENT GOAL
The Fund seeks to provide investors with above-average income and long-term
growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

Under normal market conditions, the Fund will invest at least 65% of its assets
in publicly traded equity securities issued by real estate investment trusts
("REITs") or real estate-related companies. REITs are generally dedicated to
owning, and usually operating, income-producing real estate, or dedicated to
financing real estate. The Fund primarily invests in equity REITs, which own or
lease real estate and derive their income primarily from rental income. Real
estate-related companies are those companies whose principal activity involves
the development, ownership, construction, management or sale of real estate;
companies with significant real estate holdings; and companies that provide
products or services related to the real estate industry.

AEW employs a value-oriented investment strategy designed to identify securities
that are priced below what it believes is their intrinsic value. AEW believes
that ultimately the performance of real estate equity securities is dependent
upon the performance of the underlying real estate assets and company management
as well as the overall influence of capital markets. Consequently, when
selecting securities for the Fund, AEW draws upon the combined expertise of its
real estate, research and securities professionals.

When selecting investments for the Fund, AEW generally considers the following
factors that it believes helps to identify those companies whose shares
represent the greatest value and price appreciation potential:

o VALUATION - AEW has developed a proprietary model to assess the
relative value of each stock in the Fund's investment universe.
This model is designed to estimate what an issuer's anticipated
cash flows are worth to a stock investor (a capital markets
value) and to a direct real estate investor (a real estate
value). The model helps AEW to identify stocks that it believes
trade at discounts to either or both of these model values
relative to similar stocks. AEW will generally sell a security
once it is considered overvalued or when AEW believes that there
is greater relative value in other securities in the Funds
investment universe.

o PRICE - AEW examines the historic pricing of each company in the
Fund's universe of potential investments. Those stocks that have
underperformed in price, either in absolute terms or relative to
the Fund's universe in general, are generally given greater
weight than those that have overperformed.

o INCOME - AEW further evaluates companies and REIT's by analyzing
their dividend yields as well as other factors that influence the
sustainability and growth of dividends. These factors include
cash flow, leverage and payout ratios.

o CATALYSTS - When evaluating a security, AEW also seeks to
identify potential catalysts that, in its opinion, could cause
the marketplace to re-value the security upwards in the near
term. These catalysts can be macro-economic, market-driven or
company-specific in nature.

The Fund may also:

o Hold cash and/or invest up to 100% of its assets in U.S.
government securities or money market instruments for temporary
defensive purposes in response to adverse market, economic or
political conditions. These investments may prevent the Fund from
achieving its investment goal.

PRINCIPAL INVESTMENT RISKS

EQUITY Securities of real estate-related companies and REITs in which
SECURITIES: the Fund may invest may be considered equity securities, thus
subjecting the Fund to market risks. This means that you may
lose money on your investment due to sudden, unpredictable drops
in value or periods of below-average performance in a given stock
or in the stock market as a whole.

REAL Because the Fund concentrates its investments in the real estate
ESTATE industry, the Fund's performance will be dependent in part on the
SECURITIES/ performance of the real estate market and the real estate
REITS industry in general. The real estate industry is particularly
sensitive to economic downturns. Securities of companies in the
real estate industry, including REITs, are sensitive to factors
such as changes in real estate values, property taxes, interest
rates, cash flow of underlying real estate assets, occupancy
rates, government regulations affecting zoning, land use and
rents, and the management skill and creditworthiness of the
issuer. Companies in the real estate industry may also be subject
to liabilities under environmentaland hazardous waste laws. In
addition, the value of a REIT is affected by changes in the value
of the properties owned by the REIT or securing mortgage loans
held by the REIT. REITs are dependent upon cash flow from their
investments to repay financing costs and the ability of the
REITs' managers. The Fund will indirectly bear its proportionate
share of expenses, including management fees, paid by each REIT
in which it invests in addition to the expenses of the Fund.

SMALL-CAP Companies in the real estate industry, including REITs, in which
COMPANIES: the Fund may invest may have relatively small market
capitalizations. Small-cap companies and REITs, which AEW
considers to be those with market capitalizations of $1 billion
or less, tend to have more limited markets and resources than
companies with a larger market capitalization. Consequently,
share prices of small-cap companies and REITs can be more
volatile than, and perform differently from, larger company
stocks.

2
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FUND FEES AND EXPENSES

The following tables describe the fees and expenses that you may pay if you buy
and hold shares of the Fund.

SHAREHOLDER FEES
(fees paid directly from your investment)

Maximum deferred sales charge (load) None
Redemption fees None*

* Generally, a transaction fee will be charged for expedited payment of
redemption proceeds such as by wire or overnight delivery.

ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, as a percentage of average net
assets)

----------------------------------------------- -----------------------------
REAL ESTATE SECURITIES FUND
----------------------------------------------- -----------------------------
Management Fees 0.80%
Distribution and/or Service (12b-1) Fees 0.00%
Other Expenses* 40.00%
Total Annual Fund Operating Expenses 40.80%
Fee Waiver/Expense Reimbursement 39.55%**
Net Expenses 1.25%

* Other expenses are based on estimated amounts for the current fiscal year.

** AEW has given a binding undertaking to the Fund to limit the amount of its
total fund operating expense to 1.25% of the Fund's total net assets. This
binding undertaking will be in effect until January 31, 2002 and will be
reevaluated on an annual basis thereafter.

EXAMPLE
This example, which is based on the net expenses* shown above, is intended to
help you compare the cost of investing in the Fund with the cost of investing in
other mutual funds.

The example assumes that:

o You invest $10,000 in the Fund for the time periods indicated;

o Your investment has a 5% return each year; and

o The Fund's operating expenses remain the same.

Although your actual costs and returns may be higher or lower, based on these
assumptions your costs would be:

* The Examples are based on the Net Expenses shown above for the first
seventeen months of the period illustrated in the Example, and on the Total
Annual Fund Operating Expenses for the remaining years.

3
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MORE ABOUT RISK
The principal investment strategies of the Fund come with inherent risks. The
following is a list of risks to which the Fund may be subject by investing in
various types of securities or engaging in various practices.

MARKET RISK The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably, based upon a change in an issuer's
financial condition as well as overall market and economic conditions.

MANAGEMENT RISK The risk that a strategy used by the Fund's portfolio management
may fail to produce the intended result.

CREDIT RISK The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation.

INTEREST RATE RISK The risk of market losses attributable to changes in interest
rates. A rise in interest rates typically causes a fall in value. Rising
interest rates may cause investors in REITs or real estate operating companies
to demand a higher annual yield, which may in turn decrease market prices for
equity securities issued by REITs or real estate operating companies. Rising
interest rates also generally increase the costs of obtaining financing, which
could cause the value of the Fund's investments to decline. Also, during periods
of declining interest rates, many mortgages may be refinanced, which may reduce
the yield from REITs that invest primarily in loans secured by real estate and
generally derive their income primarily from interest payments on its mortgage
loans.

INFORMATION RISK The risk that key information about a security is inaccurate or
unavailable.

OPPORTUNITY RISK The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments.

LIQUIDITY RISK The risk that certain securities may be difficult or impossible
to sell at the time and at the price that the seller would like. This may result
in a loss or may otherwise be costly to the Fund.

VALUATION RISK The risk that the Fund has valued certain securities at a higher
price than it can sell them for.

PREPAYMENT RISK The risk that unanticipated prepayments may occur, reducing the
value of mortgage- or asset-backed securities or REITs.

POLITICAL RISK The risk of losses directly attributable to government or
political actions.

4
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MANAGEMENT TEAM
---------------

MEET THE FUND'S INVESTMENT ADVISER

AEW MANAGEMENT AND ADVISORS, L.P.

AEW, located at World Trade Center East, Two Seaport Lane, Boston, Massachusetts
02210, serves as the adviser to the Fund. AEW, together with other AEW advisor
affiliates, manages approximately $6 billion of client capital as of June 30,
2000. The Fund is distributed through Nvest Funds Distributor, L.P. (the
"Distributor"). AEW and the Distributor are subsidiaries of Nvest Companies,
L.P. ("Nvest Companies"), which is part of an affiliated group including Nvest,
L.P., a publicly traded company listed on the New York Stock Exchange (the
"Exchange"). As of June 30, 2000, Nvest Companies' 18 principal subsidiary or
affiliated asset management firms, collectively, had more than $130 billion in
assets under management. AEW manages the Fund's investments and also provides
general business management and administration to the Fund. It is currently
anticipated that AEW will convert from a limited partnership into a limited
liability company subsequent to the launch of the Fund. It is anticipated that
this conversion will occur in the fourth quarter of 2000.

The Fund pays advisory fees at the annual rate of 0.80% of the first $500
million of the Fund's average daily net assets and 0.75% of such assets in
excess of $500 million.

Nvest Companies and Nvest, L.P. have entered into an agreement for CDC Asset
Management to acquire all of their outstanding partnership units. CDC Asset
Management is the investment management arm of France's Caisse des Depots et
Consignations ("CDC"), a major diversified financial institution. It is expected
that after the transaction Nvest Companies will be renamed CDC Asset Management
- North America and will continue to use the holding company structure. Nvest
affiliates, including AEW, are expected to retain their investment independence,
brand names, management and operating autonomy. The transaction is not expected
to affect the daily operations of the Fund or the investment management
activities of AEW. Consummation of the transaction with CDC is subject to a
number of conditions, including regulatory approvals and approval of the
unitholders of Nvest, L.P. and Nvest Companies. Under the Investment Company Act
of 1940, the transaction will result in a change of control of AEW's parent
company, Nvest Companies, and, therefore, the Fund's advisory agreement with AEW
will terminate. Consequently, it is anticipated that AEW will seek approval of a
new advisory agreement from the Fund's Board of Trustees and sole shareholder
prior to consummation of the transaction, which is expected to close in the
fourth quarter of 2000.

PORTFOLIO TRADES
In placing portfolio trades, AEW may use brokerage firms that market the Fund's
shares or are affiliated with Nvest Companies or AEW. In placing trades, AEW
will seek to obtain the best combination of price and execution, which involves
a number of judgmental factors. Such portfolio trades are subject to applicable
regulatory restrictions and related procedures adopted by the Fund's Board of
Trustees.

MEET THE FUND'S PORTFOLIO MANAGER

MATTHEW A. TROXELL, CFA
Matthew Troxell has managed the Fund since its inception. Mr. Troxell joined AEW
in 1994 and is a Director of the company. Prior to joining AEW, Mr. Troxell was
a Vice President and Assistant to the President of Landmark Land Company, and an
equity analyst at A.G. Becker Paribas. He also holds the designation of
Chartered Financial Analyst (CFA) and is a member of the National Association of
Real Estate Investment Trusts (NAREIT). Mr. Troxell earned a B.A. from Tufts
University and has over 19 years of experience in investment analysis and
portfolio management.

5
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MANAGEMENT TEAM
---------------
MEET THE FUND'S INVESTMENT ADVISER

ADVISER'S PAST PERFORMANCE

The account returns shown below represent composite returns derived from
performance data furnished by AEW ("AEW Composite") relating to all accounts
managed by AEW Capital Management, L.P. with substantially similar investment
objectives, strategies and policies as the Fund (the "Accounts"). (AEW is a
wholly-owned subsidiary of AEW Capital Management, L.P.). Matthew Troxell, the
Fund's portfolio manager, has been the lead manager for the Accounts since July
1999.

The Accounts have not been subject to the same types of expenses to which the
Fund is subject nor to the diversification requirements, investment limitations
and other restrictions to which the Fund is subject under the Investment Company
Act and the Internal Revenue Code. The Accounts' performance results may have
been less favorable had they been subject to these expenses or restrictions or
to other restrictions applicable to investment companies under relevant laws.
THE INFORMATION REGARDING THE PERFORMANCE OF THE ACCOUNTS DOES NOT REPRESENT THE
FUND'S PERFORMANCE. SUCH INFORMATION SHOULD NOT BE CONSIDERED A PREDICTION OF
THE FUTURE PERFORMANCE OF THE FUND. THE FUND IS NEWLY ORGANIZED AND HAS NO
PERFORMANCE RECORD OF ITS OWN.

The table below shows the average annual total return of the Accounts managed by
AEW Capital Management, L.P. for the one year period ending June 30, 2000. The
Account returns are also compared against the Morgan Stanley REIT Index. The
past performance data for the Accounts has been adjusted to reflect the
management fees and other expenses actually paid by the Accounts and assumes the
reinvestment of all dividends and distributions. THE FEES AND EXPENSES PAID BY
THE FUND WILL BE HIGHER THAN THE FEES AND EXPENSES PAID BY THE ACCOUNTS. THE
PERFORMANCE OF THE ACCOUNTS WOULD HAVE BEEN LOWER THAN THAT SHOWN BELOW IF THEY
HAD BEEN SUBJECT TO THE FEES AND EXPENSES OF THE FUND.

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1)
(for the period ended June 30, 2000)
--------------------------------------------------------------------------------
1 YEAR
--------------------------------------------------------------------------------
AEW ACCOUNTS 6.88%
--------------------------------------------------------------------------------
MORGAN STANLEY
REIT INDEX 3.37%
--------------------------------------------------------------------------------

1. Average Annual Total Return: The AEW Composite consists of all client
accounts whose portfolios were managed by Matthew Troxell at AEW Capital
Management, L.P. from July 1, 1999 until June 30, 2000 using investment
policies and strategies substantially similar to those that will be used to
manage the Fund. The average annual total return for the Accounts was
calculated using a time-weighted rate of return, which differs in part from
the proscribed formula used by mutual funds to calculate their returns. The
Morgan Stanley REIT Index is a market capitalization-weighted, unmanaged,
total-return index of REITs that meet certain liquidity requirements. The
index was designed to track the total-return performance of a broad group
of REIT stocks assuming dividend reinvestment in the index.

6
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FUND SERVICES
-------------

IT'S EASY TO OPEN AN ACCOUNT

TO OPEN AN ACCOUNT WITH AEW:

1. Read this Prospectus carefully.

2. Read the following eligibility and minimum investment requirements to
determine who may purchase shares of the Fund:

To invest in the Fund, the minimum initial investment is $2,500 and the
minimum subsequent investment is $100, except as indicated below.

There is no initial or subsequent investment minimum for:

o EMPLOYEES OF AEW.

o RETIREMENT PLANS (401(a), 401(k), 457 or 403(b) plans) that meet
certain total investment asset minimums. Your 401(k) or other
retirement plan will provide shareholder services to you as
required in accordance with your plan agreement. You should
contact your plan sponsor or service provider for information
about the services available to you under the terms of your plan.

o INSURANCE COMPANY ACCOUNTS of New England Financial, Metropolitan
Life Insurance Company ("MetLife") or their affiliates.

o SEPARATE ACCOUNTS of New England Financial, MetLife or their
affiliates.

o WRAP FEE PROGRAMS of certain broker-dealers not being paid by the
Fund, AEW or the Distributor. Such wrap fee programs may be
subject to additional or different conditions, including a wrap
account fee. Each broker-dealer is responsible for transmitting
to its customer a schedule of fees and other information
regarding any such conditions.

o CERTAIN SERVICE ACCOUNTS through an omnibus account by investment
advisers, financial planners, broker-dealers or other
intermediaries who have entered into a service agreement with the
Fund. A fee may be charged to shareholders purchasing through a
service account if they effect transactions through such parties
and should contact such parties regarding information regarding
such fees.

3. You should contact the Fund's transfer agent, Nvest Services Company, Inc.
("Transfer Agent"), at 877-637-REIT before attempting to purchase Fund
shares.

4. Use the following sections as your guide for purchasing shares.

7
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FUND SERVICES
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BUYING SHARES

OPENING AN ACCOUNT ADDING TO AN ACCOUNT
--------------------------- -------------------------------------------------

BY MAIL
o Make out a check in o Make out a check in
U.S. dollars for the U.S. dollars for the
investment amount, the investment amount,
payable to "AEW Fund." payable to "AEW Fund."

o Note: Cash, drafts, starter o Note: Cash, drafts, starter
checks, third party checks or checks, third party checks or
checks drawn on banks outside checks drawn on banks outside
of the U.S. or purchase orders of the U.S. or purchase
specifying a particular purchase orders specifying a
date or price per share will particular purchase date or
not be accepted. price per share will not
be accepted.
o Mail the check with your
completed application to o Include with the check a
AEW Fund, P.O. Box 8062, letter specifying the Fund
Boston, MA 02266-8062 name, your account number and
Attention: T.A. Ops the registered account
name(s). Mail the check with
the letter to AEW Fund, P.O.
Box 8062, Boston, MA
02266-8062 Attention:
T.A. Ops

BY WIRE

o Call 877-637-REIT to obtain o Instruct your bank to
wire transfer instructions. transfer funds to State
Street Bank & Trust Company,
ABA#011000028, DDA#99054967.

o Specify the Fund name, your
account number and the
registered account name(s).
Your bank may charge you for
such a transfer.

SELLING SHARES
TO SELL SOME OR ALL OF YOUR SHARES
Certain restrictions may apply. See the section entitled "Restrictions on Buying
and Selling Shares" below.

BY MAIL

o Write a letter to request a redemption specifying the name of the
Fund, your account number, the exact registered account name(s), the
number of shares or the dollar amount to be redeemed and the method by
which you wish to receive your proceeds. Additional materials may be
required. See the section entitled "Selling Shares in Writing" below.

o The request must be signed by all of the owners of the shares
including the capacity in which they are signing, if appropriate.

o Mail your request by REGULAR mail to: AEW Fund, P.O. Box 8062,
Boston, MA 02266-8062 Attention: T.A. Ops or by REGISTERED, EXPRESS OR
CERTIFIED mail to: AEW Funds, 66 Brooks Drive, Braintree, MA 02184.

o Your proceeds will be delivered by the method chosen in your letter.
If you choose to have your proceeds delivered by mail, they will
generally be mailed to you on the business day after the request is
received. You may also choose to redeem by wire (see below).

BY WIRE

o Fill out the "Telephone Withdrawal" and "Bank Information" sections on
your account application.

o Call 877-637-REIT or indicate in your redemption request letter (see
above) that you wish to have your proceeds wired to your bank.

o Proceeds will generally be wired on the next business day. A wire fee
(currently $5.00) will be deducted from the proceeds.

BY TELEPHONE

o You may receive your proceeds by mail or by wire (see above).

o Call 877-637-REIT to choose the method you wish to use to redeem your
shares.

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FUND SERVICES
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SELLING SHARES IN WRITING

If you wish to redeem your shares in writing, all owners of the shares must sign
the redemption request in the exact names in which the shares are registered and
indicate any special capacity in which they are signing. In certain situations,
we also may require a signature guarantee or additional documentation.

A signature guarantee protects you against fraudulent orders and is necessary
if:

o Your address of record has changed within the past 30 days;
o You are selling more than $100,000 worth of shares and you are requesting
the proceeds by check; or
o A proceeds check for any amount is mailed to an address other than the
address of record or not payable to registered owner(s).

A notary public cannot provide a signature guarantee. A signature guarantee can
be obtained from one of the following sources:

o A financial representative or securities dealer;
o A federal savings bank, cooperative or other type of bank;
o A savings and loan or other thrift institution;
o A credit union; or
o A securities exchange or clearing agency.

9
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FUND SERVICES
-------------

RESTRICTIONS ON BUYING AND SELLING SHARES

PURCHASE RESTRICTIONS
Although the Fund does not anticipate doing so, it reserves the right to suspend
or change the terms of purchasing shares. The Fund reserves the right to refuse
or limit any purchase order by a particular purchaser (or group of related
purchasers) if the transaction is deemed harmful to the best interest of the
Fund's other shareholders or would disrupt the management of the Fund.

SELLING RESTRICTIONS
The table below describes restrictions placed on selling shares of the Fund:

--------------------------------------------------------------------------------
RESTRICTION SITUATION
--------------------------------------------------------------------------------

The Fund may suspend the right o When the Exchange is closed
of redemption or postpone payment (other than a weekend/holiday);
for more than 7 days: o During an emergency; or
o Any other period permitted by
the SEC.

The Fund reserves the right to o With a notice of a dispute
suspend account services or between registered owners; or
refuse transaction requests: o Suspicion/evidence of a
fraudulent act.

The Fund may pay the redemption o When it is detrimental for the
price in whole or part by a Fund to make cash payments as
distribution in kind of readily determined in the sole discretion
marketable securities in lieu of of AEW.
cash or may take up to 7 days to
pay a redemption request in order
to raise capital:

The Fund may withhold redemption o Redemptions of shares purchased
proceeds until the check or funds by check within 10 calendar days
have cleared (which may take up of such purchase.
to 15 days):

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

SMALL ACCOUNT REDEMPTION
When the Fund account falls below a set minimum (currently $1,000 as set by the
Fund's Board of Trustees), the Fund may close your account and send you the
proceeds. You will have 60 days after being notified of the Fund's intention to
close your account to increase its amount to the set minimum. This does not
apply to certain qualified retirement plans or accounts that have fallen below
the minimum solely because of fluctuations in the Fund's net asset value per
share.

CERTIFICATES
You will not receive certificates representing Fund shares.

10
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FUND SERVICES
-------------

HOW FUND SHARES ARE PRICED

"Net asset value" is the price of one share of the Fund without a sales charge
and is calculated each business day using this formula:

TOTAL VALUE OF SECURITIES + CASH AND OTHER ASSETS - LIABILITIES
NET ASSET VALUE = --------------------------------------------------------------
NUMBER OF OUTSTANDING SHARES

The net asset value of Fund shares is determined according to this schedule:

o A share's net asset value is determined at the close of regular trading on
the New York Stock Exchange (the "Exchange") on the days it is open for
trading. This is normally 4:00 p.m. Eastern time.

o The price you pay for purchasing or redeeming a share will be based upon
the net asset value next calculated after your order is received by the
Fund's Transfer Agent.

o Requests received by the Transfer Agent after the Exchange closes will be
processed based upon the net asset value determined at the close of regular
trading on the next day that the Exchange is open.

o If the Fund is heavily invested in foreign securities, it may have net
asset value changes on days when you cannot buy or sell its shares.

Generally, Fund securities are valued as follows:

o EQUITY SECURITIES - most recent sales or quoted bid price or as provided
by a pricing service if a sales or quoted bid price is unavailable.

o DEBT SECURITIES (OTHER THAN SHORT-TERM OBLIGATIONS) - based upon pricing
service valuations, which are determined for normal, institutional-size
trading units of such securities using market information, transactions for
comparable securities and various relationships between securities that are
generally recognized by institutional traders.

o SHORT-TERM OBLIGATIONS (REMAINING MATURITY OF LESS THAN 60 DAYS) -
amortized cost (which approximates market value).

o SECURITIES TRADED ON FOREIGN EXCHANGES - most recent sale/bid price on a
non-U.S. exchange, unless an occurrence after the closing of the exchange
will materially affect its value. In that case, the security is assigned a
fair value as determined by or under the direction of the Board of Trustees
at the close of regular trading on a U.S. exchange.

o OPTIONS - last sale price, or if not available, last offering price.

o FUTURES - unrealized gain or loss on the contract using current settlement
price. When a settlement price is not used, futures contracts will be
valued at their fair value as determined by or under the direction of the
Fund's Board of Trustees.

o ALL OTHER SECURITIES - fair market value as determined by or under the
direction of the Fund's Board of Trustees.

The effect of fair value pricing as described above under "Securities traded on
foreign exchanges" and "All other securities" is that securities may not be
priced on the basis of quotations from the primary market in which they are
traded, but, rather, may be priced by another method that the Board of Trustees
believes accurately reflects fair value.

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FUND SERVICES
-------------

DIVIDENDS AND DISTRIBUTIONS

The Fund generally distributes most or all of its net investment income (other
than long-term capital gains) in the form of dividends on a quarterly basis. The
Fund distributes all net realized long- and short-term capital gains annually,
after applying any available capital loss carryovers. The Fund's Board of
Trustees may adopt a different schedule as long as payments are made at least
annually.

Depending on your investment goals and priorities, you may choose to reinvest
distributions from dividends, interest and capital gains in additional shares of
the Fund at net asset value or you may receive all distributions in cash. If you
do not indicate how you wish to receive your distributions, they will
automatically be reinvested in shares of the Fund at net asset value. For more
information or to change your distribution option, contact the Fund's Transfer
Agent in writing or call 877-637-REIT.

If you earn more than $10 annually in taxable income you will receive a Form
1099 to help you report the prior calendar year's distributions on your federal
income tax return. Be sure to keep the 1099 as a permanent record. A fee may be
charged for any duplicate information requested.

TAX CONSEQUENCES

The Fund intends to meet all requirements of the Internal Revenue Code necessary
to qualify as a "regulated investment company" and thus does not expect to pay
any federal income tax on income and capital gains distributed to shareholders.

Fund distributions paid to you either in cash or reinvested in additional shares
are generally taxable to you either as ordinary income or as capital gains.
Distributions derived from short-term capital gains or investment income are
generally taxable at ordinary income rates. If you are a corporation investing
in the Fund, a portion of these dividends may qualify for the dividends-received
deduction provided that you meet certain holding period requirements. Any
distributions received by the Fund from REITs will not qualify, however, for the
corporate dividends-received deduction. Distributions of gains from investments
that the Fund owned for more than one year that are designated by the Fund as
capital gain dividends will generally be taxable to a shareholder receiving such
distributions as long-term capital gains, regardless of how long the shareholder
has held Fund shares.

Any gain resulting from the sale of Fund shares will generally be subject to
tax. If you purchase shares of the Fund shortly before it declares a capital
gain distribution or a dividend, a portion of the purchase price may be returned
to you as a taxable distribution.

Dividends derived from interest on securities issued by the U.S. government or
its agencies or instrumentalities may be exempt from state and local income
taxes. The Fund advises shareholders of the proportion of the Fund's dividends
that are derived from such interest. Also, REITs attempt to qualify for
beneficial tax treatment by distributing 95% of their taxable income to their
interest holders. If a REIT fails to qualify for such beneficial tax treatment,
it would be taxed as a corporation, and distributions to its shareholders
(including the Fund) would bear not only a proportionate share of the expenses
of the Fund, but also, indirectly, similar expenses of the REIT. The Fund's
investments in REIT equity securities may require the Fund to accrue and
distribute income not yet received or may result in the Fund making
distributions that constitute a return of capital to Fund shareholders for
federal income tax purposes. You should consult your tax adviser about any
federal, state and local taxes that may apply to the distributions you receive.

12
<PAGE>

[GRAPHIC OMITTED]

GLOSSARY OF TERMS

BID PRICE - The price a prospective buyer is ready to pay. This term is used by
traders who maintain firm bid and offer prices in a given security by standing
ready to buy or sell security units at publicly quoted prices.

CAPITAL GAIN DISTRIBUTIONS - Payments to the Fund's shareholders of profits
earned from selling securities in the Fund's portfolio. Capital gain
distributions are usually paid once a year.

DIVERSIFICATION - The strategy of investing in a wide range of securities
representing different market sectors to reduce the risk if an individual
company or sector suffers losses.

DIVIDEND YIELD - The current or estimated annual dividend divided by the market
price per share of a security.

FFO MULTIPLE - The price per share of a REIT divided by its Funds from
Operations (FFO). The FFO of a REIT is the measure of its operating performance
showing its net income plus depreciation of real estate and excluding gains or
losses from sales of property or debt restructuring.

INCOME DISTRIBUTIONS - Payments to the Fund's shareholders resulting from the
net interest or dividend income earned by the Fund's portfolio.

INFLATION - A general increase in prices coinciding with a fall in the real
value of money, as measured by the Consumer Price Index.

INTEREST RATE - Rate of interest charged for the use of money, usually expressed
at an annual rate.

MARKET CAPITALIZATION - The market price of a company's shares multiplied by the
number of shares outstanding. Large capitalization companies generally have over
$5 billion in market capitalization; medium capitalization companies between
$1.5 billion and $5 billion; and small capitalization companies less than $1.5
billion. These capitalization figures may vary depending upon the index and/or
the guidelines used by the adviser.

MATURITY - The final date on which the payment of a debt instrument (e.g.,
bonds, notes, and repurchase agreements) becomes due and payable. Short-term
bonds generally have maturities of up to 5 years; intermediate-term bonds
between 5 and 15 years; and long-term bonds over 15 years.

NET ASSET VALUE - The market value of one share of a mutual fund on any given
day without a front-end sales charge or contingent deferred sales charge. It is
determined by dividing a fund's total net assets by the number of shares
outstanding. See "How Fund Shares are Priced" above.

TOTAL RETURN - The change in value of a mutual fund investment over a specific
time period expressed as a percentage. Total returns assume all earnings are
reinvested in additional shares of the Fund.

VALUE INVESTING - A relatively conservative investment approach that focuses on
companies that may be temporarily out of favor or whose earnings or assets are
not fully reflected in their stock prices. Value stocks will tend to have a
lower price-to-earnings ratio than growth stocks.

VOLATILITY - The general variability of a portfolio's value resulting from price
fluctuations of its investments. In most cases, the more diversified a portfolio
is, the less volatile it will be.

YIELD - The rate at which a fund earns income, expressed as a percentage. Mutual
fund yield calculations are standardized, based upon a formula developed by the
SEC.

13
<PAGE>

[GRAPHIC OMITTED]

IF YOU WOULD LIKE MORE INFORMATION ABOUT
THE FUND, THE FOLLOWING DOCUMENT IS
AVAILABLE FREE UPON REQUEST:

STATEMENT OF ADDITIONAL INFORMATION
(SAI) - The SAI provides more detailed
information about the Fund and its
investment limitations and policies,
has been filed with the SEC and is
incorporated into this Prospectus by
reference.

AEW REAL ESTATE SECURITIES FUND
TO ORDER A FREE COPY OF THE FUND'S SAI,
CONTACT THE FUND'S TRANSFER AGENT AT:

Nvest Services Company, Inc.
399 Boylston Street
Boston, Massachusetts 02116
Telephone: 877-637-REIT

The Transfer Agent will also assist
you with questions and will provide
additional information that you may
require.

You can review the Fund's SAI at the
SEC's Public Reference Room in
Washington, D.C. Information on the
operation of the Public Reference Room
may be obtained by calling the SEC at
202-942-8090. The SAI and other
information about the Fund are available
on the EDGAR database on the SEC's
website at www.sec.gov.

Copies of these publications are also
available after payment of a duplication
fee by electronic request at the
following e-mail address:
[email protected], or by writing the
Public Reference Room of the SEC,
Washington, D.C. 20549-0102.

The Distributor and other firms selling
shares of the Fund are members of the
National Association of Securities
Dealers, Inc. ("NASD"). As a service to
investors, the NASD has asked that we
inform you of the availability of a
brochure on its Public Disclosure
Program. The program provides access to
information about securities firms and
their representatives. Investors may
obtain a copy by contacting the NASD at
800-289-9999 or by visiting their Web
site at www.NASDR.com.

(Investment Company Act File No. 811-09945)

<PAGE>

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

AEW REAL ESTATE SECURITIES FUND

STATEMENT OF ADDITIONAL INFORMATION
September 1, 2000

This Statement of Additional Information (the "Statement") contains
information that may be useful to investors, but which is not included in the
Prospectus of the AEW Real Estate Securities Fund (the "Fund"). This Statement
is not a prospectus and is authorized for distribution only when accompanied or
preceded by the Prospectus of the Fund dated September 1, 2000. The Statement
should be read together with the Prospectus. Investors may obtain a free copy of
the Prospectus from the Fund's transfer agent, Nvest Services Company, Inc.
("Transfer Agent"), by writing to AEW Fund, 399 Boylston Street, Boston, MA
02116 or by calling 877-637-REIT. The Fund is a diversified fund of Nvest
Companies Trust I, a registered open-end management investment company (the
"Trust").

TABLE OF CONTENTS
Page

Investment Restrictions 1
Fund Charges and Expenses 2
Ownership of Fund Shares 3
Miscellaneous Investment Practices 3
Management of the Trust 8
Portfolio Transactions and Brokerage 13
Description of the Trust and Ownership of Shares 14
How to Buy Shares 15
Net Asset Value 16
Shareholder Services 17
Redemptions 17
Standard Performance Measures 18
Income Dividends, Capital Gain Distributions and Tax Status 21
Financial Statements 24
Appendix A - Description of Bond Ratings 29
Appendix B - Publications That May Contain 31
Fund Information
Appendix C - Advertising and Promotional 34
Literature

i
<PAGE>
--------------------------------------------------------------------------------

INVESTMENT RESTRICTIONS

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

The following is a description of restrictions on the Fund's investments.
Except in the case of those restrictions marked with a dagger (+) below, the
percentages set forth below and the percentage limitations set forth in the
Prospectus will apply at the time of the purchase of a security and shall not be
considered violated unless an excess or deficiency occurs or exists immediately
after and as a result of a purchase of such security.

Fundamental Restrictions
The following restrictions may not be changed without the vote of a majority of
the outstanding voting securities of the Fund (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act")).

The Fund may not:

(1) with respect to 75% of the Fund's total assets, purchase the securities of
any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities ("U.S. Government
Securities")) if, as a result, (a) more than 5% of the Fund's total assets
would be invested in the securities of that issuer, or (b) the Fund would
hold more than 10% of the outstanding voting securities of that issuer;

(2) purchase the securities of any issuer (other than U.S. Government
Securities) if, as a result, 25% or more of the Fund's total assets would
be invested in the securities of companies whose principal business
activities are in the same industry, except that the Fund will invest 25%
or more of its total assets in securities of companies primarily engaged in
the real estate industry;

(3) issue senior securities, except as otherwise permitted by the 1940 Act;

(4)+ borrow money or pledge its assets; provided, however, that the Fund may
borrow money as a temporary measure for extraordinary or emergency purposes
or to meet redemptions, in amounts not exceeding 33 1/3% of its total
assets and pledge its assets to secure such borrowings; and, provided,
further, that the Fund will not purchase any additional portfolio
securities at any time that its borrowings exceed 5% of its total
assets; for the purpose of this restriction, collateral arrangements with
respect to the writing of options, interest rate futures contracts, options
on interest rate futures contracts, and collateral arrangements with
respect to initial and variation margin are not deemed to be a pledge of
assets and neither such arrangements nor the purchase or sale of futures or
related options are deemed to be the issuance of a senior security;

(5) underwrite securities of other issuers except insofar as the Fund may be
deemed an underwriter under the Securities Act of 1933, as amended (the
"1933 Act") in the disposition of restricted securities;

(6) purchase and sell real estate unless acquired as a result of ownership of
securities or other instruments; provided, however, that this limitation
shall not prevent the Fund from investing in securities or other
instruments backed by real estate or securities of companies engaged in the
real estate business;

(7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments; provided, however, that this
limitation shall not prevent the Fund from purchasing or selling options
and futures contracts or from investing in securities or other instruments
backed by physical commodities; or

(8) lend any portfolio security or make any other loan, if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, it being
understood that this limitation does not apply to purchases of debt
securities or to repurchase agreements.

The Fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its assets in the securities of a single open-end
management investment company managed by AEW Management and Advisors, L.P. or an
affiliate or successor with substantially the same fundamental investment
objective, policies and limitations as the Fund.
1
<PAGE>

Non-Fundamental Restrictions
----------------------------
The following investment restrictions are not fundamental, and may be changed
without shareholder approval.

The Fund may not:

(1) purchase any security on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of transactions;
for this purpose, the deposit or payment by the Fund of initial or
variation margin in connection with interest rate futures contracts or
related options transactions is not considered the purchase of a security
on margin;

(2) make short sales of securities or maintain a short position, unless at all
times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without payment
of any further consideration, for securities of the same issue as, and
equal in amount to, the securities sold short, and unless not more than 10%
of the Fund's net assets (taken at market value) is held as collateral for
such sales at any one time;

(3)+ invest more than 15% of the Fund's net assets in illiquid securities
(excluding Rule 144A securities and certain Section 4(2) commercial paper
deemed to be liquid under guidelines established by the Fund's Board of
Trustees);

(4) write, purchase or sell puts, calls or combinations thereof, except that
the Fund may write, purchase and sell puts, calls or combinations thereof
with respect to U.S. Government Securities and with respect to interest
rate futures contracts; or

(5) invest in the securities of other investment companies, except by purchases
in the open market involving only customary brokers' commissions, or in
connection with a merger, consolidation or similar transaction; under the
1940 Act, the Fund may not (a) invest more than 10% of its total assets
(taken at current value) in such securities, (b) own securities of any one
investment company having a value in excess of 5% of the Fund's total
assets taken at current value, or (c) own more than 3% of the outstanding
voting stock of any one investment company.

The Fund does not currently intend to invest all of its assets in the securities
of a single open-end management investment company managed by AEW Management and
Advisors, L.P. or an affiliate or successor with substantially the same
fundamental investment objective, policies and limitations as the Fund.

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

FUND CHARGES AND EXPENSES

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

MANAGEMENT FEES

Pursuant to an advisory agreement dated September 1, 2000 (the "Advisory
Agreement"), AEW Management and Advisors, L.P. ("AEW" or the "Adviser") has
agreed, subject to the supervision of the Trust's Board of Trustees, to manage
the investment and reinvestment of the assets of the Fund and to provide certain
administrative services to the Fund. For the services described in the Advisory
Agreement, the Fund pays AEW a gross management fee at the annual rate of 0.80%
of the average daily net assets of the Fund for the first $500 million in assets
and 0.75% of the average daily net assets of amounts in excess of $500 million.

AEW has given a binding undertaking to the Fund to reduce its fees, and if
necessary, to bear certain expenses related to operating the Fund in order to
limit the Fund's total operating expenses to an annual rate of 1.25% of the
average daily net assets of the Fund. The undertaking will be binding on AEW
until January 31, 2002 and will be evaluated on an annual basis thereafter
(subject to the obligation of the Fund to pay such deferred fees or expense
reimbursement in later periods to the extent that the Fund's expenses fall below
the annual rate of 1.25% of average daily net assets; provided, however, that
the Fund is not obligated to pay any such deferred fees or expense reimbursement
more than one year after the end of the fiscal year in which the fee was
deferred.)

2
<PAGE>
--------------------------------------------------------------------------------

OWNERSHIP OF FUND SHARES

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

As of September 1, 2000, to the Trusts' knowledge, the following persons
owned of record or beneficially 5% or more of the outstanding shares of the
Fund. In addition, each person that has direct or indirect beneficial ownership
of more than 25% of the outstanding shares of the Fund may be deemed to control
the Fund as defined in the 1940 Act.

Shareholder and Address Ownership Percentage
----------------------- --------------------

AEW Capital Management, L.P. 100%
World Trade Center East
Two Seaport Lane
Boston, MA 02210

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

MISCELLANEOUS INVESTMENT PRACTICES

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

The Fund's primary strategies are detailed in its Prospectus. The following
is a list of certain investment practices in which the Fund may engage as
SECONDARY investment strategies.

Mortgage Real Estate Investment Trusts
Hybrid Real Estate Investment Trusts
Foreign Securities (Foreign Equity Securities and Depository Receipts)
Certificates of Deposit, Demand and Time Deposits and Banker's Acceptances
Prime Commercial Paper, including Master Demand Notes
Repurchase Agreements secured by U.S. government securities
When-issued Securities
Zero Coupon Securities
Convertible Securities
Illiquid Securities and Restricted Securities (including Rule 144A
Securities)
Loans of Portfolio Securities
Short-term Investments
Fixed-Income Securities
Collateralized Mortgage Obligations
Collateralized Mortgage-backed Securities
Money Market Instruments

The following is a description of the various investment practices in which
the Fund may engage, whether as a primary or secondary strategy, and a summary
of certain attendant risks:

Equity Securities
------------------
The Fund may invest in equity securities. Equity securities are securities that
represent an ownership interest (or the right to acquire such an interest) in a
company and include common and preferred stocks and securities exercisable for
or convertible into common or preferred stocks (such as warrants, convertible
debt securities and convertible preferred stock). While offering great potential
for long-term growth, equity securities are more volatile and more risky than
other forms of investment. Therefore, the value of your investment in the Fund
may sometimes decrease instead of increase. The Fund may invest in equity
securities of companies with relatively small market capitalizations. Securities
of such companies may be more volatile than the securities of larger, more
established companies and the broad equity market indices (See "Small Companies"
below). The Fund's investments may include securities traded "over-the-counter"
as well as those traded on a securities exchange. Some over-the-counter
securities may be more difficult to sell under some market conditions.

Real Estate Securities
----------------------
The Fund invests primarily in securities of companies in the real estate
industry, including REITs, and is, therefore, subject to the special risks
associated with the real estate market and the real estate industry in general.
Companies in the real estate industry are those that (i) have principal activity
involving the development, ownership,

3
<PAGE>

construction management or sale of real estate; (ii) have significant real
estate holdings, such as hospitality companies, supermarkets and mining, lumber
and paper companies; and/or (iii) provide products or services related to the
real estate industry, such as financial institutions that make and/or service
mortgage loans and manufacturers or distributors of building supplies.
Securities of companies in the real estate industry are sensitive to factors
such as changes in real estate values, property taxes, interest rates, cash flow
of underlying real estate assets, occupancy rates, government regulations
affecting zoning, land use, and rents, and the management skill and
creditworthiness of the issuer. Companies in the real estate industry may also
be subject to liabilities under environmental and hazardous waste laws.

Real Estate Investment Trusts (REITs)
-------------------------------------
The Fund may invest in REITs. REITs are pooled investment vehicles that invest
primarily in either real estate or real estate-related loans. REITs may be
characterized as equity REITs, mortgage REITs or hybrid REITs. An equity REIT
owns or leases real estate and derives its income primarily from rental income.
A mortgage REIT invests primarily in loans secured by real estate and generally
derives its income primarily from interest payments on its mortgage loans. A
hybrid REIT combines the characteristics of both equity REITs and mortgage
REITs, generally by holding both ownership and mortgage interests in real
estate. The Fund anticipates that under normal circumstances a majority of its
REIT investments will consist of equity REITs, but this is not a requirement of
the Fund.

Small Companies
----------------
The Fund may invest in companies and REITs with relatively smaller market
capitilizations, which AEW considers to be those with market capitilizations of
$1 billion or less. Investments in companies with relatively small
capitalization may involve greater risk than is usually associated with larger,
more established companies. These companies often have sales and earnings growth
rates that exceed those of companies with larger capitalization. Such growth
rates may in turn be reflected in more rapid share price appreciation. However,
companies with smaller capitalization often have limited product lines, markets
or financial resources and may be dependent upon a relatively small management
group. The securities may have limited marketability and may be subject to more
abrupt or erratic movements in price than securities of companies with larger
capitalization or market averages in general. The net asset value of the Fund
therefore may fluctuate more widely than market averages.

Warrants
--------
The Fund may invest in warrants. A warrant is an instrument that gives the
holder a right to purchase a given number of shares of a particular security at
a specified price until a stated expiration date. Buying a warrant generally can
provide a greater potential for profit or loss than an investment of equivalent
amounts in the underlying common stock. The market value of a warrant does not
necessarily move with the value of the underlying securities. If a holder does
not sell the warrant, it risks the loss of its entire investment if the market
price of the underlying security does not, before the expiration date, exceed
the exercise price of the warrant plus the cost thereof. Investment in warrants
is a speculative activity. Warrants pay no dividends and confer no rights (other
than the right to purchase the underlying securities) with respect to the assets
of the issuer.

U.S. Government Securities
--------------------------
The Fund may invest in some or all of the following U.S. Government Securities:

o U.S. Treasury Bills
-------------------
- Direct obligations of the United States Treasury that are issued in
maturities of one year or less. No interest is paid on Treasury bills;
instead, they are issued at a discount and repaid at full face value when
they mature. These obligations are backed by the full faith and credit of
the United States government.

o U.S. Treasury Notes and Bonds
-----------------------------
- Direct obligations of the United States Treasury issued in maturities
that vary between one and 40 years, with interest normally payable every
six months. These obligations are backed by the full faith and credit of
the United States government.

o "Ginnie Maes"
-------------
- Debt securities issued by a mortgage banker or other mortgagee, which
represent an interest in a pool of mortgages insured by the Federal Housing
Administration or the Farmer's Home Administration or guaranteed by the
Veterans Administration. The Government National Mortgage Association
("GNMA") guarantees the timely payment of principal and interest when such
payments are due, whether or not these amounts are collected by the issuer
of these certificates on the underlying mortgages. An assistant attorney
general of the United States has rendered an opinion that the guarantee by
GNMA is a general obligation of the United States backed by its full faith
and credit. Mortgages included in single family or multi-family residential
mortgage pools backing an issue of Ginnie Maes have a maximum maturity of
up to 30 years. Scheduled payments of principal and interest are made to
the registered holders of Ginnie Maes (such as the Fund) each month.
Unscheduled prepayments may be made by homeowners, or as a result of a
default. Prepayments are passed through to the registered holder (such as
the Fund, which reinvests any prepayments) of Ginnie Maes along with
regular monthly payments of principal and interest.

o "Fannie Maes"
-------------
- The Federal National Mortgage Association ("FNMA") is a
government-sponsored corporation owned entirely by private stockholders
that purchases residential mortgages from a list of approved
seller/servicers. Fannie

<PAGE>

Maes are pass-through securities issued by FNMA that are guaranteed as to
timely payment of principal and interest by FNMA, but are not backed by the
full faith and credit of the United States government.

o "Freddie Macs"
--------------
- The Federal Home Loan Mortgage Corporation ("FHLMC") is a corporate
instrumentality of the United States government. Freddie Macs are
participation certificates issued by FHLMC that represent an interest in
residential mortgages from FHLMC's National Portfolio. FHLMC guarantees the
timely payment of interest and ultimate collection of principal, but
Freddie Macs are not backed by the full faith and credit of the United
States government.

U.S. Government Securities generally do not involve the credit risks
associated with investments in other types of fixed-income securities, although,
as a result, the yields available from U.S. Government Securities are generally
lower than the yields available from corporate fixed-income securities. Like
other fixed-income securities, however, the values of U.S. Government Securities
change as interest rates fluctuate. Fluctuations in the value of portfolio
securities will not affect interest income on existing portfolio securities, but
will be reflected in the Fund's net asset value. Since the magnitude of these
fluctuations will generally be greater at times when the Fund's average maturity
is longer, under certain market conditions the Fund may accept lower current
income from short-term investments rather than investing in higher-yielding
long-term securities. Such shorter term investments may lower the Fund's return.

Foreign Investments
-------------------
Investments in foreign securities present risks not typically associated with
investments in comparable securities of U.S. issuers.

Since most foreign securities are denominated in foreign currencies or
traded primarily in securities markets in which settlements are made in foreign
currencies, the value of these investments and the net investment income
available for distribution to shareholders of the Fund may be affected favorably
or unfavorably by changes in currency exchange rates or exchange control
regulations. Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S. dollar
will result in a change in the U.S. dollar value of the Fund's assets and the
Fund's income available for distribution. In addition, many European countries
have adopted a single European currency, the "euro." The consequences of this
conversion for foreign exchange rates, interest rates and the value of European
securites are presently unclear. Such consequences may adversely affect the
value and/or increase the volitility of securities held by the Fund.

In addition, although the Fund's income may be received or realized in
foreign currencies, the Fund will be required to compute and distribute its
income in U.S. dollars. Therefore, if the value of a currency relative to the
U.S. dollar declines after the Fund's income has been earned in that currency,
translated into U.S. dollars and declared as a dividend, but before payment of
such dividend, the Fund could be required to liquidate portfolio securities to
pay such dividend. Similarly, if the value of a currency relative to the U.S.
dollar declines between the time the Fund incurs expenses in U.S. dollars and
the time such expenses are paid, the amount of such currency required to be
converted into U.S. dollars in order to pay such expenses in U.S. dollars will
be greater than the equivalent amount in such currency of such expenses at the
time they were incurred.

There may be less information publicly available about a foreign corporate
or government issuer than about a U.S. issuer, and foreign corporate issuers are
not generally subject to accounting, auditing and financial reporting standards
and practices comparable to those in the United States. The securities of some
foreign issuers are less liquid and at times more volatile than securities of
comparable U.S. issuers. Foreign brokerage commissions and securities custody
costs are often higher than those in the United States, and judgments against
foreign entities may be more difficult to obtain and enforce. With respect to
certain foreign countries, there is a possibility of governmental expropriation
of assets, confiscatory taxation, political or financial instability and
diplomatic developments that could affect the value of investments in those
countries. The receipt of interest on foreign government securities may depend
on the availability of tax or other revenues to satisfy the issuer's
obligations.

The Fund may invest in foreign equity securities either by purchasing such
securities directly or by purchasing "depository receipts." Depository receipts
are instruments issued by a bank that represent an interest in equity securities
held by arrangement with the bank. Depository receipts can be either "sponsored"
or "unsponsored." Sponsored depository receipts are issued by banks in
cooperation with the issuer of the underlying equity securities. Unsponsored
depository receipts are arranged without involvement by the issuer of the
underlying equity securities. Less information about the issuer of the
underlying equity securities may be available in the case of unsponsored
depository receipts.

In determining whether to invest in securities of foreign issuers, the
Advisor will consider the likely effects of foreign taxes on the net yield
available to the Fund and its shareholders. Compliance with foreign tax law may
reduce the Fund's net income available for distribution to shareholders.

5
<PAGE>

When Issued Securities
----------------------
The Fund may purchase "when-issued" equity securities, which are traded on a
price basis prior to actual issuance. Such purchases will only be made to
achieve the Fund's investment objective and not for leverage. The when-issued
trading period generally lasts from a few days to months, or 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 actual issuance. The Trust's custodian
will establish a segregated account for the 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 the Fund.

Repurchase Agreements
----------------------
The Fund may enter into repurchase agreements, by which the Fund purchases a
security and obtains a simultaneous commitment from the seller to repurchase the
security at an agreed-upon price and date. The resale price is in excess of the
purchase price and reflects an agreed-upon market rate unrelated to the coupon
rate on the purchased security. Such transactions afford the Fund the
opportunity to earn a return on temporarily available cash at relatively low
market risk. While the underlying security may be a bill, certificate of
indebtedness, note or bond issued by an agency, authority or instrumentality of
the United States government, the obligation of the seller is not guaranteed by
the United States government, and there is a risk that the seller may fail to
repurchase the underlying security. In such event, the Fund would attempt to
exercise rights with respect to the underlying security, including possible
disposition in the market. However, the Fund may be subject to various delays
and risks of loss, including (a) possible declines in the value of the
underlying security during the period while the Fund seeks to enforce its rights
thereto, (b) possible reduced levels of income and lack of access to income
during this period and (c) inability to enforce rights and the expenses involved
in the attempted enforcement.

Convertible Securities
----------------------
The Fund may invest in convertible securities, including corporate bonds, notes
or preferred stocks of U.S. issuers that can be converted into (that is,
exchanged for) common stock or other equity securities. Convertible securities
also include other securities, such as warrants, that provide an opportunity for
equity participation. Because convertible securities can be converted into
equity securities, their values will normally vary in some proportion with those
of the underlying equity securities. Convertible securities usually provide a
higher yield than the underlying equity, however, so that the price decline of a
convertible security may sometimes be less substantial than that of the
underlying equity security.

Illiquid Securities, Restricted Securities, Rule 144 Securities and Section 4(2)
--------------------------------------------------------------------------------
Commercial Paper
----------------
Illiquid securities include those that are not readily resalable (restricted
securities), which may include securities whose disposition is restricted by
federal securities laws or those that are not readily marketable. Rule 144A
securities are privately offered securities that can be resold only to certain
qualified institutional buyers pursuant to Rule 144A under the 1933 Act. The
Fund may also purchase commercial paper issued under Section 4(2) of the 1933
Act. Investing in Rule 144A securities and Section 4(2) commercial paper could
have the effect of increasing the level of the 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 adviser has determined, under
guidelines established by the Fund's Board of Trustees, that the particular
issue of Rule 144A securities is liquid. The Fund may also invest in securities
that are subject to restrictions relating to resale. Investment in restricted or
other illiquid securities involves the risk that the Fund may be unable to sell
such a security at the desired time. Also, the Fund may incur expenses, losses
or delays in the process of registering restricted securities prior to resale.

Loans of Portfolio Securities
-------------------------------
The Fund may lend up to 33 1/3% of its total assets in the form of its portfolio
securities to broker-dealers under contracts calling for collateral equal to at
least the market value of the securities loaned, marked to market on a daily
basis. The Fund will continue to benefit from interest or dividends on the
securities loaned and may also receive interest through investment of the cash
collateral in short-term liquid investments, which may include shares of money
market funds subject to any investment restriction listed in this Statement. Any
voting rights or rights to consent relating to securities loaned pass to the
borrower. However, if a material event affecting the investment occurs, such
loans will be called so that the securities may be voted by the Fund. The Fund
pays various fees in connection with such loans, including shipping fees and
reasonable custodian and placement fees approved by the Fund's Board of Trustees
or persons acting pursuant to the direction of the Board.

These transactions must be fully collateralized at all times, but involve
some credit risk to the Fund if the other party should default on its obligation
and the Fund is delayed in or prevented from recovering the collateral.

6
<PAGE>

Short-Term Trading
------------------
The Fund may, consistent with its investment objectives, engage in portfolio
trading in anticipation of, or in response to, changing economic or market
conditions and trends. These policies may result in higher turnover rates in the
Fund's portfolio, which may produce higher transaction costs and a higher level
of taxable capital gains. Portfolio turnover considerations will not limit the
adviser's investment discretion in managing the Fund's assets. The Fund
anticipates that its portfolio turnover rate will vary significantly from time
to time depending on the volitility of economic and market conditions.

Fixed-income Securities
-----------------------
The Fund may invest in real estate related fixed-income securities. The Fund
will typically invest in fixed-income securities that are rated by an
independent ratings service, such as Standard & Poor's Ratings Group ("S&P") or
Moody's Investors Service, Inc. ("Moody's"). For a detailed description of the
ratings assigned by S&P and Moody's, please refer to the Statement's "Appendix A
-- Description of Bond Ratings."

Fixed-income securities in which the Fund may invest include a broad array of
short, medium and long term obligations issued by the U.S. or foreign
governments, government or international agencies and instrumentalities, and
corporate issuers whose primary business is in the real estate industry. Some
fixed-income securities represent uncollateralized obligations of their issuers;
in other cases, the securities may be backed by specific assets (such as
mortgages or other receivables) that have been set aside as collateral for the
issuer's obligation. Fixed-income securities generally involve an obligation of
the issuer to pay interest or dividends on either a current basis or at the
maturity of the securities, as well as the obligation to repay the principal
amount of the security at maturity.

Fixed-income securities are subject to market and credit risk. Credit risk
relates to the ability of the issuer to make payments of principal and interest
and includes the risk of default. In the case of municipal bonds, the issuer may
make these payments from money raised through a variety of sources, including
(1) the issuer's general taxing power, (2) a specific type of tax such as a
property tax, or (3) a particular facility or project such as a highway. The
ability of an issuer of municipal bonds to make these payments could be affected
by litigation, legislation or other political events, or the bankruptcy of the
issuer. U.S. government securities do not involve the credit risks associated
with other types of fixed-income securities; as a result, the yields available
from U.S. government securities are generally lower than the yields available
from corporate fixed-income securities. Market risk is the risk that the value
of the security will fall because of changes in market rates of interest.
(Generally, the value of fixed-income securities falls when market rates of
interest are rising.) Some fixed-income securities also involve prepayment or
call risk. This is the risk that the issuer will repay the Fund the principal on
the security before it is due, thus depriving the Fund of a favorable stream of
future interest payments.

Because interest rates vary, it is impossible to predict the income of a fund
that invests in fixed-income securities for any particular period. Fluctuations
in the value of the Fund's investments in fixed-income securities will cause the
Fund's net asset value to increase or decrease.

Mortgage-Related Securities
---------------------------
Mortgage-related securities differ from traditional debt securities. Among the
major differences are that interest and principal payments are made more
frequently, usually monthly, and that principal may be prepaid at any time
because the underlying mortgage loans generally may be prepaid at any time. As a
result, if the Fund purchases these assets at a premium, a faster-than-expected
prepayment rate will reduce yield to maturity, and a slower-than-expected
prepayment rate will have the opposite effect of increasing yield to maturity.
If the Fund purchases mortgage-related securities at a discount,
faster-than-expected prepayments will increase, and slower-than-expected
prepayments will reduce, yield to maturity. Prepayments, and resulting amounts
available for reinvestment by the Fund, are likely to be greater during a period
of declining interest rates and, as a result, are likely to be reinvested at
lower interest rates. Accelerated prepayments on securities purchased at a
premium may result in a loss of principal if the premium has not been fully
amortized at the time of prepayment. Although these securities will decrease in
value as a result of increases in interest rates generally, they are likely to
appreciate less than other fixed-income securities when interest rates decline
because of the risk of prepayments. In addition, an increase in interest rates
would also increase the inherent volatility of the Fund by increasing the
average life of the Fund's portfolio securities.

Collateralized Mortgage Obligations ("CMOs")
--------------------------------------------
A CMO is a security backed by a portfolio of mortgages or mortgage securities
held under an indenture. The underlying mortgages or mortgage securities are
issued or guaranteed by the U.S. government or an agency or instrumentality
thereof. The issuer's obligation to make interest and principal payments is
secured by the underlying portfolio of mortgages or mortgage securities. CMOs
are issued with a number of classes or series, which have different maturities
and which may represent interests in some or all of the interest or principal on
the underlying collateral or a combination thereof. CMOs of different classes
are generally retired in sequence as the underlying mortgage loans in the
mortgage pool are repaid. In the event of sufficient early prepayments on such
mortgages, the class or series of CMO first to mature generally will be retired
prior to its maturity. Thus, the early retirement of a particular class or

7
<PAGE>

series of CMO held by the Fund would have the same effect as the prepayment of
mortgages underlying a mortgage pass-through security. CMOs may be considered
derivative securities.

Money Market Instruments
------------------------
The Fund may seek to minimize risk by investing in money market instruments,
which are high-quality, short-term securities. Although changes in interest
rates can change the market value of a security, the Fund expects those changes
to be minimal, although this value cannot be guaranteed.

Money market obligations of foreign banks or of foreign branches or
subsidiaries of U.S. banks may be subject to different risks than obligations of
domestic banks, such as foreign economic, political and legal developments and
the fact that different regulatory requirements apply.

Temporary Strategies
--------------------
The Fund has the flexibility to respond promptly to changes in market and
economic conditions. In the interest of preserving shareholders' capital, the
adviser may employ a temporary defensive strategy if it determines such a
strategy to be warranted. Pursuant to such a defensive strategy, the Fund
temporarily may hold cash (U. S. dollars, foreign currencies, or multinational
currency units) and/or invest up to 100% of its assets in U.S. Government
Securities or money market instruments. It is impossible to predict whether,
when or for how long the Fund will employ defensive strategies. The use of
defensive strategies may prevent the Fund from achieving its goal.

In addition, pending investment of proceeds from new sales of Fund shares
or to meet ordinary daily cash needs, the Fund may temporarily hold cash (U.S.
dollars, foreign currencies or multinational currency units) and may invest any
portion of its assets in money market instruments.

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

MANAGEMENT OF THE TRUST

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

The Fund is governed by a Board of Trustees, which is responsible for generally
overseeing the conduct of Fund business and for protecting the interests of the
shareholders. The Trustees meet periodically throughout the year to oversee the
Fund's activities, review contractual arrangements with companies that provide
services to the Fund and review the Fund's performance.

Trustees
--------

Trustees of the Trust and their ages (in parentheses), address and
principal occupations during at least the past five years are listed below.
Those Trustees marked with an asterisk (*) may be deemed to be an "interested
person" of the Trust as defined in the 1940 Act.

GRAHAM T. ALLISON, JR.-- Trustee
-------
(60);79 John F. Kennedy Street, Cambridge, Massachusetts 02138 -- Member of
the Contract Review and Governance Committee for the Trust -- Douglas
Dillon Professor and Director for the Center of Science and International
Affairs, John F. Kennedy School of Government; Special Advisor to the
United States Secretary of Defense; formerly, Assistant Secretary of
Defense; formerly, Dean, John F. Kennedy School of Government.

DANIEL M. CAIN - Trustee
-------
(55); 452 Fifth Avenue, New York, New York 10018 -- Member of the Audit
Committee for the Trust -- President and CEO, Cain Brothers & Company,
Incorporated (investment banking); Trustee, Universal Health Realty Income
Trust (NYSE); Norman Rockwell Museum; Sharon Health Corporation and
National Committee for Quality Healthcare (all not-for-profit
organizations).

KENNETH J. COWAN -- Trustee
-------
(68); One Beach Drive, S.E. #2103, St. Petersburg, Florida 33701 -- Member
of the Contract Review and Governance Committee for the Trust -- Retired;
formerly, Senior Vice President-Finance and Chief Financial Officer, Blue
Cross of Massachusetts, Inc. and Blue Shield of Massachusetts, Inc.;
formerly, Director, Neworld Bank for Savings and Neworld Bancorp.

RICHARD DARMAN - Trustee
-------
(56); 1001 Pennsylvania Avenue, N.W., Washington, D.C. 20004 -- Member of
the Contract Review and Governance Committee for the Trust -- Partner, The
Carlyle Group (investments); Public Service Professor, Harvard Graduate
School of Government; Trustee, Council for Excellence in Government (a
not-for-

8
<PAGE>

profit organization); Director, Frontier Ventures (personal investment);
Director, Telcom Ventures (telecommunications); Director, Prime
Communications (cable communications); Director, Neptune Communications
(undersea cable systems); formerly, Director of the U.S. Office of
Management and Budget and a member of President Bush's Cabinet; formerly,
Managing Director, Shearson Lehman Brothers (investments).

* JOHN T. HAILER - President and Trustee
---------------------
(39); President and Chief Executive Officer, Nvest Funds Distributor, L.P.;
President and Chief Executive Officer, Nvest Distribution Corporation;
President and Chief Executive Officer, Nvest Management; formerly, Senior
Vice President, Fidelity Investments Institutional Services Company;
formerly, Senior Vice President and Director of Retail Business
Development, Putnam Investments; Director, Home for Little Wanderers.

SANDRA O. MOOSE -- Trustee
-------
(58); Exchange Place, Boston, Massachusetts 02109 -- Member of the Audit
Committee for the Trust -- Senior Vice President and Director, The Boston
Consulting Group, Inc. (management consulting); Director, GTE Corporation
(communications services); Director, Rohm and Haas Company (specialty
chemicals); Trustee, Boston Public Library Foundation; Board of Overseers,
Museum of Fine Arts and Beth Israel/New England Deaconess Hospital;
Director, Harvard Graduate School Society Council; Member, Visiting
Committee, Harvard School of Public Health.

JOHN A. SHANE -- Trustee
-------
(67); 200 Unicorn Park Drive, Woburn, Massachusetts 01801 -- Member of the
Audit Committee for the Trust -- President, Palmer Service Corporation
(venture capital organization); General Partner, Palmer Partners L.P.;
Director, Arch Communications Group, Inc. (paging service); Director,
Eastern Bank Corporation; Director, Gensym Corporation (developer of expert
system software); Director, Overland Data, Inc. (manufacturer of computer
tape drives); Director, United Asset Management Corporation (holding
company for institutional money management firms).

* PETER S. VOSS -- Chairman of the Board, Chief Executive Officer, and Trustee
-----------------------------------------------------------
(53); Chairman of the Board and Director, President and Chief Executive
Officer, Nvest, L.P. and Nvest Companies, L.P. ("Nvest Companies");
Chairman of the Board and Director, President and Chief Executive Officer,
Nvest Corporation; Director, Nvest Services Company; Director, Nvest
Distribution Corporation; Director of various affiliates of Nvest
Management; formerly, Director, New England Financial; Board Member,
Investment Company Institute and United Way of Massachusetts Bay; Committee
Member, New York Stock Exchange Listed Company Advisory Committee.

PENDLETON P. WHITE -- Trustee
-------
(69); 6 Breckenridge Lane, Savannah, Georgia 31411; Member of the Contract
Review and Governance Committee for the Trust; Retired; formerly, President
and Chairman of the Executive Committee, Studwell Associates (executive
search consultants); formerly, Trustee, The Faulkner Corporation (community
hospital corporation).

The Contract Review and Governance Committee of the Fund is comprised solely of
disinterested Trustees and considers matters relating to advisory and
distribution arrangements, potential conflicts of interest between the adviser
and the Fund, and governance matters relating to the Fund.

The Audit Committee of the Fund is comprised solely of disinterested Trustees
and considers matters relating to the scope and results of the Fund's 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,
regulations of the SEC and Internal Revenue Service ("IRS") as well as
operational issues relating to the transfer agent.

Officers
--------

Officers of the Trust, in addition to Mr. Voss and Mr. Hailer, and their
ages (in parentheses) and principal occupations during at least the past five
years are listed below.

THOMAS P. CUNNINGHAM - Treasurer
---------
(54); Senior Vice President, Nvest Services Company; Senior Vice President,
Nvest Management; formerly, Vice President, Allmerica Financial Life
Insurance and Annuity Company; formerly, Treasurer, Allmerica Investment
Trust; formerly, Vice President, First Data Investor Services Group.

JOHN E. PELLETIER - Secretary and Clerk
--------------------
(35); Executive Vice President, General Counsel, Secretary and Clerk, Nvest
Services Company; Director, Nvest Distribution Corporation; Senior Vice
President, General Counsel, Secretary and

9
<PAGE>

Clerk, Nvest Funds Distributor, L.P.; Senior Vice President, General
Counsel, Secretary and Clerk, Nvest Management; formerly, Senior Vice
President and General Counsel, Funds Distributor, Inc. (mutual funds
service company); formerly, Vice President and General Counsel, Boston
Institutional Group (mutual funds service company); formerly, Senior Vice
President and General Counsel, Financial Research Corporation.

Previous positions during the past five years with New England Financial or
Metropolitan Life Insurance Company ("MetLife"), Nvest Funds Distributor, L.P.
or Nvest Management are omitted, if not materially different from a Trustee's or
officer's current position with such entity. As indicated below under "Trustee
Fees," each of the Trust's trustees is also a trustee of certain other
investment companies for which Nvest Funds Distributor, L.P. acts as principal
underwriter. Except as indicated above, the address of each Trustee and officer
of the Trust is 399 Boylston Street, Boston, Massachusetts 02116.

Trustee Fees
------------

The Trust pays no compensation to its officers or to its Trustees who are
interested persons thereof.

Each Trustee who is not an interested person of the Trust receives, in the
aggregate for serving on the Board of Trustees of the Trust, a retainer fee at
the annual rate of $100.

The Trustees also serve on the Board of Trustees for Nvest Funds Trust I,
Nvest Funds Trust II, Nvest Funds Trust III, Nvest Cash Management Trust and
Nvest Tax Exempt Money Market Trust (all five Nvest Funds Trusts collectively,
the "Nvest Funds Trusts"), comprising as of June 30, 2000 a total of 22 mutual
fund portfolios, a retainer fee at the annual rate of $40,000 and meeting
attendance fees of $3,500 for each meeting of the Board of Trustees that he or
she attends. Each committee member receives an additional retainer fee at the
annual rate of $6,000. Furthermore, each committee chairman receives an
additional retainer fee (beyond the $6,000 fee) at the annual rate of $4,000.
These fees are allocated among the mutual fund portfolios in the Nvest Funds
Trusts based on a formula that takes into account, among other factors, the
relative net assets of each Fund.

During the calendar year ended December 31, 1999, the trustees of the Trust
and the Nvest Funds Trusts (collectively, the "Trusts") received the amounts set
forth in the following table for serving as a trustees of the Trusts.

<TABLE>

<S> <C> <C> <C> <C> <C>
Aggregate
Aggregate Compensation Pension or
Compensation from Retirement Estimated Total
from Nvest Benefits Annual Compensation
Nvest Funds Companies Accrued as Part Benefits from the
Trusts Trust I of Fund Expenses Upon Trusts
Name of Trustee in 1999* in 1999** in 1999 Retirement in 1999*
--------------- -------- --------- ------- ---------- --------
Graham T. Allison, Jr. $60,000 $0 $0 $0 $60,000
Daniel M. Cain $64,000 $0 $0 $0 $64,000
Kenneth J. Cowan $64,000 $0 $0 $0 $64,000
Richard Darman $60,000 $0 $0 $0 $60,000
Sandra O. Moose $60,000 $0 $0 $0 $60,000
John A. Shane $60,000 $0 $0 $0 $60,000
Pendleton P. White $60,000 $0 $0 $0 $60,000
</TABLE>

[FN]
*Amounts include payments deferred by Trustees for 1999. The total amount of
deferred compensation for all periods to date accrued for the Trustees follows:
Allison ($810, 057); Cain ($16,000); Cowan ($55,777); Darman ($15,000).

** Nvest Companies Trust I was formed on March 17, 2000 and, therefore, its
trustees did not receive compensation for the calendar year ended December 31,
1999.
</FN>

The Fund provides no pension or retirement benefits to trustees, but has
adopted a deferred payment arrangement under which each trustee may elect not to
receive fees from the Fund on a current basis but to receive in a subsequent
period an amount equal to the value that such fees would have been if they had
been invested in a Fund or Funds selected by the Trustee on the normal payment
date for such fees. The Fund posts a deferred Trustee fee liability in an amount
equal to its pro rata share of the deferred fees. As a result of this
arrangement, each Fund, upon making the deferred payments, will be in
substantially the same financial position as if the deferred fees had been paid
on the normal payment dates.

10
<PAGE>

At September 1, 2000, the officers and trustees of the Trust as a group
owned less than 1% of the outstanding shares of the Fund.

Advisory Agreement
------------------

The Fund's Advisory Agreement between the Fund and AEW provides that AEW
will furnish or pay the expenses of the Fund for office space, facilities and
equipment, services of executive and other personnel of the Trust and certain
administrative services. AEW is responsible for obtaining and evaluating such
economic, statistical and financial data and information and performing such
additional research as is necessary to manage the Fund's assets in accordance
with its investment objectives and policies.

The Fund pays all expenses not borne by its Adviser, including, but not
limited to, the charges and expenses of the Fund's custodian and transfer agent,
independent auditors and legal counsel for the Fund and the Fund's independent
Trustees, all brokerage commissions and transfer taxes in connection with
portfolio transactions, all taxes and filing fees, the fees and expenses for
registration or qualification of its shares under federal and state securities
laws, all expenses of shareholders' and Trustees' meetings and of preparing,
printing and mailing reports to shareholders and the compensation of Trustees
who are not directors, officers or employees of the Adviser or its affiliates,
other than affiliated registered investment companies.

The Advisory Agreement provides that it will continue in effect for two
years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Board of Trustees or by
vote of a majority of the outstanding voting securities of the Fund and (ii) by
vote of a majority of the Trustees who are not "interested persons" of the
Trust, as that term is defined in the 1940 Act, cast in person at a meeting
called for the purpose of voting on such approval. The Advisory Agreement may be
terminated without penalty by vote of the Board of Trustees of the Trust or by
vote of a majority of the outstanding voting securities of the Fund, upon 60
days' written notice, or by the Adviser upon 90 days' written notice, and
terminates automatically in the event of its assignment.

The Advisory Agreement provides that the Adviser shall not be subject to
any liability in connection with the performance of its services thereunder in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.

AEW is a registered investment adviser whose origins date back to 1981. AEW
is a limited partnership that is a wholly-owned subsidiary of AEW Capital
Management, L.P., which in turn is a wholly-owned subsidiary of Nvest Holdings,
L.P. ("Nvest Holdings"). It is currently anticipatedd that AEW will convert from
a limited partnership into a limited liability company subsequent to the launch
of the Fund. It is anticipated that this conversion will occur in the fourth
quarter of 2000. Nvest Holdings is a wholly-owned subsidiary of Nvest Companies.
Nvest Distribution Corp. is also the sole general partner of Nvest Funds
Distributor, L.P. (the "Distributor") and the sole shareholder of Nvest Services
Company, Inc. ("Nvest Services Company"), the transfer and dividend-disbursing
agent of the Fund. Nvest Companies owns the entire limited partnership interest
in each of AEW and the Distributor. Nvest Services Company may subcontract
certain of its obligations as the transfer and dividend-disbursing agent of the
Fund to third parties. Nvest Services Company, Inc. also does business as Nvest
Services Company and Nvest Services Co.

Nvest Companies' managing general partner, Nvest Corporation, is a
wholly-owned subsidiary of MetLife New England Holdings, Inc., which in turn is
a wholly-owned subsidiary of MetLife, a stock life insurance company, which is
wholly-owned by MetLife, Inc., a publicly traded corporation. MetLife owns
approximately 47% (and in the aggregate, directly and indirectly, approximately
48%) of the outstanding limited partnership interests in Nvest Companies. Nvest
Companies' advising general partner, Nvest, L.P., is a publicly traded company
listed on the New York Stock Exchange (the "Exchange"). Nvest Corporation is the
sole general partner of Nvest, L.P. The eighteen principal subsidiary or
affiliated asset management firms of Nvest Companies, collectively, have more
than $130 billion in assets under management or administration as of June 30,
2000.

11
<PAGE>

management activities of AEW. Consummation of the transaction with CDC is
subject to a number of conditions, including regulatory approvals and approval
of the unitholders of Nvest, L.P. and Nvest Companies. Under the Investment
Company Act of 1940, the transaction will result in a change of control of AEW's
parent company, Nvest Companies, and, therefore, the Fund's advisory agreement
with AEW will terminate. Consequently, it is anticipated that AEW will seek
approval of a new advisory agreement from the Fund's Board of Trustees and sole
shareholder prior to consummation of the transaction, which is expected to close
in the fourth quarter of 2000.

Certain officers of AEW have responsibility for the management of other
client portfolios. The other clients served by AEW sometimes invest in
securities in which the Fund also invests. If the Fund and such other clients
advised by AEW desire to buy or sell the same portfolio securities at about the
same time, purchases and sales will be allocated, to the extent practicable, on
a pro rata basis in proportion to the amounts desired to be purchased or sold
for each. It is recognized that in some cases the practices described in this
paragraph could have a detrimental effect on the price or amount of the
securities, which the Fund purchases or sells. In other cases, however, it is
believed that these practices may benefit the Fund. It is the opinion of the
Fund's Trustees that the desirability of retaining AEW as Adviser outweighs the
disadvantages, if any, which might result from these practices.

Distribution Agreements.
------------------------
Under an agreement with the Fund (the "Distribution Agreement"), the Distributor
serves as the principal underwriter of Fund shares. 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 Fund available through advertising and other means and the cost of
printing and mailing Prospectuses to persons other than shareholders. The 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 Distribution Agreement for the 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 Fund or by vote
of a majority of the disinterested Trustees.

The Distribution Agreement will continue in effect for successive one-year
periods, provided that such continuance is specifically approved (i) by the vote
of a majority of the disinterested 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 the Fund.

The Distributor controls the words "Nvest" in the name of the Trust and if
it should cease to be the principal distributor of the Fund's shares, Nvest
Companies Trust I may be required to change its name and delete these words or
letters. The Distributor also acts as principal distributor for Nvest Funds
Trust I, Nvest Funds Trust II, Nvest Funds Trust III, Kobrick Capital Fund,
Kobrick Emerging Growth Fund, Kobrick Growth Fund, Nvest Cash Management Trust
and Nvest Tax Exempt Money Market Trust. The address of the Distributor is 399
Boylston Street, Boston, Massachusetts, 02116.

Custodial Arrangements.
-----------------------
State Street Bank and Trust Company ("State Street Bank" or the "Custodian"),
225 Franklin Street, Boston, Massachusetts 02110, is the Fund's custodian. As
such, State Street Bank holds in safekeeping certificated securities and cash
belonging to the Fund and, in such capacity, is the registered owner of
securities in book-entry form belonging to the Fund. Upon instruction, State
Street Bank receives and delivers cash and securities of the 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 Trust and calculates the total net asset
value, total net income and net asset value per share of the Fund on a daily
basis.

Independent Accountants.
------------------------
The Fund's independent accountant is PricewaterhouseCoopers LLP, 160 Federal
Street, Boston, Massachusetts 02110. The independent accountants conduct an
annual audit of the Fund's 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.

12
<PAGE>

Other Arrangements
------------------
Pursuant to a contract between the Trust and Nvest Services Company, Nvest
Services Company acts as shareholder servicing and transfer agent for the Fund
(in such capacity, the "Transfer Agent") and is responsible for services in
connection with the establishment, maintenance and recording of shareholder
accounts, including all related tax and other reporting requirements and the
implementation of investment and redemption arrangements offered in connection
with the sale of the Fund's shares.

In addition, pursuant to an Administrative Services Agreement between the
Trust and Nvest Services Company, Nvest Services Company performs certain
accounting and administrative services for the Fund (in such capacity, the
"Administrative Service Agent"). The Fund pays Nvest Services Company a fee of
0.0325% of the first $1 billion of the Fund's average daily net assets, 0.0225%
of the next $1 billion of the average daily net assets and 0.0175% of the
average daily net assets in excess of $2 billion for these services. The Fund
also reimburses Nvest Services Company for all or part of Nvest Service
Company's expenses of providing these services, which include the following: (i)
expenses for personnel performing bookkeeping, accounting, internal auditing and
financial reporting functions and clerical functions relating to the Fund; (ii)
expenses for services required in connection with the preparation of
registration statements and prospectuses, registration of shares in various
states, shareholder reports and notices, proxy solicitation material furnished
to shareholders of the Fund or regulatory authorities and reports and
questionnaires for SEC compliance; and (iii) registration, filing and other fees
in connection with requirements of regulatory authorities.

The Trust, AEW and the Distributor have adopted Codes of Ethics pursuant to
the requirements of the 1940 Act. These Codes of Ethics permit personnel subject
to the Codes to invest in securities, including securities that may be purchased
or held by the Fund.

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

PORTFOLIO TRANSACTIONS AND BROKERAGE

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

In placing orders for the purchase and sale of equity securities, the
Adviser selects only brokers that it believes are financially responsible, will
provide efficient and effective services in executing, clearing and settling an
order and will charge commission rates that, when combined with the quality of
the foregoing services, will produce best price and execution for the
transaction. This does not necessarily mean that the lowest available brokerage
commission will be paid. However, the commissions are believed to be competitive
with generally prevailing rates. The Adviser will use its best efforts to obtain
information as to the general level of commission rates being charged by the
brokerage community from time to time and will evaluate the overall
reasonableness of brokerage commissions paid on transactions by reference to
such data. In making such evaluation, all factors affecting liquidity and
execution of the order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account.

Subject to the overriding objective of obtaining the best possible
execution of orders, the Adviser may allocate brokerage transactions to
affiliated brokers. Any such transactions will comply with Rule 17e-1 under the
1940 Act. In order for the affiliated broker to effect portfolio transactions
for the Fund, the commissions, fees or other remuneration received by the
affiliated broker must be reasonable and fair compared to the commissions, fees
and other remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period. Furthermore, the Fund's Board of
Trustees, including a majority of those Trustees who are not "interested
persons" of the Trust as defined in the 1940 Act have adopted procedures that
are reasonably designed to provide that any commissions, fees or other
remuneration paid to an affiliated broker are consistent with the foregoing
standard.

General
-------

Under the 1940 Act, persons affiliated with the Trust are prohibited from
dealing with the Fund as principals in the purchase and sale of securities.
Since transactions in the over-the-counter market usually involve transactions
with dealers acting as principals for their own accounts, affiliated persons of
the Trust may not serve as the Fund's dealer in connection with such
transactions.

13
<PAGE>

To the extent permitted by applicable law, and in all instances subject to
the foregoing policy of best execution, the Adviser may allocate brokerage
transactions in a manner that takes into account the sale of shares of one or
more Funds distributed by the Distributor. In addition, the 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 the commissions paid by the Fund toward the reduction of
the Fund's expenses, subject to the requirement that the adviser will seek best
execution.

It is expected that the portfolio transactions in fixed-income securities,
if any, will generally be with issuers or dealers on a net basis without a
stated commission. Securities firms may receive brokerage commissions on
transactions involving options, futures and options on futures and the purchase
and sale of underlying securities upon exercise of options. The brokerage
commissions associated with buying and selling options may be proportionately
higher than those associated with general securities transactions.

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

DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES

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

The Trust is organized as a Massachusetts business trust under the laws of
Massachusetts by an Agreement and Declaration of Trust (a "Declaration of
Trust") dated March 17, 2000, and is a "series" company as described in Section
18(f)(2) of the 1940 Act. The Fund commenced operations on September 1, 2000.

The Declaration of Trust permits the Fund's Trustees to issue an unlimited
number of full and fractional shares of each series. The Fund is represented by
a particular series of shares. The Declaration of Trust further permits the
Fund's Board of Trustees to divide the shares of each series into any number of
separate classes, each having such rights and preferences relative to other
classes of the same series as the Fund's Board of Trustees may determine. When
you invest in the Fund, you acquire freely transferable shares of beneficial
interest that entitle you to receive annual or quarterly dividends as determined
by the Fund's Board of Trustees and to cast a vote for each dollar of net asset
value you own at shareholder meetings. Shares of the Fund do not have any
preemptive rights. The Declaration of Trust also permits the Board of Trustees
to charge shareholders directly for custodial, transfer agency and servicing
expenses.

The Declaration of Trust also permits the Fund's Board of Trustees, without
shareholder approval, to subdivide any series or class of shares or fund into
various sub-series or sub-classes with such dividend preferences and other
rights as the Trustees may designate. While the Fund's Board of Trustees has no
current intention to exercise this power, it is intended to allow them to
provide for an equitable allocation of the impact of any future regulatory
requirements that might affect various classes of shareholders differently. The
Fund's Board of Trustees may also, without shareholder approval unless as
provided therein, amend or supplement the Declaration of Trust so as to add to,
delete, replace or otherwise modify any provisions contained in the Declaration
of Trust, including, but not limited to, adding one or more additional series or
classes or merge two or more existing series or classes.

The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or the Fund, however, may be terminated at any time, subject to
applicable federal and state law, by (i) vote of at least two-thirds of the
outstanding shares of the Fund or (ii) without the vote or consent of
shareholders by a majority of the Trustees either at a meeting or by written
consent. The Trustees shall provide written notice to the affected shareholders
of a termination effected under clause (ii) above. The Trust also permits the
Board of Trustees, subject to applicable federal and state law, to reorganize,
merge or consolidate property of the Trust or any series thereof with other
trusts, corporations, partnerships or other organizations without shareholder
approval. The Trustees shall provide written notice to the affected shareholders
of such reorganization, merger or consolidation.

Voting Rights
-------------

Shareholders of a series or class are entitled to one vote for each dollar
of net asset value (number of shares owned multiplied by net asset value per
share) of such series or class thereof, on any matter on which such shareholder
is entitled to vote, and each fractional dollar amount shall be entitled to a
proportionate fractional vote.

14
<PAGE>

The Declaration of Trust provides that on any matter submitted to a vote of
all shareholders of the Trust, all Trust shares entitled to vote shall be voted
together irrespective of series or class unless the rights of a particular
series or class would be adversely affected by the vote, in which case a
separate vote of that series or class shall also be required to decide the
question. Also, a separate vote shall be held whenever required by the 1940 Act
or any rule thereunder. Rule 18f-2 under the 1940 Act provides in effect that a
series or class shall be deemed to be affected by a matter unless it is clear
that the interests of each series or class in the matter are substantially
identical or that the matter does not affect any interest of such series or
class. On matters affecting an individual series or class, only shareholders of
that series or class are entitled to vote. Consistent with the current position
of the SEC, shareholders of all series and classes vote together, irrespective
of series or class, on the election of Trustees and the selection of the Fund's
independent accountants, but shareholders of each series vote separately on
other matters requiring shareholder approval, such as certain changes in
investment policies of that series or the approval of the investment advisory
and subadvisory agreement relating to that series, and shareholders of each
class within a series vote separately as to the Rule 12b-1 plan (if any)
relating to that class.

There will normally be no meetings of shareholders for the purpose of
electing Trustees except that, in accordance with the 1940 Act, (i) the Trust
will hold a shareholders' meeting for the election of Trustees at such time as
less than a majority of the Trustees holding office have been elected by
shareholders, and (ii) if there is a vacancy on the Board of Trustees, such
vacancy may be filled only by a vote of the shareholders unless, after filing
such vacancy by other means, at least two-thirds of the Trustees holding office
shall have been elected by the shareholders. In addition, Trustees may be
removed from office by a written consent signed by the holders of two-thirds of
the outstanding shares and filed with the Fund's Custodian or by a vote of the
holders of two-thirds of the outstanding shares at a meeting duly called for
that purpose, which meeting shall be held upon the written request of the
holders of not less than 10% of the outstanding shares.

Upon written request by the holders of shares having a net asset value of
at least $25,000 or at least 1% of the outstanding shares stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
Trustee, the Trust will undertake to provide a list of shareholders or to
disseminate appropriate materials (at the expense of the requesting
shareholders).

Except as set forth above, the Trustees shall continue to hold office and
may appoint successor Trustees. Shareholder voting rights are not cumulative.

Shareholder and Trustee Liability
---------------------------------

Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of a Trust. However, the
Declaration of Trust 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 Declaration of Trust provides for indemnification out of the
Fund's property for all loss and expense of any shareholder held personally
liable for the obligations of the Fund by reason of owning shares of such Fund.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is considered remote since it is limited to circumstances
in which the disclaimer is inoperative and the Fund itself would be unable to
meet its obligations.

The Declaration of Trust further provides that the Board of Trustees will
not be liable for errors of judgment or mistakes of fact or law. However,
nothing in the Declaration of Trust protects a Trustee against any liability to
which the Trustee would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office. The By-Laws of the Trust provide for
indemnification by the Trust of Trustees and officers of the Trust, except with
respect to any matter as to which any such person did not act in good faith in
the reasonable belief that his or her action was in, or not opposed to, the best
interests of the Trust. Such persons may not be indemnified against any
liability to the Trust or the Fund's shareholders to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.

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

HOW TO BUY SHARES

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

The procedures for purchasing shares of the Fund are summarized in the
Prospectus. All purchases made by check should be in U.S. dollars and made
payable to AEW Fund, or, in the case of a retirement account, a custodian

15
<PAGE>

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 purchases 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 Exchange on a day when the
Exchange is open; otherwise the settlement date is the following business day.

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

NET ASSET VALUE

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

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 Fund shares (the excess of the assets of
the Fund over its liabilities) is determined at the close of regular trading
(normally 4:00 p.m. Eastern time) on each day that the Exchange is open for
trading. The weekdays that the Exchange 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 last reported bid price estimated by a broker. Unlisted securities
traded in the over-the-counter market are valued at the last reported bid price
in the over-the-counter market or on the basis of yield equivalents as obtained
from one or more dealers that make a market in the securities. U.S. Government
Securities are traded in the over-the-counter market. Options, interest rate
futures and options thereon that are traded on exchanges are valued at their
last sale price as of the close of such exchanges. Securities for which current
market quotations are not readily available and all other assets are taken at
fair value as determined in good faith by the Board of Trustees, although the
actual calculations may be made by persons acting pursuant to the direction of
the Board.

Generally, trading in foreign government securities and other fixed-income
securities, as well as trading in equity securities in markets outside the
United States, is substantially completed each day at various times prior to the
close of the Exchange. 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. 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 Exchange, generally 4:00 p.m. Eastern Time, when the Fund
computes 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 Exchange, which events will not be reflected in the computation
of the Fund's net asset value. If events materially affecting the value of the
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 Fund takes place in
various markets outside the United States on days and at times other than when
the Exchange is open for trading. Therefore, the calculation of the Fund's 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 net asset value of the Fund's shares is computed by dividing the number
of shares outstanding into the total net asset value. The public offering price
of a Fund share is the net asset value per share next-determined after a
properly completed purchase order is accepted by the Fund's Transfer Agent.

16
<PAGE>

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

SHAREHOLDER SERVICES

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

Open Accounts
-------------

A shareholder's investment is automatically credited to an open account
maintained for the shareholder by the Transfer Agent. 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, the Transfer Agent 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. The Transfer Agent 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 Fund shares.

The costs of maintaining the open account system are paid by the Fund and
no direct charges are made to shareholders. Although the Fund has no present
intention of making such direct charges to shareholders, it reserves the right
to do so. Shareholders will receive prior notice before any such charges are
made.

Retirement Plans Offering Tax Benefits
--------------------------------------

The federal tax laws provide for a variety of retirement plans offering tax
benefits. These plans may be funded with shares of the Fund or with certain
other investments. The reduced minimum initial investment available to
retirement plans offering tax benefits is referred to in the Prospectus. Income
dividends and capital gain distributions must be reinvested (unless the investor
is over age 59 1/2 or disabled). These types of accounts may be subject to fees.
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.

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 Exchange (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 the 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 or the Transfer Agent, as the case
may be, 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.

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

REDEMPTIONS

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

The procedures for redemption of Fund shares are summarized in the
Prospectus.

The redemption price will be the net asset value per share next determined
after the redemption request and any necessary special documentation are
received by the Transfer Agent in proper form. Payment normally will be made by
the Transfer Agent on behalf of the Fund within seven days thereafter. However,
in the event of a request to redeem shares for

17
<PAGE>

which the Fund has not yet received good payment, the Fund reserves the right to
withhold payments of redemption proceeds until the check or funds have cleared
(which may take up to 15 days) if the purchase of shares was made by check
within 10 calendar days prior to the redemption request.

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, as amended (the "1934 Act"). 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
877-637-REIT. 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 Exchange. Requests made after that time or on a day when the Exchange 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, which
complies with the redemption procedures established by the Fund from time to
time.

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 the Transfer Agent. When selecting the
service, a shareholder may have their withdrawal proceeds sent to their bank, in
which case the shareholder must designate a bank account on their application or
Service Options Form to which the redemption proceeds should be sent as well as
provide a check marked "VOID" and/or a deposit slip that includes the routing
number of their bank. Any change in the bank account so designated may be made
by furnishing to the Transfer Agent 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 Fund, the Distributor and State Street Bank
are not responsible for the authenticity of withdrawal instructions received by
telephone, subject to established verification procedures. The Transfer Agent in
agreement with the Fund will employ reasonable procedures to confirm that your
telephone instructions are genuine, and if it does not, it may be liable for any
losses due to unauthorized or fraudulent instructions. Such verification
procedures include, but are not limited to, requiring a form of personal
identification prior to acting on an investor's telephone instructions and
recording an investor's instructions.

The Fund will normally redeem shares for cash; however, the Fund reserves
the right to pay the redemption price wholly or partially in kind if the Fund's
Board of Trustees determines it to be advisable and in the interest of the
remaining shareholders of the Fund. The redemptions in kind will be selected by
the 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 Fund has elected to be governed by Rule 18f-1 under the
1940 Act, pursuant to which the Fund is 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 Fund at the beginning of such period.
The Fund does not currently intend to impose any redemption charge, although it
reserves the right to charge such a fee. 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 Fund may also close your account and send you the proceeds if the
balance in your account falls below a minimum amount set by the Fund's Board of
Trustees (currently $1,000). 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.

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

STANDARD PERFORMANCE MEASURES

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

Calculation of Total Return.
------------------------------
Total return is a measure of the change in value of an investment in the Fund
over the period covered, which assumes that any dividends or capital gains
distributions are automatically reinvested in shares of the

18
<PAGE>

Fund rather than paid to the investor in cash. The Fund may show its average
annual total return for the one-year, five-year and ten-year periods through the
end of the most recent calendar quarter. The formula for total return used by
the Fund is prescribed by the SEC and includes three steps: (1) adding to the
total number of shares 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 contingent deferred sales charge, 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 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
the Fund. If the Fund presents returns reflecting an expense limitation or
waiver, its total return would be been lower if no limitation or waiver were in
effect.

Performance Comparisons
-----------------------

The Fund may from time to time include its total return in advertisements
or in information furnished to present or prospective shareholders. The 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 Lipper, Inc. ("Lipper") or Morningstar, Inc. ("Morningstar") as
having similar investment objectives.

The Fund may cite its 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").

Lipper Indices and Averages are calculated and published by Lipper, an
independent service that monitors the performance of more than 1,000 funds. The
Fund 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 the Fund to a different category or develop
(and place the Fund into) a new category, the Fund may compare its performance
or ranking against other funds in the newly assigned category, as published by
the service.

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 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 Morgan Stanley REIT Index is a market capitalization-weighted,
unmanaged, total-return index of REITs that meet certain liquidity requirements.
The index was designed to track the total-return performance of a broad group of
REIT stocks assuming dividend reinvestment in the index on the ex-dividend date.
The index is composed only of publicly traded equity REITs and does not include
REITs that invest primarily in healthcare facilities, real estate mortgages, or
debt securities.

The Whilshire REIT Index is a market capitalization-weighted and unmanaged
index of U.S. publicly traded REITs. This index is a subset of the Whilshire
Real Estate Securities Index.

The Whilshire Real Estate Securities Index is a market
capitalization-weighted and unmanaged index of equity securities whose primary
business is equity ownership of commercial real estate, equity (non-health)
REITs, and storage properties.

The NAREIT Equity Index is a market capitalization-weighted, unmanaged
index of equity REITs, which are defined as REITs with 75% or greater of their
gross invested book assets invested directly or indirectly in the equity
ownership of real estate.

19
<PAGE>

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
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included.

Articles and releases, developed by the Fund and other parties, about the
Fund regarding performance, rankings, statistics and analyses and the fund
group's asset levels and sales volumes, numbers of Fund shareholders, 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, including, 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 and
Morningstar. References to these rankings or reviews or reprints of such
articles may be used in the Fund's 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, 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
Fund's advertising and promotional literature, see Appendix C.

The Fund may use the accumulation charts below in its advertisements to
demonstrate the benefits of monthly savings at an 8% and 10% rate of return,
respectively.

<TABLE>

INVESTMENTS AT 8% RATE OF RETURN
<S> <C> <C> <C> <C> <C> <C>

5 yrs. 10 15 20 25 30
------------ ------------ ------------ ------------ ------------ ------------
$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

INVESTMENTS AT 10% RATE OF RETURN

5 yrs. 10 15 20 25 30
------------ ------------ ------------ ------------ ------------ ------------
$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 Fund's advertising and sales literature may refer to historical,
current and prospective political, social, economic and financial trends and
developments that affect domestic and international investment as it relates to
the Fund. The Fund's advertising and sales literature may include historical and
current performance and total returns of investment alternatives to the Fund.
Articles, releases, advertising and literature may discuss the range of services
offered by the Trust, the Distributor, and the Transfer Agent of the Fund, with
respect to investing in shares of the Fund and customer service.

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. 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.

20
<PAGE>

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 Fund. 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 Fund may be compared to the beta coefficients of other
funds.

The Fund may enter into arrangements with banks exempted from broker-dealer
registration under the 1934 Act. Advertising and sales literature developed to
publicize such arrangements will explain the relationship of the bank to the
Fund and the Distributor as well as the services provided by the bank relative
to the Fund. 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 Fund's
prospective shareholders. These materials may include, but are not limited to,
discussions of college planning, retirement planning and reasons for investing
and historical examples of the investment performance of various classes of
securities, securities markets and indices.

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

INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS

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

As described in the Prospectus, it is the policy of the 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 particular Fund based upon the net asset value
determined as of the close of the Exchange on the record date for each dividend
or distribution. Shareholders, however, may elect to receive their ordinary
income dividends or capital gain distributions, or both, in cash. The election
may be made at any time by submitting a written request directly to AEW Funds.
In order for a change to be in effect for any dividend or distribution, it must
be received by AEW 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.

The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). In order to qualify, the 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.

21
<PAGE>

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, the 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
the 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. The Fund intends to make distributions sufficient to avoid imposition of
the excise tax. Distributions declared and payable by the 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. However, any distributions received by the Fund from REITs will
not qualify for the corporate dividends-received deduction. 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, the 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.

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 the 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 the Fund's net asset value also reflects unrealized
losses.

The Fund's transactions, if any, in foreign currencies and foreign currency
denominated bonds and hedging activities 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.

Redemptions of the Fund's shares is a taxable event and, accordingly,
shareholders may realize gains and losses on such transactions. Currently, if
shares have been held for more than one year, gain or loss realized will be
taxed at long-term federal tax rates (generally 20% for noncorporate
shareholders), provided the shareholder holds the shares as a capital asset.
Furthermore, no loss will be allowed on the sale of Fund shares to the extent
the shareholder acquired other shares of the same Fund within 30 days prior to
the sale of the loss shares or 30 days after such sale.

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.

The Fund's investments in REIT equity securities may require the Fund to
accrue and distribute income not yet received. In order to generate sufficient
cash to make required distributions, the Fund may be required to sell securities
in its portfolio that it otherwise would have continued to hold (including when
it is advantageous to do so). The Fund's investments in REIT equity securities
may at other times result in the Fund's receipt of cash in excess of the REIT's
earnings; if the Fund distributes such amounts, such distribution could
constitute a return of capital to Fund shareholders for federal income tax
purposes.

22
<PAGE>

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.

The 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 the Fund is notified that you have
underreported income in the past or if you fail to certify to the 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% U.S. withholding tax (or a reduced rate of
withholding provided by treaty).

23
<PAGE>

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

FINANCIAL STATEMENTS

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

STATEMENT OF ASSETS AND LIABILITIES

AEW Real Estate Securities Fund
Statement of Assets and Liabilities
August 31, 2000

ASSETS
Cash $100,000
Expense reimbursement receivable due from
investment adviser 28,694
------
TOTAL ASSETS 128,694
-------

LIABILITIES
Accounts payable and accrued expenses 28,694
------
TOTAL LIABILITIES 28,694
------
NET ASSETS 100,000
=======

NET ASSETS CONSIST OF:
Paid-in capital $100,000
--------

NET ASSETS $100,000
--------

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Net assets $100,000
========
Shares of beneficial interest 10,000
======
Net asset value, offering and redemption
price per share $ 10.00
=========

See accompanying notes to financial statements.

24
<PAGE>

STATEMENT OF OPERATIONS

AEW Real Estate Securities Fund
Statement of Operations
Period ended August 31, 2000

INVESTMENT INCOME $ 0
Expenses
Audit services 4,500
Legal fees 19,600
Registration fees 4,500
Other 94
------
Total expenses 28,694
------

Fees waived and/or reimbursed by investment adviser (28,694)
-------

Net expenses 0
-------
Net investment loss 0
-------

NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 0
=========

See accompanying notes to financial statements.

25
<PAGE>

NOTES TO FINANCIAL STATEMENTS

AEW Real Estate Securities Fund
August 31, 2000

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. The Fund is a series of
Nvest Companies Trust I (the "Trust"), a Massachusetts business trust,
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company. The Fund seeks to provide
investors with above-average income and long-term growth of capital. The
Declaration of Trust permits the Fund's Trustees to issue an unlimited number of
shares of the Trust in multiple series (each such series is a "Fund"). The
Declaration of Trust further permits the Fund's Trustees to divide the shares of
each series into any number of separate classes of shares.

The Fund has had no operations other than matters relating to its organization
and registration under federal and state securities laws and regulations. The
Fund currently offers one class of shares. At August 31, 2000 there were 10,000
shares of beneficial interest outstanding that were purchased at $10.00 per
share by the parent company of the Fund's investment adviser (see Note 3).

The following is a summary of significant accounting policies that the Fund
expects to consistently follow in the preparation of its financial statements.
The policies are in conformity with accounting principles generally accepted in
the United States for investment companies. The preparation of financial
statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.

A. SECURITY VALUATION. Equity securities are valued on the basis of valuations
furnished by a pricing service authorized by the Board of Trustees, which
service provides the last reported sale price for securities listed on an
applicable securities exchange or on the NASDAQ national market system, or, if
no sale was reported and in the case of over-the-counter securities not so
listed, the last reported bid price. Debt securities (other than short-term
obligations with a remaining maturity of less than sixty days) are valued on the
basis of valuations furnished by a pricing service as authorized by the Board of
Trustees, which service determines valuations for normal, institutional-size
trading units of such securities using market information, transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders. Short-term obligations with a
remaining maturity of less than sixty days are stated at amortized cost, which
approximates market value. Securities for which current market quotations are
not readily available and all other assets are valued at their fair value as
determined in good faith by the Fund's investment adviser and officers, under
the supervision of the Fund's Trustees.

B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions
are accounted for on the trade date. Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. In
determining net gain or loss on securities sold, the cost of securities will be
determined on the identified cost basis.

C. FEDERAL INCOME TAXES. The Fund intends to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies, and to
distribute to its shareholders all of its income and any net realized capital
gains, at least annually. Accordingly, the Fund does not intend to make a
provision for federal income tax.

D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are
recorded on the ex-dividend date. The timing and characterization of certain
income and capital gains distributions are determined in accordance with federal
tax regulations which may differ from generally accepted accounting principles.
Permanent book and tax basis differences relating to shareholder distributions
will result in reclassification to the paid in capital account.

E. REPURCHASE AGREEMENTS. The Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is the
Fund's policy that the market value of the collateral be at least equal to 100%
of the repurchase price, including interest. The Fund's investment adviser is
responsible for determining that the value of the collateral is at all times at
least equal to the repurchase price. 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.

F. ORGANIZATION EXPENSE. Costs incurred in connection with the Fund's
organization and registration, amounting to $28,694, have been accrued by the
Fund and are shown as expenses in the Fund's Statement of Operations (see Note
5).

2. PURCHASES AND SALES OF SECURITIES. The Fund had no purchases or sales of
portfolio securities.

<PAGE>

3A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. The Fund pays gross
management fees to its investment adviser, AEW Management and Advisors, L. P.
("AEW"), at the annual rate of 0.80% of the first $500 million of the Fund's
average daily net assets and 0.75% of such assets in excess of $500 million. AEW
is a wholly owned subsidiary of AEW Capital Management, L. P. ("AEW Capital"),
which in turn is a wholly-owned subsidiary of Nvest Holdings, L. P. Nvest
Holdings, L. P. is a wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest"),
which is a subsidiary of Metropolitan Life Insurance Company (see note 6). The
Fund has paid no fees paid to AEW.

B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. Nvest Services Company, Inc. ("NSC")
is a wholly owned subsidiary of Nvest and performs certain accounting and
administrative services for the Fund. The Fund pays NSC a fee for these services
equal to the annual rate of 0.0325% of the first $1 billion of average daily net
assets, 0.0225% of the next $1 billion of the average daily net assets, and
0.0175% of the average daily net assets in excess of $2 billion. The minimum
annual administrative fee is $55,000. The Fund has paid no fees paid to NSC.

C. TRANSFER AGENT FEES. NSC is also the transfer and shareholder-servicing agent
to the Fund and Boston Financial Data Services ("BFDS") serves as the
sub-transfer agent for the Fund. NSC receives from the Fund an account fee for
each shareholder account and pays BFDS for its services. NSC and BFDS are also
reimbursed by the Fund for out-of-pocket expenses. The minimum annual account
fee paid to NSC is $28,800. The Fund has made no account or expense payments to
NSC and BFDS.

D. DISTRIBUTION AGREEMENT. The Fund has entered into a distribution agreement
with Nvest Funds Distributor, L.P. ("Nvest Funds"), and a wholly owned
subsidiary of Nvest, to serve as principal underwriter of Fund shares.

E. TRUSTEE FEES AND EXPENSES. The Fund does not pay any compensation directly to
its officers or Trustees who are directors, officers or employees of AEW, AEW
Capital, Nvest Funds, Nvest, NSC or their affiliates. Each other Trustee
receives a fee at the annual rate of $100. Each other Trustee also receives
substantially higher fees for serving on the Boards of Trustees of five
affiliated Nvest Funds Trusts. These five Nvest Funds Trusts collectively have a
total of twenty-two mutual funds with total aggregate net assets of
approximately $7.4 billion on June 30, 2000.

4. CAPITAL SHARES. At August 31, 2000 there was an unlimited number of shares of
beneficial interest authorized.

5. EXPENSE REDUCTIONS. AEW has given a binding undertaking to the Fund through
January 31, 2002 to reduce its management fees, and if necessary, to bear
certain expenses related to operating the Fund, exclusive of brokerage,
interest, taxes, and extraordinary expenses, in order to limit the Fund's total
operating expenses to an annual rate of 1.25% of the average daily net assets of
the Fund. AEW is also permitted to recover from the Fund in later periods
expenses AEW has borne through January 31, 2002 to the extent that the Fund's
total operating expenses falls below the annual rate of 1.25%. The recovery
period is limited to not more than one year after the end of the Fund's fiscal
year in which AEW had reimbursed the Fund. These one year recovery periods will
expire on January 31, 2002 and January 31, 2003, respectively.

6. SUBSEQUENT EVENT. Nvest, L.P., and its affiliated operating partnership,
Nvest Companies, L.P., have entered into an agreement for CDC Asset Management
to acquire all of their outstanding partnership units. CDC Asset Management is
the investment management arm of France's Caisse des Depots Group, which is a
major diversified financial institution. Nvest, L. P. will be renamed CDC Asset
Management-North America and it will continue to use the holding company
structure. Nvest affiliates will retain their investment independence, brand
names, management and operating autonomy. The transaction will not affect daily
operations of the Fund or the investment management activities of the Funds'
investment adviser, AEW.

Consummation of the transaction with CDC is subject to a number of
contingencies, including regulatory approvals and approval of the unitholders of
Nvest, L.P. and Nvest Companies L.P. Under the rules for mutual funds the
transaction may result in a change of control for the Nvest affiliates.
Consequently, it is anticipated that the Nvest affiliates will seek approval of
new agreements from each Board of Trustees and shareholders prior to the
consummation of the transaction. The transaction is expected to close in the
fourth quarter of 2000.

27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Nvest Companies Trust I and
Shareholder of AEW Real Estate Securities Fund

In our opinion, the accompanying statement of assets and liabilities and the
related statement of operations present fairly, in all material respects, the
financial position of AEW Real Estate Securities Fund (the "Fund") at August 31,
2000, and the results of its operations for the period indicated, in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.

PricewaterhouseCoopers LLP

Boston, Massachusetts
August 31, 2000

28
<PAGE>

APPENDIX A
DESCRIPTION OF BOND RATINGS

STANDARD & POOR'S RATINGS GROUP
-------------------------------

AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay interest and repay
principal.

AA -- Bonds rated AA also qualify as high quality debt obligations. Capacity to
pay interest and repay principal is very strong, and in the majority of
instances they differ from AAA 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.

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 repay principal and pay interest for
bonds in this category than for bonds in higher rated categories.

BB, B, CCC, CC, C -- Bonds rated BB, B, CCC, CC and C are regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.

CI -- The rating CI is reserved for income bonds on which no interest is being
paid.

D -- Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.

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

MOODY'S INVESTORS SERVICE, INC.
-------------------------------

Aaa -- Bonds that 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 that are rated Aa are judged to be 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 that make the
long-term risks appear somewhat larger than in Aaa securities.

A -- Bonds that 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 that
suggest a susceptibility to impairment sometime in the future.

Baa -- Bonds that 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.

29
<PAGE>

Ba -- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B -- Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default of there may be present elements of danger with respect to principal or
interest.

Ca -- Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C -- Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Should no rating be assigned by Moody's, the reason may be one of the following:

1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed in which case the rating is not
published in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is not longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.

Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, and B1.

FITCH INVESTOR SERVICES, INC.
-----------------------------

AAA -- This is the highest rating assigned by Fitch to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.

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.

CI -- The rating CI is reserved for income bonds on which no interest is being
paid.

D -- Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.

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

30
<PAGE>

APPENDIX B
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION

ABC and affiliates
Adam Smith's Money World
America OnLine
Anchorage Daily News
Arizona Republic
Atlanta Constitution
Atlanta Journal
Austin American Statesman
Baltimore Sun
Bank Investment Marketing
Barron's
Bergen County Record (NJ)
Bloomberg
Business News
B'nai B'rith Jewish Monthly
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
Cincinnati Post
CNBC
CNN
Columbus Dispatch
CompuServe
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghues Money Fund Report
Dorfman, Dan (syndicated column)
Dow Jones News Service
Economist
FACS of the Week
Fee Adviser
Financial News Network
Financial Planning
Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World
Fitch Insights

31
<PAGE>

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 Advisor
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
Leckey, Andrew (syndicated column)
Lear's
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
Mutual Funds Magazine
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel

<PAGE>

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 Advisor
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

33
<PAGE>

APPENDIX C
ADVERTISING AND PROMOTIONAL LITERATURE

References may be included in the Fund's advertising and promotional
literature to Nvest Companies and its affiliates that perform advisory functions
for the Fund, including, but not limited to AEW.

References may be included in the Fund's advertising and promotional literature
to other Nvest Companies affiliates including, but not limited to, Nvest
Corporation, Back Bay Advisors, L.P., Harris Associates L.P., Loomis, Sayles &
Company, L.P., Capital Growth Management Limited Partnership, Westpeak
Investment Advisors, L.P., Vaughan, Nelson, Scarborough & McCullough, L.P.,
Kobrick Funds LLC, Snyder Capital Management, L.P., Reich & Tang Capital
Management, Reich and Tang Mutual Funds Group and Jurika & Voyles, L.P. and
their fund groups.

The Fund's advertising and promotional material will include, but is not
limited to, discussions of the following information about both affiliated and
unaffiliated entities:

o Specific and general assessments and forecasts regarding U.S. and world
economies, and the economies of specific nations and their impact on the
Fund;

o Specific and general investment emphasis, specialties, fields of expertise,
competencies, operations and functions;

o Specific and general investment philosophies, strategies, processes,
techniques and types of analysis;

o Specific and general sources of information, economic models, forecasts and
data services utilized, consulted or considered in the course of providing
advisory or other services;

o The corporate histories, founding dates and names of founders of the
entities;

o Awards, honors and recognition given to the entities;

o The names of those with ownership interest and the percentage of ownership
interest;

o The industries and sectors from which clients are drawn and specific client
names and background information on current individual, corporate and
institutional clients, including pension and profit sharing plans;

o Current capitalizations, levels of profitability and other financial and
statistical information;

o Identification of portfolio managers, researchers, economists, principals
and other staff members and employees;

o The specific credentials of the above individuals, including, but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors;

o Specific and general reference to past and present notable and renowned
individuals including reference to their field of expertise and/or specific
accomplishments;

o Current and historical statistics regarding:

-total dollar amount of assets managed
-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;

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o The general and specific strategies applied by the advisers in the
management of the Fund, including, but not limited to:

-the pursuit of growth, value, income oriented, risk management or other
strategies
-the manner and degree to which the strategy is pursued
-whether the strategy is conservative, moderate or extreme and an
explanation of other features and attributes
-the types and characteristics of investments sought and specific portfolio
holdings
-the actual or potential impact and result from strategy implementation
-through its own areas of expertise and operations, the value added by
sub-advisers to the management process
-the disciplines it employs; and

o Specific and general references to portfolio managers and funds that they
serve as portfolio manager of and those families of funds. Any such
references will indicate that the Fund and 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 Fund and other funds managed by AEW, including,
but not limited to, those provided by Morningstar, Lipper Analytical
Services, Forbes and Worth.

In addition, communications and materials developed by the Fund 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 Exchange. Nvest Companies has 18 principal
subsidiary or affiliated asset management firms, which collectively had more
than $130 billion of assets under management as of June 30, 2000. In addition,
promotional materials may include:

Nvest Advisor Services ("NAS"), Nvest Managed Account Services ("NMAS") 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.

NAS, NMAS 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, NMAS
and NRS and the types of services it provides which may include: seminars; its
1-800 number, web site, Internet or other electronic facilities; qualitative
information about the funds' investment methodologies; information about
specific strategies and management techniques; performance data and features of
the funds; institutional oriented research and portfolio manager insight and
commentary. Additional information contained in advertising and promotional
literature may include: rankings and ratings of the funds including, but not
limited to, those of Morningstar and Lipper Analytical Services; statistics
about the advisers', fund groups' or a specific fund's assets under management;
the histories of the advisers and biographical references to portfolio managers
and other staff including, but not limited to, background, credentials, honors,
awards and recognition received by the advisers and their personnel; and
commentary about the advisers, their funds and their personnel from third-party
sources including newspapers, magazines, periodicals, radio, television or other
electronic media.

References may be included in the Fund's advertising and promotional
literature about 401(k) and retirement plans. The information may include, but
is not limited to:

o Specific and general references to industry statistics regarding 401(k) and
retirement plans including historical information, industry trends and
forecasts regarding the growth of assets, numbers of plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms including, but not limited to, DC Xchange,
William Mercer and other organizations involved in 401(k) and retirement
programs.

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o Specific and general discussion of economic, legislative, and other
environmental factors affecting 401(k) and retirement plans, including, but
not limited to, statistics, detailed explanations or broad summaries of:

-past, present and prospective tax regulation, Internal Revenue Service
requirements and rules, including, but not limited to, reporting
standards, minimum distribution notices, Form 5500, Form 1099R and other
relevant forms and documents, Department of Labor rules and standards and
other regulations. This includes past, current and future initiatives,
interpretive releases and positions of regulatory authorities about the
past, current or future eligibility, availability, operations,
administration, structure, features, provisions or benefits of 401(k) and
retirement plans;
-information about the history, status and future trends of Social
Security and similar government benefit programs including, but not
limited to, eligibility and participation, availability, operations and
administration, structure and design, features, provisions, benefits and
costs; and
-current and prospective ERISA regulation and requirements.

o Specific and general discussion of the benefits of 401(k) investment and
retirement plans to the participant and plan sponsor, including
explanations, statistics and other data, about:

-increased employee retention
-reinforcement or creation of morale
-deductibility of contributions for participants
-deductibility of expenses for employers
-tax deferred growth, including illustrations and charts
-loan features and exchanges among accounts
-educational services materials and efforts, including, but not limited
to, videos, slides, presentation materials, brochures, an investment
calculator, payroll stuffers, quarterly publications, releases and
information on a periodic basis and the availability of wholesalers and
other personnel.

o Specific and general reference to the benefits of investing in mutual funds
for 401(k) and retirement plans, including, but not limited to:

-the significant economies of scale experienced by mutual fund companies in
the 401(k) and retirement benefits arena
-broad choice of investment options and competitive fees
-plan sponsor and participant statements and notices
-the plan prototype, summary descriptions and board resolutions
-plan design and customized proposals
-trusteeship, record keeping and administration
-the services of State Street Bank, including, but not limited to, trustee
services and tax reporting
-the services of DST and BFDS, including, but not limited to, mutual fund
processing support, participant 800 numbers and participant 401(k)
statements
-the services of Trust Consultants Inc. (TCI), including, but not limited
to, sales support, plan record keeping, document service support, plan
sponsor support, compliance testing and Form 5500 preparation.

o Specific and general reference to the role of the investment dealer and the
benefits and features of working with a financial professional including:

-access to expertise on investments
-assistance in interpreting past, present and future market trends and
economic events
-providing information to clients including participants during enrollment
and on an ongoing basis after participation
-promoting and understanding the benefits of investing, including mutual
fund diversification and professional management.

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