Securities Act of 1933 Registration No. 2-81614
Investment Act of 1940 Registration No. 811-3658
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No.___[ ]
Post-Effective Amendment No. 28 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 28 [X]
NVEST TAX EXEMPT MONEY MARKET TRUST
(Exact Name of Registrant as Specified in Charter)
399 Boylston Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 578-1669
John E. Pelletier, Esq.
Nvest Funds Distributor, L.P.
399 Boylston Street
Boston, Massachusetts 02110
(Name and Address of Agent for Service)
Copies to:
John M. Loder, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
It is proposed that this filing will become effective under Rule 485:
[ ] Immediately upon filing pursuant to paragraph (b),
[x] On September 1, 2000 pursuant to paragraph (b),
[ ] 60 days after filing pursuant to paragraph (a)(1),
[ ] On ___________ pursuant to paragraph (a)(1),
[ ] 75 days after filing pursuant to paragraph (a)(2),
[ ] On ___________ pursuant to paragraph (a)(2).
If appropriate, check the following box:
[ ] This post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
<PAGE>
[NVEST LOGO GOES HERE]
NVEST
MONEY MARKET FUNDS
BACK BAY ADVISORS, L.P.
Taxable Money Market Fund
Nvest Cash Management Trust--
Money Market Series
Back Bay Advisors, L.P.
Tax Exempt Money Market Fund
Nvest Tax Exempt
Money Market Trust
Back Bay Advisors, L.P.
PROSPECTUS
September 1, 2000
WHAT'S INSIDE
Goals, Strategies & Risks
Page 2
--------------------------
Fund Fees & Expenses
Page 6
--------------------------
Management Team
Page 8
--------------------------
Fund Services
Page 9
--------------------------
Fund Performance
Page 18
--------------------------
The Securities and Exchange Commission 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 general information on the Fund or any of its services and for assistance in
opening an account, contact your financial representative or call Nvest
Funds.
NVEST FUNDS
399 Boylston Street, Boston, Massachusetts 02116
800-225-5478
www.nvestfunds.com
<PAGE>
NVEST CASH MANAGEMENT TRUST-
MONEY MARKET SERIES
NVEST TAX EXEMPT MONEY MARKET TRUST
Supplement dated September 1, 2000 to the Funds' Prospectus and
Statement of Additional Information dated September 1, 2000
The information contained in the Prospectus in the section entitled "Meet the
Funds' Investment Adviser and Subadviser" and in the Statement of Additional
Information ("SAI") in the section entitled "Investment Advisory, Subadvisory,
Distribution and Other Services" assumes the closing of the acquisition of
Nvest, L.P. and Nvest Companies, L.P. by CDC Asset Management. Following the
acquisition, it is expected that Nvest Companies, L.P. will be renamed to CDC
Asset Management - North America. The acquisition is scheduled to close in the
fourth quarter of 2000; however, the closing may be delayed or the acquisition
may never close. Until the closing of the acquisition, the following information
is in effect:
Prospectus
----------
Nvest Management is a subsidiary of Nvest Companies, L.P. ("Nvest Companies"),
which is part of an affiliated group of companies that includes Nvest, L.P., a
publicly traded company listed on the New York Stock Exchange. Nvest Companies'
18 principal subsidiaries or affiliated asset management firms, collectively,
had more than $130 billion in assets under management as of June 30, 2000.
SAI
---
Nvest Management, formed in 1995, is a limited partnership whose sole general
partner, Nvest Distribution Corporation, is a wholly-owned subsidiary of Nvest
Holdings, L.P. ("Nvest Holdings"), which in turn is a wholly-owned subsidiary of
Nvest Companies. Nvest Companies owns the entire limited partnership interest in
each of Nvest Management and the Distributor.
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,
directly or indirectly, approximately 48% of the outstanding limited partnership
interests in Nvest Companies. Nvest Companies' advising general partner is
Nvest, L.P. Nvest Corporation is the sole general partner of Nvest, L.P.
<PAGE>
TABLE OF CONTENTS
GOALS, STRATEGIES & RISKS
Nvest Cash Management Trust - Money Market Series ...... 2
Nvest Tax Exempt - Money Market Trust .................. 4
FUND FEES & EXPENSES
Fund Fees & Expenses ................................... 6
MORE ABOUT RISK
More About Risk ........................................ 7
MANAGEMENT TEAM
Meet the Fund's Investment Adviser and Subadviser ...... 8
FUND SERVICES
Investing in the Funds ................................. 9
It's Easy to Open an Account ........................... 9
Buying Shares ..........................................10
Selling Shares .........................................11
Selling Shares in Writing ..............................12
Exchanging Shares ......................................13
Restrictions on Buying, Selling and Exchanging Shares ..14
How Fund Shares Are Priced .............................15
Dividends and Distributions ............................16
Tax Consequences .......................................16
Addional Investor Services .............................17
FUND PERFORMANCE
Nvest Cash Management Trust - Money Market Series ......18
Nvest Tax Exempt - Money Market Trust ..................19
Glossary of Terms ......................................20
If you have questions about any of the terms used in this Prospectus, please
refer to the "Glossary of Terms."
<PAGE>
GOALS, STRATEGIES & RISKS
-------------------------
NVEST CASH MANAGEMENT
TRUST - MONEY MARKET SERIES
ADVISER: Nvest Funds Management, L.P. ("Nvest Management")
SUBADVISER: Back Bay Advisors, L.P. ("Back Bay Advisors")
FUND FOCUS
-------------------------------
STABILITY | INCOME | GROWTH
HIGH X | |
--------------------------------
MOD. | |
--------------------------------
LOW | X | X
TICKER SYMBOL: CLASS A CLASS B CLASS C
---------------------------
NEMXX NMBXX NVCXX
INVESTMENT GOAL
The Fund seeks maximum current income consistent with preservation of capital
and liquidity.
PRINCIPAL INVESTMENT STRATEGIES
The Fund will invest up to 100% of its assets in high-quality, short-term, U.S.
dollar-denominated money market investments issued by U.S. and foreign issuers.
To preserve its investors' capital, the Fund seeks to maintain a stable $1.00
share price. Some of the Fund's portfolio positions include:
* Certificates of deposit
* Bankers' acceptances or bank notes
* Securities issued or guaranteed by the U.S. government
* Commercial paper
* Repurchase agreements
* Other corporate debt obligations
* Cash
Back Bay Advisors will manage the Fund's portfolio in compliance with
industry-standard requirements for money market funds. These requirements
include:
o CREDIT QUALITY -- The Fund's investments are generally rated in the two
highest rating categories as rated by a major credit agency.
o MATURITY -- Each of the Fund's investments has a maturity of 397 days or
less and the dollar-weighted average portfolio maturity is 90 days or less.
o DIVERSIFICATION -- The Fund is diversified, which limits its exposure to
any given issuer.
The Fund's portfolio manager may adjust the Fund's holdings or its average
maturity based on actual or anticipated changes in interest rates or credit
quality. The Fund is appropriate for investors who seek a conservative
investment for their portfolio or who are comfortable with the risks described
below and need cash immediately.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report.
PRINCIPAL INVESTMENT RISKS OF MONEY MARKET SECURITIES
CREDIT AND INTEREST RATE RISK. Subject to credit risk and interest rate risk.
Credit risk relates to the ability of an issuer to make payments of principal
and interest when due and includes the risk of default. Although generally
considered unlikely, the risk of default could cause the Fund's share price or
yield to fall. Interest rate risk relates to changes in a security's value as a
result of changes in interest rates. Generally, the value of money market
securities rises when prevailing interest rates fall and falls when interest
rates rise.
FOREIGN INVESTMENT RISK. Risks of foreign investments include a lack of issuer
information, the risk of political uncertainties as well as different regulatory
requirements.
NOT INSURED. An investment in the Fund is not a deposit of a bank or insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the net asset value of your
investment at $1.00 per share, it is possible to lose money by investing in the
Fund.
To learn more about the possible risks of investing in a Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Funds may engage. Please read this section carefully
before you invest.
<PAGE>
GOALS, STRATEGIES & RISKS
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in the Fund by showing changes in the Fund's performance from year to year. The
Fund's past performance does not necessarily indicate how the Fund will perform
in the future. The bar chart shows the Fund's total returns for Class A shares
for each of the last ten calendar years.+
[BAR CHART APPEARS HERE]
TOTAL RETURN
------------
1990 8.29%
1991 7.15%
1992 4.58%
1993 2.84%
1994 2.68%
1995 4.76%
1996 4.96%
1997 4.77%
1998 4.99%
1999 4.54%
o Highest Quarterly Return: Fourth Quarter 1990, up 1.95%
o Lowest Quarterly Return: Third Quarter 1999, up 0.61%
+ The Fund's Class A shares total return year-to-date as of June 30, 2000 was
2.65%.
The table below shows the Fund's average annual total returns for the one-year,
five-year and ten-year periods (or since the class's inception if shorter).
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED JUNE 30, 2000) PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
--------------------------------------------------------------------------------
Nvest Cash Management Trust -
Money Market Series:
Class A (Inception 7/10/78) 5.10% 4.87% 4.63%
Nvest Cash Management Trust -
Money Market Series:
Class B (Inception 9/13/93) 5.10% 4.88% 4.61%*
Nvest Cash Management Trust -
Money Market Series:
Class C (Inception 3/1/98) 5.10% -- 4.86%*
*Since class inception
For actual past expenses of Class A, B and C shares, see the section entitled
"Fund Fees and Expenses."
For current yield information about the Fund, shareholders or their financial
representatives may call Nvest Funds Personal Access Line(R) 24 hours a day at
800-225-5478, press 1.
Prospectus -- 3
<PAGE>
GOALS, STRATEGIES & RISKS
-------------------------
NVEST TAX EXEMPT
MONEY MARKET TRUST
ADVISER: Nvest Funds Management, L.P. ("Nvest Management")
SUBADVISER: Back Bay Advisors, L.P. ("Back Bay Advisors")
FUND FOCUS
-------------------------------
STABILITY | INCOME | GROWTH
HIGH X | |
--------------------------------
MOD. | |
--------------------------------
LOW | X | X
TICKER SYMBOL: CLASS A CLASS B
------------------
NEEXX TEBXX
INVESTMENT GOAL
The Fund seeks current income exempt from federal income taxes consistent with
the preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest in high-quality,
short-term, U.S. dollar-denominated money market instruments that pay interest
that is exempt from federal income tax ("Municipal Securities"). Municipal
Securities are generally issued by state and local governments and their
agencies. It is a fundamental policy of the Fund that, unless it has adopted a
temporary defensive position in response to adverse conditions, it will invest
at least 80% of its net assets in Municipal Securities. To preserve its
investors' capital, the Fund seeks to maintain a stable $1.00 share price. Some
of the Fund's portfolio positions include:
o Notes or bonds
o Commercial paper
o When-issued securities or securities purchased from a broker-dealer with
the right to sell them back at a certain time and price (a "put")
o Variable or floating interest rate obligations
o Taxable, high-quality money market securities including certificates of
deposit, bankers' acceptances or bank notes, and other corporate debt
obligations
o Repurchase Agreements
o Cash
Back Bay Advisors will manage the Fund's portfolio in compliance with
industry-standard requirements for money market funds. These requirements
include:
o CREDIT QUALITY -- The Fund's investments are generally rated in the two
highest rating categories as rated by a major credit agency.
o MATURITY -- Each of the Fund's investments has a maturity of 397 days or
less and the dollar-weighted average portfolio maturity is 90 days or less.
o DIVERSIFICATION -- The Fund is diversified, which limits its exposure to
any given issuer.
The Fund's portfolio manager may adjust the Fund's holdings or its average
maturity based on actual or anticipated changes in interest rates or credit
quality. The Fund is appropriate for investors who seek a conservative
investment exempt from federal taxes for their portfolio or who are comfortable
with the risks described below and need cash immediately.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS OF MONEY MARKET SECURITIES
CREDIT AND INTEREST RATE RISK. Subject to credit risk and interest rate risk.
Credit risk relates to the ability of an issuer to make payments of principal
and interest when due and includes the risk of default. Although generally
considered unlikely, the risk of default could cause the Fund's share price or
yield to fall. Interest rate risk relates to changes in a security's value as a
result of changes in interest rates. Generally, the value of money market
securities rises when prevailing interest rates fall and falls when interest
rates rise.
STABILITY AND LIQUIDITY. The Fund's price stability and liquidity may not be
equal to that of a taxable money market fund, because the market for Municipal
Securities is not as broad as the market for taxable money market securities and
the average portfolio maturity is generally greater for the Fund than for a
taxable money market fund.
NOT INSURED. An investment in the Fund is not a deposit of a bank or insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
To learn more about the possible risks of investing in a Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Funds may engage. Please read this section carefully
before you invest.
Prospectus-- 4
<PAGE>
GOALS, STRATEGIES & RISKS
--------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in the Fund by showing changes in the Fund's performance from year to year. The
Fund's past performance does not necessarily indicate how the Fund will perform
in the future. The bar chart shows the Fund's total returns for Class A shares
for each of the last ten calendar years.+
[BAR CHART APPEARS HERE]
TOTAL RETURN
------------
1990 5.56%
1991 4.93%
1992 3.42%
1993 2.20%
1994 2.10%
1995 3.15%
1996 3.33%
1997 3.20%
1998 3.29%
1999 2.80%
o Highest Quarterly Return: Fourth Quarter 1990, up 1.43%
o Lowest Quarterly Return: Third Quarter 1999, up 0.48%
+ The Fund's Class A shares total return year-to-date as of June 30, 2000 was
1.67%.
The table below shows the Fund's average annual total returns for the one-year,
five-year and ten-year periods (or since the class's inception if shorter).
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED JUNE 30, 2000) PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
--------------------------------------------------------------------------------
Nvest Tax Exempt Money Market Trust -
Class A (Inception 4/21/83) 3.13% 3.15% 3.15%
Nvest Tax Exempt Money Market Trust -
Class B (Inception 9/13/93) 3.13% 3.15% 3.08%*
*Since class inception
For actual past expenses of Class A and B shares, see the section entitled "Fund
Fees and Expenses."
For current yield information about the Fund, shareholders or their financial
representatives may call Nvest Funds Personal Access Line(R) 24 hours a day at
800-225-5478, press 1.
Prospectus-- 5
<PAGE>
FUND FEES & EXPENSES
--------------------
The following tables describe the fees and expenses that you may pay if you buy
and hold shares of each Fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
CASH MANAGEMENT TRUST -- TAX EXEMPT
MONEY MARKET SERIES MONEY MARKET TRUST
CLASS A CLASS B CLASS C CLASS A CLASS B
--------------------------------------------------------------------------------
Maximum sales charge (load)
imposed on purchases None None None None None
Maximum deferred sales
charge (load) None* None* None* None* None*
Redemption fees None** None** None** None** None**
* Shares of each class are sold without any sales charge. However, shares may
be subject to a Contingent Deferred Sales Charge ("CDSC") if the shares
were purchased by exchange from another Nvest Fund. See the section
entitled "Exchanging Shares."
** 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)
CASH MANAGEMENT TRUST -- TAX EXEMPT
MONEY MARKET SERIES MONEY MARKET TRUST
CLASS A CLASS B CLASS C CLASS A CLASS B
--------------------------------------------------------------------------------
Management fees 0.42% 0.42% 0.42% 0.40% 0.40%
Distribution and/or
service (12b-1) fees 0.00% 0.00% 0.00% 0.00% 0.00%
Other expenses 0.42% 0.42% 0.42% 0.39% 0.39%
Total annual fund
operating expenses 0.84% 0.84% 0.84% 0.79% 0.79%
EXAMPLE
This example is intended to help you compare the cost of investing in each Fund
with the cost of investing in other mutual funds. The example assumes that:
o You invest $10,000 in the Fund for the time periods indicated;
o Your investment has a 5% return each year; and
o The Fund's operating expenses remain the same.
Although your actual costs and returns may be higher or lower, based on these
assumptions your costs would be:
CASH MANAGEMENT TRUST-- TAX EXEMPT
MONEY MARKET SERIES MONEY MARKET TRUST
CLASS A CLASS B CLASS C CLASS A CLASS B
(1) (1)
--------------------------------------------------------------------------------
1 year $ 86 $ 86 $ 86 $ 81 $ 81
3 years $ 268 $ 268 $ 268 $ 252 $ 252
5 years $ 466 $ 466 $ 466 $ 439 $ 439
10 years $ 1,037 $ 1,037 $ 1,037 $ 978 $ 978
(1) Assumes CDSC does not apply to the redemption. See the section entitled
"Exchanging Shares."
6-PROSPECTUS
<PAGE>
MORE ABOUT RISK
The Fund have principal investment strategies that come with inherent risks. The
following is a list of risks to which each Fund may be subject by investing in
various types of securities or engaging in various practices.
MARKET RISK (Both Funds) 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 (Both Funds) The risk that a strategy used by a Fund's portfolio
management may fail to produce the intended result.
CREDIT RISK (Both Funds) The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to honor a
financial obligation.
INTEREST RATE RISK (Both Funds) The risk of market losses attributable to
changes in interest rates. With fixed-income securities, a rise in interest
rates typically causes a fall in a security's value.
FOREIGN RISK (Cash Management Trust - Money Market Series) A foreign security
may be affected by limited liquidity and higher volatility than securities held
by a U.S. bank. Political, economic and information risks as well as different
regulatory requirements are also associated with securities held by a foreign
bank.
INFORMATION RISK (Both Funds) The risk that key information about a security is
inaccurate or unavailable.
OPPORTUNITY RISK (Both Funds) The risk of missing out on an investment
opportunity because the assets necessary to take advantage of such opportunity
are tied up in less advantageous investments.
LIQUIDITY RISK (Both Funds) The risk that certain securities may be difficult or
impossible to sell at the time and at the price that the seller would like. This
may result in a loss or may otherwise be costly to a Fund.
VALUATION RISK (Both Funds) The risk that the Fund has valued certain securities
at a higher price than it can sell them for.
POLITICAL RISK (Both Funds) The risk of losses directly attributable to
government or political actions.
PROSPECTUS-7
<PAGE>
MANAGEMENT TEAM
---------------
MEET EACH FUND'S INVESTMENT ADVISER AND SUBADVISER
The Nvest Funds family includes 25 mutual funds with a total of over $8 billion
in assets under management as of June 30, 2000. Nvest Funds are distributed
through Nvest Funds Distributor, L.P. (the "Distributor"). This Prospectus
covers Nvest Cash Management Trust - Money Market Series and Nvest Tax Exempt
Money Market Trust (the "Money Market Funds" and each a "Fund"). Nvest Stock
Funds, Nvest Bond Funds, Nvest Star Funds, Kobrick Funds and Nvest State
Tax-Free Funds constitute the "Nvest Funds."
NVEST FUNDS MANAGEMENT, L.P.
Nvest Management, located at 399 Boylston Street, Boston, Massachusetts 02116,
serves as the adviser to each of the Funds. Nvest Management is a subsidiary of
CDC Asset Management - North America (formerly Nvest Companies, L.P.), which is
a subsidiary of CDC Asset Management. CDC Asset Management is part of the
investment management arm of France's Caisse des Depots et Consignations
("CDC"), a major diversified financial institution. As of June 30, 2000, CDC
Asset Management - North America had more than $130 billion in assets under
management. Nvest Management oversees, evaluates and monitors the subadvisory
services provided to each Fund. It also provides general business management and
administration to each Fund. Back Bay Advisors makes the investment decisions
for each Fund.
The combined advisory and subadvisory fees paid by the Funds for the year ended
June 30, 2000, as a percentage of each Fund's average daily net assets, were
0.42% for the Cash Management Trust - Money Market Series and 0.40% for the Tax
Exempt Money Market Trust.
SUBADVISER
BACK BAY ADVISORS, located at 399 Boylston Street, Boston, Massachusetts 02116,
serves as the subadviser for each Fund. Back Bay Advisors is a subsidiary of CDC
Asset Management - North America. Back Bay Advisors, founded in 1986, provides
discretionary investment management services for approximately $4.9 billion in
assets as of June 30, 2000 for mutual funds and other institutional investors.
SUBADVISORY AGREEMENTS
Each Fund has received an exemptive order from the Securities and Exchange
Commission (the "SEC") which permits Nvest Management to amend or continue
existing subadvisory agreements when approved by the Fund's Board of Trustees,
without shareholder approval. The exemption also permits Nvest Management to
enter into new subadvisory agreements with subadvisers that are not affiliated
with Nvest Management if approved by each Fund's Board of Trustees. Shareholders
will be notified of any subadviser changes.
PORTFOLIO TRADES
In placing portfolio trades, each Fund's adviser or subadviser may use brokerage
firms that market the Fund's shares or are affiliated with CDC Asset Management
- North America, Nvest Management, or Back Bay Advisors. In placing trades, Back
Bay Advisors 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 each
Fund's Board of Trustees.
8 -- Prospectus
<PAGE>
FUND SERVICES
-------------
INVESTING IN THE FUNDS
CHOOSING A SHARE CLASS
Nvest Cash Management Trust - Money Market Series offers Class A, Class B and
Class C shares to the public and Nvest Tax Exempt Money Market Trust offers only
Class A and Class B shares. The classes of each Fund enable shareholders in the
same classes of another Nvest Fund to invest in the Money Market Funds through
an exchange of shares.
IT'S EASY TO OPEN AN ACCOUNT
TO OPEN AN ACCOUNT WITH NVEST FUNDS:
1. Read this Prospectus carefully.
2. Determine how much you wish to invest. The following chart shows the
investment minimums for various types of accounts:
MINIMUM TO OPEN AN
MINIMUM TO ACCOUNT USING MINIMUM FOR
TYPE OF ACCOUNT OPEN AN ACCOUNT INVESTMENT BUILDER EXISTING ACCOUNTS
--------------------------------------------------------------------------------
Any account other
than those listed
below $2,500 $100 $100
Accounts registered
under the Uniform
Gifts to Minors Act
or the Uniform
Transfers to Minors $2,500 $100 $100
Act Individual
Retirement Accounts
("IRAs") $500 $100 $100
Retirement plans with
tax benefits such as
corporate pension,
profit sharing and
Keogh plans $250 $100 $100
Payroll Deduction
Investment Programs
for SARSEP*, SEP,
SIMPLE IRA,
403(b)(7) and
certain other
retirement plans $25 N/A $25
3. Complete the appropriate parts of the account application, carefully
following the instructions. If you have any questions, please call your
financial representative or Nvest Funds at 800-225-5478. For more
information on Nvest Funds' investment programs, refer to the section
entitled "Additional Investor Services" in this Prospectus.
4. Use the following sections as your guide for purchasing shares.
* Effective January 1, 1997, the Savings Incentive Match Plan for Employees
of Small Employers (SIMPLE) IRA became available replacing SARSEP plans.
SARSEP plans established prior to January 1, 1997 may remain active and
continue to add new employees.
SELF-SERVICING YOUR ACCOUNT
Buying or selling shares is easy with the services described below:
NVEST FUNDS PERSONAL ACCESS LINE(R) NVEST FUNDS WEB SITE
800-225-5478, press 1 WWW.NVESTFUNDS.COM
You have access to your account 24 hours a day by calling Personal Access Line
(R) from a touch-tone telephone or by visiting us online.
Using these customer service options, you may:
o purchase, exchange or redeem shares in your existing accounts (certain
restrictions may apply);
o view your account balances, recent transactions, Fund prices and recent
performance;
o order duplicate account statements; and
o obtain tax information.
Please see the following pages for other ways to buy, exchange or sell your
shares.
Prospectus -- 9
<PAGE>
FUND SERVICES
--------------
BUYING SHARES
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
--------------------------------------------------------------------------------
THROUGH YOUR INVESTMENT DEALER
o Call your investment o Call your investment
dealer for information. dealer for information.
--------------------------------------------------------------------------------
BY MAIL
o Make out a check in U.S. o Make out a check in U.S.
dollars for the dollars for the
investment amount, investment amount,
payable to "Nvest Funds." payable to "Nvest Funds."
Third party checks and Third party checks and
"starter" checks will not "starter" checks will not
be accepted. be accepted.
o Mail the check with your o Fill out the detachable
completed application to investment slip from an
Nvest Funds, P.O. Box account statement. If no
8551, Boston, MA slip is available,
02266-8551. include with the check a
letter specifying the
Fund name, your class of
shares, your account
number and the registered
account name(s). To make
investing even easier,
you can order more
investment slips by
calling 800-225-5478.
--------------------------------------------------------------------------------
BY EXCHANGE
o Obtain a current o Call your investment
prospectus for the Fund dealer or Nvest Funds at
into which you are 800-225-5478 to request
exchanging by calling an exchange.
your investment dealer or
Nvest Funds at o See the section entitled
800-225-5478. "Exchanging Shares".
o Call your investment
dealer or Nvest Funds to
request an exchange.
o See the section entitled
"Exchanging Shares".
--------------------------------------------------------------------------------
BY WIRE
o Call Nvest Funds at o Instruct your bank to
800-225-5478 to obtain an transfer funds to State
account number and wire Street Bank & Trust
transfer instructions. Company, ABA# 011000028,
Your bank may charge you DDA# 99011538.
for such a transfer.
o Specify the Fund name,
your class of shares,
your account number and
the registered account
name(s). Your bank may
charge you for such a
transfer.
--------------------------------------------------------------------------------
AUTOMATIC INVESTING THROUGH INVESTMENT BUILDER
o Indicate on your o Please call Nvest Funds
application that you at 800-225-5478 for a
would like to begin an Service Options Form. A
automatic investment plan signature guarantee may
through Investment be required to add this
Builder and the amount of privilege.
your monthly investment
($100 minimum). o See the section entitled
"Additional Investor
o Send a check marked Services."
"Void" or a deposit slip
from your bank account
along with your
application.
--------------------------------------------------------------------------------
THROUGH AUTOMATED CLEARING HOUSE (ACH)
o Ask your bank or credit o Call Nvest Funds at
union whether it is a 800-225-5478 to add
member of the ACH system. shares to your account
through ACH.
o Complete the "Telephone
Withdrawal and Exchange" o If you have not signed up
and "Bank Information" for the ACH system,
sections on your account please call Nvest Funds
application. for a Service Options
Form. A signature
o Mail your completed guarantee may be required
application to Nvest to add this privilege.
Funds, P.O. Box 8551,
Boston, MA 02266-8551.
10-PROSPECTUS
<PAGE>
FUND SERVICES
-------------
SELLING SHARES
TO SELL SOME OR ALL OF YOUR SHARES
Certain restrictions may apply. See section entitled "Restrictions on Buying,
Selling and Exchanging Shares."
--------------------------------------------------------------------------------
THROUGH YOUR INVESTMENT DEALER
o Call your investment dealer for information.
--------------------------------------------------------------------------------
BY MAIL
o Write a letter to request a redemption specifying the name of the
Fund, the class of shares, your account number, the exact
registered account name(s), the number of shares or the dollar
amount to be redeemed and the method by which you wish to receive
your proceeds. Additional materials may be required. See the
section entitled "Selling Shares in Writing."
o The request must be signed by all of the owners of the shares and
must include the capacity in which they are signing, if
appropriate.
o Mail your request by REGULAR mail to Nvest Funds, P.O. Box 8551,
Boston, MA 02266-8551 or by REGISTERED, EXPRESS OR CERTIFIED mail
to Nvest Funds, 66 Brooks Drive, Braintree, MA 02184.
o Your proceeds (less any applicable CDSC) will be delivered by the
method chosen in your letter. If you choose to have your proceeds
delivered by mail, they will generally be mailed to you on the
business day after the request is received in good order. You may
also choose to redeem by wire or through ACH (see below).
--------------------------------------------------------------------------------
BY EXCHANGE
o Obtain a current prospectus for the Fund into which you are
exchanging by calling your investment dealer or Nvest Funds at
800-225-5478.
o Call Nvest Funds or visit nvestfunds.com to request an exchange.
o See the section entitled "Exchanging Shares" for more details.
--------------------------------------------------------------------------------
BY WIRE
o Fill out the "Telephone Withdrawal and Exchange" and "Bank
Information" sections on your account application.
o Call Nvest Funds at 800-225-5478 or indicate in your redemption
request letter (see above) that you wish to have your proceeds
wired to your bank.
o Proceeds (less any applicable CDSC) will generally be wired on
the next business day. A wire fee (currently $5.00) will be
deducted from the proceeds.
--------------------------------------------------------------------------------
THROUGH AUTOMATED CLEARING HOUSE (ACH)
o Ask your bank or credit union whether it is a member of the ACH
system.
o Complete the "Telephone Withdrawal and Exchange" and "Bank
Information" sections on your account application.
o If you have not signed up for the ACH system on your application,
please call Nvest Funds at 800-225-5478 for a Service Options
Form.
o Call Nvest Funds to request a redemption through this system.
o Proceeds (less any applicable CDSC) will generally arrive at your
bank within three business days.
--------------------------------------------------------------------------------
BY SYSTEMATIC WITHDRAWAL PLAN
o Please refer to the section entitled "Additional Investor
Services" or call Nvest Funds at 800-225-5478 or your financial
representative for information.
o Because withdrawal payments may have tax consequences, you should
consult your tax adviser before establishing such a plan.
--------------------------------------------------------------------------------
BY TELEPHONE
o You may receive your proceeds by mail, by wire or through ACH
(see above).
o Call Nvest Funds at 800-225-5478 to choose the method you wish to
use to redeem your shares.
--------------------------------------------------------------------------------
BY CHECK (FOR CLASS A ONLY)
o Select the checkwriting option on your account application and
complete the attached signature card.
o To add this privilege to an existing account, call Nvest Funds at
800-225-5478 for a Service Options Form.
o Each check must be written for $250 or more.
o You may not close your account by withdrawal check. Please call
your financial representative or Nvest Funds to close an account.
Prospectus-- 11
<PAGE>
FUND SERVICES
-------------
SELLING SHARES IN WRITING
If you wish to redeem your shares in writing, all owners of the shares must sign
the redemption request in the exact names in which the shares are registered and
indicate any special capacity in which they are signing. In certain situations,
you will be required to make your request to sell shares in writing. In these
instances, a letter of instruction signed by the authorized owner is necessary.
In certain situations we also may require a signature guarantee or additional
documentation.
A signature guarantee protects you against fraudulent orders and is necessary
if:
o your address of record has been changed within the past 30 days;
o you are selling more than $100,000 worth of shares and you are
requesting the proceeds by check; or
o a proceeds check for any amount is either mailed to an address other
than the address of record or not payable to the registered owner(s).
A notary public CANNOT provide a signature guarantee. A signature guarantee can
be obtained from one of the following sources:
o a financial representative or securities dealer;
o a federal savings bank, cooperative, or other type of bank;
o a savings and loan or other thrift institution;
o a credit union; or
o a securities exchange or clearing agency.
The table below shows some situations in which additional documentation may be
necessary. Please call your financial representative or Nvest Funds regarding
requirements for other account types.
SELLER (ACCOUNT TYPE) REQUIREMENTS FOR WRITTEN REQUESTS
INDIVIDUAL, JOINT, SOLE o The request must include the
PROPRIETORSHIP, UGMA/UTMA (MINOR signatures of all persons
ACCOUNTS) authorized to sign, including
title, if applicable.
o Signature guarantee, if
applicable (see above).
CORPORATE OR ASSOCIATION ACCOUNTS o The request must include the
signatures of all persons
authorized to sign, including
title.
OWNERS OR TRUSTEES OF TRUST o The request must include the
ACCOUNTS signatures of all persons
authorized to sign, including
title.
o If the names of the trustees
are not registered on the
account, please provide a copy
of the trust document
certified within the past 60
days.
o Signature guarantee, if
applicable (see above).
JOINT TENANCY WHOSE CO-TENANTS ARE o The request must include the
DECEASED signatures of all surviving
tenants of the account.
o Copy of the death certificate.
o Signature guarantee if
proceeds check is issued to
other than the surviving
tenants.
POWER OF ATTORNEY (POA) o The request must include the
signatures of the
attorney-in-fact, indicating
such title.
o A signature guarantee.
o Certified copy of the POA
document stating it is still
in full force and effect,
specifying the exact Fund and
account number, and certified
within 30 days of receipt of
instructions.*
QUALIFIED RETIREMENT BENEFIT PLANS o The request must include the
(EXCEPT NVEST FUNDS PROTOTYPE signatures of all those
DOCUMENTS) authorized to sign, including
title.
o Signature guarantee, if
applicable (see above).
EXECUTORS OF ESTATES, o The request must include the
ADMINISTRATORS, GUARDIANS, signatures of all those
CONSERVATORS authorized to sign, including
capacity.
o A signature guarantee.
o Certified copy of court
document where signer derives
authority, e.g.: Letters of
Administration,
Conservatorship, Letters
Testamentary.*
INDIVIDUAL RETIREMENT ACCOUNTS o Additional documentation and
(IRAS) distribution forms are
required.
* Certification may be made on court documents by the court, usually
certified by the clerk of the court. Power of Attorney certification may be
made by a commercial bank, broker/member of a domestic stock exchange or a
practicing attorney.
12 -- Prospectus
<PAGE>
FUND SERVICES
-------------
EXCHANGING SHARES
In general, you may exchange shares of your Fund for shares of the other Money
Market Fund or a Nvest Fund subject to certain restrictions shown below. An
exchange must be for a minimum of $1,000 (or the total net asset value of your
account, whichever is less), or $100 if made under the Automatic Exchange Plan
(see the section entitled "Additional Investor Services"). All exchanges are
subject to the eligibility requirements of the Fund into which you are
exchanging. The exchange privilege may be exercised only in those states where
shares of the Funds may be legally sold. Please refer to the Statement of
Additional Information (the "SAI") for more detailed information on exchanging
Fund shares.
EXCHANGE OPTIONS
CLASS A SHARES OF A MONEY MARKET FUND NOT PREVIOUSLY SUBJECT TO A SALES CHARGE
OR CDSC MAY EXCHANGE INTO:
o Class A, B or C shares of a Money Market Fund without paying a sales charge
or CDSC.
o Class A, B or C shares of a Nvest Fund plus the applicable sales charge or
CDSC.
CLASS A SHARES OF A MONEY MARKET FUND PREVIOUSLY SUBJECT TO A SALES CHARGE OR
CDSC MAY EXCHANGE INTO:
o Class A shares of the other Money Market Fund without a sales charge or
CDSC.
o Class A shares of a Nvest Fund without paying a sales charge or CDSC
(unless you exchanged into a Money Market Fund from shares of the Nvest
Intermediate Tax Free Fund of California that you held for less than 6
months, which would subject you to pay the difference between the sales
charge previously paid on your California Fund shares and the sales charge
currently imposed on other Nvest Fund shares).
CLASS B SHARES OF A MONEY MARKET FUND MAY EXCHANGE INTO:
o Class B shares of the other Money Market Fund without paying a sales charge
or CDSC.
o Class B shares of a Nvest Fund subject to its CDSC
schedule.
CLASS C SHARES OF CASH MANAGEMENT TRUST - MONEY MARKET SERIES MAY EXCHANGE INTO:
o Class C shares of a Nvest Fund subject to its CDSC schedule.
If you exchange shares of a Nvest Fund into shares of the Money Market Funds,
the holding period for purposes of determining the CDSC for Class A, B or C
shares and conversion from Class B into Class A shares stops until you exchange
back into shares of another Nvest Fund. If you choose to redeem those Money
Market Fund shares, a CDSC may apply.
Prospectus -- 13
<PAGE>
FUND SERVICES
--------------
RESTRICTIONS ON BUYING, SELLING AND EXCHANGING SHARES
PURCHASE AND EXCHANGE RESTRICTIONS
Although the Fund does not anticipate doing so, it reserves the right to suspend
or change the terms of purchasing or exchanging shares. The Fund and the
Distributor reserve the right to refuse or limit any purchase or exchange order
by a particular purchaser (or group of related purchasers) if the transaction is
deemed harmful to the best interest of the Fund's other shareholders or would
disrupt the management of the Fund. The Fund and the Distributor reserve the
right to restrict purchases and exchanges for the accounts of "market timers" by
limiting the transaction to a maximum dollar amount. An account will be deemed
to be one of a market timer if: (i) more than two exchange purchases of a given
Fund are made for the account in a calendar quarter or (ii) the account makes
one or more exchange purchases of a given Fund in a calendar quarter in an
aggregate amount in excess of 1% of the Fund's total net assets.
SELLING RESTRICTIONS
The table below describes restrictions placed on selling shares of the Fund:
RESTRICTION SITUATION
The Fund may suspend the right of o When the New York Stock
redemption or postpone payment for more Exchange (the "Exchange") is
than 7 days: closed (other than a
weekend/holiday)
o During an emergency
o Any other period permitted by
the SEC
The Fund reserves the right to suspend o With a notice of a dispute
account services or refuse transaction between registered owners
requests:
o With suspicion/evidence of a
fraudulent act
The Fund may pay the redemption price in o When it is detrimental for the
whole or part by a distribution in kind Fund to make cash payments as
of readily marketable securities in lieu determined in the sole
of cash or may take up to 7 days to pay discretion of the adviser or
a redemption request in order to raise subadviser
capital:
The Fund may withhold redemption o When redemptions are made
proceeds until the check or funds have within 10 calendar days of
cleared: purchase by check or ACH of
the shares being redeemed
Telephone redemptions are not accepted
for tax-qualified retirement
accounts.
If you hold certificates representing
your shares, they must be sent with your
request for it to be honored.
The Fund recommends that certificates be
sent by registered mail.
CERTIFICATES
Certificates will not be automatically issued for any class of shares. Upon
written request, you may receive certificates for Class A shares only.
14 -- Prospectus
<PAGE>
FUND SERVICES
-------------
HOW FUND SHARES ARE PRICE
"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:
NET TOTAL MARKET VALUE OF SECURITIES + CASH AND OTHER ASSETS - LIABILITIES
ASSET =-------------------------------------------------------------------------
VALUE NUMBER OF OUTSTANDING SHARES
Fund securities are generally valued at amortized cost on each day that the
Exchange is open for trading. Amortized cost approximates market value of the
security at the time of purchase. By using amortized cost valuation, the Fund
seeks to maintain a constant net asset value of $1.00 per share despite minor
shifts in the market value of its portfolio securities.
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 Exchange on the days the Exchange is open for trading. This is normally
4:00 p.m. Eastern time. Fund shares will not be priced on the days on which
the Exchange is closed for trading.
o The price you pay for purchasing, redeeming or exchanging a share will be
based upon the net asset value next calculated after your order is received
"in good order" by State Street Bank and Trust Company, the Fund's
custodian (plus or minus applicable sales charges as described earlier in
this Prospectus).
o Requests received by the Distributor after the Exchange closes will be
processed based upon the net asset value determined at the close of regular
trading on the next day that the Exchange is open, with the exception that
those orders received by your investment dealer before the close of the
Exchange and received by the Distributor before 5:00 p.m. Eastern time* on
the same day will be based on the net asset value determined on that day.
* Under limited circumstances, the Distributor may enter into a contractual
agreement pursuant to which it may accept orders after 5:00 p.m., but not
later than 8:00 p.m.
Generally, during times of substantial economic or market change it may be
difficult to place your order by phone. During these times, you may deliver your
order in person to the Distributor or send your order by mail as described in
"Buying Shares" and "Selling Shares."
PROSPECTUS-15
<PAGE>
FUND SERVICES
-------------
DIVIDENDS AND DISTRIBUTIONS
The Funds generally distribute most or all of their net investment income (other
than long-term capital gains) in the form of dividends. Each Fund declares
dividends for each class daily and pays them monthly. Each Fund distributes all
net realized long- and short-term capital gains annually, after applying any
available capital loss carryovers. If all of your shares of a Fund are redeemed
at any time during a month, all dividends accrued to date will be paid together
with the redemption proceeds. Each 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:
o Participate in the Dividend Diversification Program, which allows you to
have all dividends and distributions automatically invested at net asset
value (plus an applicable sales charge or CDSC) in shares of the same class
of a Money Market Fund or Nvest Fund registered in your name. Class A
shareholders may also have dividends and distributions automatically
invested in Class C shares of a Nvest Fund. Certain investment minimums and
restrictions may apply. For more information about this program, see the
section entitled "Additional Investor Services."
o Receive distributions from dividends and interest in cash while reinvesting
distributions from capital gains in additional shares of the same class of
a Money Market Fund or in the same class of another Nvest Fund.
o Receive all distributions in cash.
Unless you select one of the above options, distributions will automatically be
reinvested in shares of the same class of the Fund at net asset value. For more
information or to change your distribution option, contact Nvest Funds in
writing or call 800-225-5478.
If you earn more than $10 annually in taxable income from a non-retirement plan
Nvest Fund, you will receive a Form 1099 to help you report the prior calendar
year's distributions on your federal income tax return. Be sure to keep this
Form 1099 as a permanent record. A fee may be charged for any duplicate
information requested.
TAX CONSEQUENCES
Each Fund intends to meet all requirements of the Internal Revenue Code
necessary to qualify as a "regulated investment company" and thus does not
expect to pay any federal income tax on income and capital gains distributed to
shareholders.
Fund distributions paid to you either in cash or reinvested in additional shares
are generally taxable to you as ordinary income (except for exempt-interest
dividends earned by Tax Exempt Money Market Trust - see below) or as capital
gains. Distributions derived from short-term capital gains or investment income
are generally taxable at ordinary income rates. The Funds usually do not realize
a substantial amount of long-term capital gains. If you are a corporation
investing in a Fund, a portion of these dividends may qualify for the
dividends-received deduction provided that you meet certain holding period
requirements. Distributions of gains from investments that a Fund owned for more
than one year that are designated by a Fund as capital gain dividends will
generally be taxable to a shareholder receiving such distributions as long-term
capital gains regardless of how long the shareholder has held Fund shares.
Distributions are taxable to you even if they are paid from income or gains
earned by the Fund before your investment (and thus were included in the price
you paid).
Any gain resulting from the sale of Fund shares will generally be subject to
tax. An exchange of Fund shares for shares of another Nvest Fund is treated as a
sale, and any resulting gain will generally be subject to federal income tax. If
you purchase shares of a Fund shortly before it declares a capital gain
distribution or a dividend, a portion of the purchase price may be returned to
you as a taxable distribution.
Dividends derived from interest on U.S. government securities for the Nvest Cash
Management Trust - Money Market Series may be exempt from state and local income
taxes. The Fund intends to advise shareholders of the proportion of its
dividends that are derived from such interest. You should consult your tax
adviser about any federal, state or local taxes that may apply to the
distributions you receive.
SPECIAL TAX CONSIDERATIONS FOR TAX EXEMPT MONEY MARKET TRUST
Dividends paid to you as a shareholder of the Tax Exempt Money Market Trust that
are derived from interest on Municipal Securities are "exempt-interest
dividends" and may be excluded from gross income on your federal tax return.
However, if you receive Social Security or railroad retirement benefits, you may
be taxed on a portion of those benefits as a result of receiving tax-exempt
income. Also, if the Fund invests in "private activity" municipal securities, a
portion of the Fund's dividends may constitute a tax preference item subject to
the alternative minimum tax.
The federal exemption for "exempt-interest dividends" does not necessarily
result in exemption from state and local taxes. Distributions of these dividends
may be exempt from local and state taxation to the extent they are derived from
the state and locality in which you reside. You should check the consequences
under your local and state tax laws before investing in the Fund. The Fund will
report annually on a state-by-state basis the source of income the Fund receives
on tax-exempt bonds that was paid out as dividends during the preceding year.
16 -- Prospectus
<PAGE>
FUND SERVICES
--------------
ADDITIONAL INVESTOR SERVICES
RETIREMENT PLANS
Nvest Funds offers a range of retirement plans, including IRAs, SEPs, SARSEPs*,
SIMPLE IRAs, 403(b) plans and other pension and profit sharing plans. Refer to
the section entitled "It's Easy to Open an Account" for investment minimums. For
more information about our Retirement Plans, call us at 800-225-5478.
INVESTMENT BUILDER PROGRAM
This is Nvest Funds' automatic investment plan. You may authorize automatic
monthly transfers of $100 or more from your bank checking or savings account to
purchase shares of one or more Nvest Funds. To join the Investment Builder
Program, please refer to the section entitled "Buying Shares."
DIVIDEND DIVERSIFICATION PROGRAM
This program allows you to have all dividends and any other distributions
automatically invested in shares of the same class of another Nvest Fund or a
Money Market Fund, subject to the eligibility requirements of that other fund
and to state securities law requirements. Shares will be purchased at the
selected fund's net asset value (plus the applicable sales charge or CDSC) on
the dividend record date. Before establishing a Dividend Diversification Program
into a Nvest Fund or a Money Market Fund, please read its prospectus carefully.
AUTOMATIC EXCHANGE PLAN
Nvest Funds have an automatic exchange plan under which shares of a class of a
Fund are automatically exchanged each month for shares of the same class of
another Nvest Funds or a Money Market Fund. There is no fee for exchanges made
under this plan, but there may be a sales charge in certain circumstances.
Please refer to the SAI for more information on the Automatic Exchange Plan.
SYSTEMATIC WITHDRAWAL PLAN
This plan allows you to redeem shares and receive payments from your Fund on a
regular schedule. Redemption of shares that are part of the Systematic
Withdrawal Plan are not subject to a CDSC. However, the amount or percentage you
specify in the plan may not exceed, on an annualized basis, 10% of the value of
your Fund account based upon the value of your Fund account on the day you
establish your plan. To establish a Systematic Withdrawal Plan, please refer to
the section entitled "Selling Shares."
NVEST FUNDS PERSONAL ACCESS LINE(R)
This automated customer service system allows you to have access to your account
24 hours a day by calling 800-225-5478, press 1. With a touch-tone telephone,
you can obtain information about current yields, your current account balances,
recent transactions, Fund prices and recent performance. You may also use
Personal Access line(R) to purchase, exchange or redeem shares in any of your
existing accounts. Certain restrictions may apply.
NVEST FUNDS WEB SITE
Visit us at WWW.NVESTFUNDS.COM to review your account balance and recent
transactions, to view daily prices and performance information or to order
duplicate account statements and tax information. You may also go online to
purchase, exchange or redeem shares in your existing accounts. Certain
restrictions may apply.
ELECTRONIC MAIL DELIVERY
This delivery option allows you to receive important fund documents via the
Internet instead of in paper form through regular U.S. mail. Eligible documents
include confirmation statements, quarterly statements, prospectuses, annual and
semiannual reports and proxies. Electronic Delivery will cut down on the amount
of paper mail you receive; speed up the availability of your documents; and
lower expenses to your fund. To establish this option on your account(s),
complete the appropriate section of your new account application or visit us at
www.nvestfunds.com.
* Effective January 1, 1997, the Savings Incentive Match Plan for Employees
of Small Employers (SIMPLE) IRA became available, replacing SARSEP plans.
SARSEP plans established prior to January 1, 1997 may remain active and
continue to add new employees.
Prospectus-- 17
<PAGE>
FUND PERFORMANCE
----------------
The financial highlights tables are intended to help you understand each Fund's
financial performance for the past 5 years (or, if shorter ther period of the
Fund's operations). Certain information reflects financial results for a single
Fund share. The total returns in the table represent the return that an investor
would have earned (or lost) on an investment in the Fund (assuming reinvestment
of all dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report, along with
each Fund's financial statements, is included in the SAI, which is available
without charge upon request.
NVEST CASH MANAGEMENT TRUST -- MONEY MARKET SERIES
<TABLE>
<CAPTION>
CLASS A, B, C
YEAR ENDED JUNE 30,
<S> <C> <C> <C> <C> <C>
1996 1997 1998(a) 1999 2000
Net Asset Value, Beginning of the Year $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.000
--------- --------- -------- --------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.0482 0.0467 0.0488 0.0445 0. 0498
Net Realized and Unrealized Gain
on Investments 0.0002 0.0000 0.0000 0.0000 0.0000
------ ------ ------ ------ ------
Total From Investment Operations 0.0484 0.0467 0.0488 0.0445 0.0498
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends From Net Investment Income (0.0484)(b) (0.0465)(b) (0.0488)(b) (0.0445)(b) (0.0498(b)
Dividends From Net Realized Capital Gains 0.0000 (0.0002) 0.0000 0.0000 0.0000
------ ------- ------ ------ ------
Total Distributions (0.0484) (0.0467) (0.0488) (0.0445) (0.0498)
------- ------- ------- ------- -------
Net Asset Value, End of the Year $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
TOTAL RETURN (%) 5.0 4.8 5.0 4.6 5.1
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 0.90 0.88 0.84 0.84 0.84
Ratio of Net Investment Income
to Average Net Assets (%) 4.85 4.66 4.88 4.46 4.96
Net Assets, End of Year (000,000) $ 664 $ 699 $ 607 $ 665 $ 604
<FN>
(a) Class C shares commenced operations March 1, 1998.
(b) Including net realized gain (loss) on investments.
</FN>
</TABLE>
18 -- Prospectus
<PAGE>
FUND PERFORMANCE
----------------
NVEST TAX EXEMPT MONEY MARKET TRUST
<TABLE>
<CAPTION>
CLASS A AND B
YEAR ENDED JUNE 30,
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1999 2000
Net Asset Value, Beginning of the Year $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.0327 0.0314 0.0323 0.0276 0.0309
Net Realized and Unrealized Gain
on Investments 0.0000 0.0001 0.0000 0.0000 0.0000
------ ------ ------ ------ ------
Total From Investment Operations 0.0327 0.0315 0.0323 0.0276 0.0309
------ ------ ------ ------ ------
Less Distributions
Dividends From Net Investment Income (0.0327) (0.0315)(a) (0.0323) (0.0276) (0.0309)(a)
------- ------- ------- ------- -------
Total Distributions (0.0327) (0.0315) (0.0323) (0.0276) (0.0309)
------- ------- ------- ------- -------
Net Asset Value, End of the Year $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
Total Return (%) 3.3 3.2 3.3 2.8 3.1
Ratios/Supplemental Data
Ratio of Operating Expenses
to Average Net Assets (%) 0.90 0.85 0.85 0.80 0.79
Ratio of Operating Expenses
to Average Net Assets After
Expense Reductions (%)(b) 0.56 0.56 0.60 0.65 0.65
Ratio of Net Investment Income
to Average Net Assets (%) 3.29 3.17 3.23 2.76 3.10
Net Assets, End of Year (000,000) $ 65 $ 68 $ 74 $ 85 $ 72
<FN>
(a) Including net realized gain (loss) on investments.
(b) After giving effect to the expense limitation and fee waiver.
</FN>
</TABLE>
Prospectus -- 19
<PAGE>
GLOSSARY OF TERMS
BANKERS' ACCEPTANCE -- A bill of exchange drawn on and accepted by a bank. The
bank as the drawee of the bill becomes responsible for payment of the bill at
maturity.
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 a Fund's shareholders of profits
earned from selling securities in a Fund's portfolio. Capital gain distributions
are usually paid once a year.
CREDIT RATING -- Independent evaluation of a bond's creditworthiness. This
measurement is usually calculated through an index compiled by companies such as
Standard & Poor's Group or Moody's Investors Service, Inc. Bonds with a credit
rating of BBB or higher by S&P or Baa or higher by Moody's are generally
considered investment grade.
DISCOUNTED PRICE -- The difference between a bond's current market price and its
face or redemption value.
DIVERSIFICATION -- The strategy of investing in a wide range of securities
representing different market sectors to reduce the risk if an individual
company or one sector suffers losses.
DIVIDEND YIELD -- The current or estimated annual dividend divided by the market
price per share of a security.
DURATION -- An estimate of how much a bond's price fluctuates with changes in
comparable interest rates.
INCOME DISTRIBUTIONS -- Payments to shareholders resulting from the net interest
or dividend income earned by a 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.
MATURITY -- The final date on which the payment of a debt instrument (e.g.
bonds, notes, 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 (NAV) -- The market value of one share of a Fund on any given
day without taking into account any front-end sales charge or CDSC. It is
determined by dividing a fund's total net assets by the number of shares
outstanding.
REPURCHASE AGREEMENT -- An agreement to buy a security at one price and a
simultaneous agreement to sell it back at an agreed upon price.
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 a Fund.
VARIABLE OR FLOATING-RATE DEBT SECURITIES -- Securities which pay a rate of
interest that is adjusted on a periodic basis and determined by reference to a
prescribed formula.
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 Securities and Exchange Commission.
YIELD-TO-MATURITY -- The concept used to determine the rate of return an
investor will receive if a long-term, interest-bearing investment, such as a
bond, is held to its maturity date. It takes into account purchase price,
redemption value, time to maturity, coupon yield (the interest rate on a debt
security the issuer promises to pay to the holder until maturity, expressed as
an annual percentage of face value) and the time between interest payments.
20-- Prospectus
<PAGE>
Notes -
Prospectus -- 21
<PAGE>
IF YOU WOULD LIKE MORE INFORMATION
ABOUT THE FUND, THE FOLLOWING
DOCUMENTS ARE AVAILABLE FREE UPON
REQUEST:
ANNUAL AND SEMIANNUAL REPORTS --
Provide additional information
about the Fund's investments. Each
report includes a discussion of the
market conditions and investment
strategies that significantly
affected the Fund's performance
during its last fiscal year. To
reduce costs, we mail one copy per
household. For more copies call
Nvest Funds Distributor, L.P. at
the number below.
STATEMENT OF ADDITIONAL INFORMATION NVEST FUNDS
(SAI) -- Provides more detailed MONEY MARKET FUNDS
information about the Fund and its Nvest Cash Management Trust -
investment limitations and Money Market Series
policies, has been filed with the
Securities and Exchange Commission Nvest Tax Exempt Money Market Trust
("SEC") and is incorporated into
this Prospectus by reference.
TO ORDER A FREE COPY OF THE FUND'S
ANNUAL OR SEMIANNUAL REPORT OR ITS
SAI, CONTACT YOUR FINANCIAL
REPRESENTATIVE, OR THE FUNDS AT:
Nvest Funds Distributor, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Telephone: 800-225-5478
Internet: www.nvestfunds.com
Your financial representative or
Nvest Funds will also be happy to
answer your questions or to provide
any additional information that you
may require.
You can review the Fund's reports
and SAI at the Public Reference
Room of the SEC in Washington, D.C.
Text-only copies are available free
from the Commission's Web site at:
www.sec.gov.
Copies of these publications are
also available for a fee and
information on the operation of the
Public Reference Room may be
obtained by electronic request at
the following e-mail address:
[email protected], or by writing
or calling the Public Reference
Room of the SEC, Washington, D.C.
20549-0102
Telephone: 1-202-942-8090
Nvest Funds Distributor, L.P., and
other firms selling shares of Nvest
Funds are members of the National
Association of Securities Dealers,
Inc. (NASD). As a service to
investors, the NASD has asked that
we inform you of the availability
of a brochure on its Public
Disclosure Program. The program
provides access to information
about securities firms and their
representatives. Investors may
obtain a copy by contacting the
NASD at 800-289-9999 or by visiting
their Web site at www.NASDR.com.
(Investment Company Act File No. 811-2819)
(Investment Company Act File No. 811-3658)
XM51-0900
<PAGE>
NVEST MONEY MARKET FUNDS
NVEST CASH MANAGEMENT TRUST -- MONEY MARKET SERIES
NVEST TAX EXEMPT MONEY MARKET TRUST
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 1, 2000
This Statement of Additional Information (the "Statement") is not a prospectus.
This Statement relates to the prospectus of Nvest Cash Management Trust - Money
Market Series and Nvest Tax Exempt Money Market Trust (the "Trusts" and each a
"Trust") for Class A, B and C shares dated September 1, 2000 and the Nvest Cash
Management Trust - Money Market Series Class Y shares prospectus dated September
1, 2000, (collectively, the "Prospectuses"), and should be read in conjunction
therewith. A copy of each Prospectus may be obtained from Nvest Funds
Distributor, L.P. (the "Distributor"), 399 Boylston Street, Boston,
Massachusetts 02116.
The Trusts' financial statements and accompanying notes are incorporated by
reference into this Statement. Each Trust's annual and semiannual report
contains additional performance information and is available upon request and
without charge by calling 800-225-5478.
TABLE OF CONTENTS
Page
Investment Objectives and Policies 2
Investment Restrictions 5
Management of the Funds 8
Investment Advisory, Subadvisory, Distribution and Other Services 11
Portfolio Transactions 15
Performance 15
Description of the Funds and Ownership of Shares 16
How to Buy Shares 19
Shareholder Services 20
Open Accounts 20
Automatic Investment Plans 20
Retirement Plans Offering Tax Benefits 20
Systematic Withdrawal Plans 21
Dividend Diversification Program 21
Exchange Privilege 22
Automatic Exchange Plan 22
Self-Servicing Your Account 24
Redemptions 26
Net Income, Dividends and Valuation 28
Tax-Free Investing 30
Taxes 30
Financial Statements 32
Appendix A - Description of Certain Nvest Cash Management
Trust - Money Market Series Investments A-1
Appendix B - Description of Certain Nvest Tax Exempt
Money Market Trust Investments B-1
Appendix C - Ratings of Corporate and Municipal Bonds,
Commercial Paper and Short-Term Tax Exempt C-1
Appendix D - Media That May Contain Fund Information D-1
Appendix E - Advertising and Promotional Literature E-1
1
<PAGE>
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
--------------------------------------------------------------------------------
GENERAL
The investment objectives and policies of Nvest Cash Management Trust -
Money Market Series and Nvest Tax Exempt Money Market Trust (together, the
"Money Market Funds," or the "Funds," and each a "Fund") are summarized in the
Prospectus under "Goals, Strategies & Risks."
The investment policies and types of permitted investments of each Fund set
forth below and in the Prospectus may be changed without shareholder approval
except that the investment objective of each Fund, and any investment policy
expressly identified as fundamental, may not be changed without the approval of
a majority of the outstanding voting securities of that Fund.
The terms "shareholder approval" and "majority of the outstanding voting
securities" as used in the Prospectuses and this Statement each refer to
approval by (A) 67% or more of the voting shares of the applicable Fund present
at a meeting, if the holders of more than 50% of the outstanding voting shares
of such Fund are present or represented by proxy; or (B) more than 50% of the
outstanding voting shares of such Fund, whichever is less.
CASH MANAGEMENT TRUST - MONEY MARKET SERIES
The Fund will invest only in securities which the Fund's subadviser, Back
Bay Advisors(R), L.P. ("Back Bay Advisors"), acting under guidelines established
by the Nvest Cash Management Trust's Board of Trustees, has determined are of
high quality and present minimal credit risk. For a description of certain of
the money market instruments in which the Fund may invest, and the related
descriptions of the ratings of Standard and Poor's Ratings Group ("S&P") and
Moody's Investors Service, Inc. ("Moody's"), see Appendices A and C to this
Statement. Money market instruments maturing in less than one year may yield
less than obligations of comparable quality having longer maturities.
The Fund's investments may include certificates of deposit, bankers'
acceptances and other U.S. dollar-denominated obligations of banks whose net
assets exceed $100 million. These obligations may be issued by U.S. banks,
foreign banks (including their U.S. branches) or foreign branches and
subsidiaries of U.S. banks. Obligations of foreign banks may be subject to
foreign economic, political and legal risks. Such risks include foreign economic
and political developments, foreign governmental restrictions that may adversely
affect payment of principal and interest on the obligations, foreign withholding
and other taxes on interest income, difficulties in obtaining and enforcing a
judgment against a foreign obligor, exchange control regulations (including
currency blockage), and the expropriation or nationalization of assets or
deposits. Foreign branches of U.S. banks and foreign banks are not necessarily
subject to the same or similar regulatory requirements that apply to domestic
banks. For instance, such branches and banks may not be subject to the types of
requirements imposed on domestic banks with respect to mandatory reserves, loan
limitations, examinations, accounting, auditing, record keeping and the public
availability of information. Obligations of such branches or banks will be
purchased only when Back Bay Advisors believes the risks are minimal.
The Fund may also invest in U.S. Government Securities that include all
securities issued or guaranteed by the U.S. government or its agencies,
authorities or instrumentalities ("U.S. Government Securities"). Some U.S.
Government Securities are backed by the full faith and credit of the United
States, some are supported by the discretionary authority of the U.S. government
to purchase the issuer's obligations (e.g., obligations of the Federal National
Mortgage Association), some by the right of the issuer to borrow from the U.S.
government (e.g., obligations of Federal Home Loan Banks), while still others
are supported only by the credit of the issuer itself (e.g., obligations of the
Student Loan Marketing Association).
All of the Fund's investments at the time of purchase (other than U.S.
Government Securities and repurchase agreements relating thereto) will be rated
in the highest rating category by a major credit agency or, if unrated, will be
of comparable quality as determined by the Fund's subadviser under guidelines
approved by the Nvest Cash Management Trust's Board of Trustees.
Considerations of liquidity, safety and preservation of capital may
preclude the Fund from investing in money market instruments paying the highest
available yield at a particular time. The Fund, consistent with its investment
objective, attempts to maximize yields by engaging in portfolio trading and by
buying and selling portfolio investments in anticipation
2
<PAGE>
of, or in response to, changing economic and money market conditions and trends.
The Fund also seeks to take advantage of what are believed to be temporary
disparities in the yields of the different segments or among particular
instruments within the same segment of the market. These policies, as well as
the relatively short maturity of obligations to be purchased by the Fund, may
result in frequent changes in the portfolio composition of the Fund. There are
usually no brokerage commissions as such paid by the Fund in connection with the
purchase of securities of the type in which it invests. See "Portfolio
Transactions" and "Investment Restrictions."
TAX EXEMPT MONEY MARKET TRUST
As described in the Prospectus, the Fund seeks to achieve its objective
through investment in a diversified portfolio consisting primarily of high
quality, short-term fixed, variable and floating rate debt securities the
interest on which is, in the opinion of bond counsel for the issuers of the
securities at the time of their issuance, exempt from federal income taxation
("Municipal Securities"). Municipal Securities are generally obligations issued
by or on behalf of states, territories and possessions of the United States and
the District of Columbia and their political subdivisions, agencies and
instrumentalities, or by or on behalf of multi-state agencies or authorities.
The Fund will only invest in Municipal Securities which are (i) short-term notes
rated MIG-2 or better by Moody's or SP-2 or better by S&P; (ii) municipal bonds
rated Aa or better by Moody's or AA or better by S&P with a remaining maturity
of 397 days or less whose issuer has comparable short-term obligations that are
rated in the top rating category by Moody's or S&P; and (iii) other types of
Municipal Securities, including commercial paper, rated P-2 by Moody's or A-2 by
S&P or unrated Municipal Securities determined to be of comparable quality by
the Fund's subadviser under guidelines approved by the Nvest Tax Exempt Money
Market Trust's Board of Trustees, subject to any limitations imposed by Rule
2a-7 under the Investment Company Act of 1940, as amended (the "1940 Act"). For
a more complete description of various types of Municipal Securities and the
meanings of the ratings assigned to them by Moody's and S&P, see Appendices B
and C to this Statement. The Fund expects that at least 95% of all dividends
paid by the Fund in any given year will be exempt from federal income tax. See
"Taxes."
As indicated in the Prospectus, the Fund may elect on a temporary basis to
hold cash or to invest in obligations other than Municipal Securities when such
action is deemed advisable by Back Bay Advisors. For example, the Fund might
hold cash or make such temporary investments: (i) due to market conditions; (ii)
in the event of the scarcity of suitable Municipal Securities; (iii) pending
investment of proceeds from subscriptions for Fund shares or from the sale of
portfolio securities; or (iv) in anticipation of redemptions. The Fund will
limit its investments in obligations other than Municipal Securities to "money
market securities" such as (i) U.S. Government Securities, (ii) high quality
short-term domestic certificates of deposit, commercial paper and domestic
bankers' acceptances and other high quality money market instruments, or (iii)
repurchase agreements with brokers, dealers and banks relating to Municipal or
U.S. Government Securities. The interest earned on money market securities is
not exempt from federal income tax and will generally be taxable to shareholders
as ordinary income. The ability of the Fund to invest in such taxable money
market securities is limited by a requirement of the Internal Revenue Code (the
"Code") that at least 50% of the Fund's total assets be invested in Municipal
Securities at the end of each quarter of the Fund's fiscal year (see "Taxes")
and by a fundamental policy of the Fund which requires that during periods of
normal market conditions the Fund will not purchase any security if, as a
result, less than 80% of the Fund's net assets would then be invested in
Municipal Securities.
As described in the Prospectus, the Fund may invest in variable or floating
rate Municipal Securities. These obligations pay a rate of interest adjusted on
a periodic basis and determined by reference to a prescribed formula. Such
obligations will be subject to prepayment without penalty, at the option of
either the Fund or the issuer, and may be backed by letters of credit or similar
arrangements where necessary to ensure that the obligations are of appropriate
investment quality. Back Bay Advisors intends to evaluate the credit of the
issuers of these obligations and the providers of credit support no less
frequently than quarterly.
The price stability and liquidity of the Fund may not be equal to that of a
money market fund which invests exclusively in short-term taxable money market
securities, because the taxable money market is a broader and more liquid market
with a greater number of investors, issuers and market makers than the
short-term Municipal Securities market and because the average portfolio
maturity of a money market fund will generally be shorter than the average
portfolio maturity of a tax exempt money fund such as the Fund. Adverse
economic, business or political developments might affect all or a substantial
portion of the Fund's Municipal Securities in the same manner. The issuer of a
Municipal Security may make payments from money raised through a variety of
sources, such as (i) the issuer's general taxing power; (ii) a specific type of
tax such as a property tax; or (iii) a particular facility or project such as a
highway. The ability of an issuer to make these payments could be affected by
litigation, legislation or other political events or the bankruptcy of the
issuer.
3
<PAGE>
When-Issued Securities
----------------------
The Tax Exempt Money Market Trust may purchase Municipal Securities on a
when-issued basis, which means that delivery and payment for the securities
normally occur between 15 to 45 days after the date of the commitment to
purchase. The payment obligation and the interest rate that will be received on
the securities are each fixed at the time the buyer enters into the commitment.
Pending delivery of securities purchased on a when-issued basis, the amount of
the purchase price will be held in liquid assets such as cash or high quality
debt obligations. Such obligations and cash will be maintained in a separate
account with the Fund's custodian in an amount equal on a daily basis to the
amount of the Fund's when-issued commitments. By committing itself to purchase
Municipal Securities on a when-issued basis, the Fund subjects itself to market
and credit risks on such commitments as well as such risks otherwise applicable
to its portfolio securities. Therefore, to the extent the Fund remains
substantially fully invested at the same time that it has purchased securities
on a when-issued basis, there will be a greater possibility that the market
value of the Fund's assets will vary from $1.00 per share. (See "Net Income,
Dividends and Valuation.") The Fund will make commitments to purchase such
securities only with the intention of actually acquiring the securities.
However, the Fund may sell these securities before the settlement date if it is
deemed advisable as a matter of investment strategy. Such sales may result in
capital gains that are not exempt from federal income taxes. When the time comes
to pay for when-issued securities, the Fund will meet its obligations from then
available cash flow or the sale of securities, or, although it would not
normally expect to do so, from the sale of the when-issued securities (which may
have a value greater or less than the Fund's payment obligation).
Purchase of Securities with Rights to Put Securities to Seller
--------------------------------------------------------------
The Tax Exempt Money Market Trust has authority to purchase securities,
including Municipal Securities, at a price which would result in a
yield-to-maturity ratio lower than that generally offered by the seller at the
time of purchase if the Fund simultaneously acquires the right to sell the
securities back to the seller at an agreed-upon price at any time during a
stated period or on a certain date. Such a right is generally called a "put."
The purpose of engaging in transactions involving puts is to maintain
flexibility and liquidity and to permit the Fund to meet redemptions while
remaining as fully invested as possible in Municipal Securities. The Fund will
acquire puts only from recognized securities dealers.
For the purposes of asset valuation, the Fund will not ascribe any value to
puts. The Fund will rarely pay specific consideration for them (although
typically the yield on a security that is subject to a put will be lower than
for an otherwise comparable security that is not subject to a put). In no event
will the specific consideration paid for puts held in the Fund's portfolio at
any time exceed 1/2 of 1% of the Fund's net assets. Puts purchased by the Fund
will generally not be marketable and the Fund's ability to exercise puts will
depend on the creditworthiness of the other party to the transaction.
BOTH FUNDS
As noted in the Prospectus, each Fund may enter into repurchase agreements,
which are agreements pursuant to which the Fund purchases a security and obtains
a simultaneous commitment from the seller (a member bank of the Federal Reserve
or, to the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed-upon price and date (usually seven days or
less from the date of original purchase). 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 each Fund the
opportunity to earn a return on temporarily available cash at relatively low
market risk. While the underlying security may be a U.S. Government Security (in
the case of either Fund), a Municipal Security (in the case of the Tax Exempt
Money Market Trust) or another type of high quality money market instrument, the
obligation of the seller is not guaranteed by the U.S. Government, the issuer of
the Municipal Security, or the issuer of any other high quality money market
instrument underlying the agreement, 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, in case of such a default, a 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 attempted enforcement. Each Fund will enter
into repurchase agreements only where the market value of the underlying
security equals or exceeds the repurchase price, and each Fund will require the
seller to provide additional collateral if this market value falls below the
repurchase price at any time during the term of the repurchase agreement. It is
a fundamental policy of each Fund that no more than 10% of the net assets of the
Fund are to be invested in illiquid securities, including repurchase agreements
with maturities of more than seven days.
4
<PAGE>
As described in the Prospectus, all of each Fund's investments will be in
U.S. dollars and will be determined to present minimal credit risks by the
subadviser under guidelines established by each Trust's Board of Trustees. Also,
all of each Fund's investments will, at the time of investment, have remaining
maturities of 397 days or less. The dollar-weighted average maturity of each
Fund's portfolio securities will not exceed 90 days at the time of each
investment. If the disposition of a portfolio security results in a
dollar-weighted average portfolio maturity in excess of 90 days for any Fund,
such Fund will invest its available cash in such a manner as to reduce its
dollar-weighted average portfolio maturity to 90 days or less as soon as
reasonably practicable. For the purposes of the foregoing maturity restrictions,
variable rate instruments which are scheduled to mature in more than 397 days
are treated as having a maturity equal to the longer of (i) the period remaining
until the next readjustment of the interest rate and (ii) if the Fund is
entitled to demand prepayment of the instrument, the notice period remaining
before the Fund is entitled to such prepayment; other variable rate instruments
are treated as having a maturity equal to the shorter of such periods. Floating
rate instruments which are scheduled to mature in more than 397 days are treated
as having a maturity equal to the notice period remaining before the Fund is
entitled to demand prepayment of the instrument; other floating rate
instruments, and all such instruments which are U.S. Government Securities, are
treated as having a maturity of one day.
The value of the securities in each Fund can be expected to vary inversely
with changes in prevailing interest rates. Thus, if interest rates increase
after a security is purchased, that security, if sold, might be sold at a loss.
Conversely, if interest rates decline after purchase, the security, if sold,
might be sold at a profit. In either instance, if the security were held to
maturity, no gain or loss would normally be realized as a result of these
fluctuations. Substantial redemptions of the shares of any Fund might require
the sale of portfolio investments of that Fund at a time when a sale might not
be desirable.
After purchase by a Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by such Fund but neither
event will require a sale of such security by such Fund. However, such event
will be considered in determining whether the Fund should continue to hold the
security. To the extent that the ratings given by Moody's or S&P (or another
nationally recognized statistical rating organization ["NRSRO"] approved by the
Securities and Exchange Commission (the "SEC") may change as a result of changes
in such organizations or their rating systems, each Fund will, in accordance
with standards approved by the relevant Board of Trustees, attempt to use
comparable ratings as standards for investments in accordance with the
investment policies contained in the Prospectus.
--------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
--------------------------------------------------------------------------------
The following is a list of each Fund's investment restrictions. The
restrictions set forth in the numbered paragraphs below are fundamental policies
and, accordingly, will not be changed without the consent of the holders of a
majority of the outstanding voting securities of the applicable Fund.
CASH MANAGEMENT TRUST - MONEY MARKET SERIES
The Fund will not:
(1) Purchase any security (other than U.S. Government Securities and
repurchase agreements relating thereto) if, as a result, more than 5%
of the Fund's total assets (taken at current value) would be invested
in securities of a single issuer. This restriction applies to
securities subject to repurchase agreements but not to the repurchase
agreements themselves;
(2) Purchase any security if, as a result of such purchase, more than 25%
of the Fund's total assets (taken at current value) would be invested
in any one industry. This restriction does not apply to U.S. Government
Securities and bank obligations. For purposes of this restriction,
telephone, gas and electric public utilities are each regarded as
separate industries and finance companies whose financing activities
are related primarily to the activities of their parent companies are
classified in the industry of their parents;
(3) Purchase securities on margin (but it may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities); or make short sales except where, by virtue of ownership
of other securities, it has the right to obtain, without payment of
further consideration, securities equivalent in kind and amount to
those sold, and the Fund will not deposit or pledge more than 10% of
its total assets (taken at current value) as collateral for such sales;
5
<PAGE>
(4) Acquire more than 10% of the total value of any class of the
outstanding securities of an issuer or acquire more than 10% of the
outstanding voting securities of an issuer. This restriction does not
apply to U.S. Government Securities;
(5) Borrow money, except as a temporary measure for extraordinary or
emergency purposes (but not for the purpose of investment) up to an
amount not in excess of the lower of (i) 10% of its total assets (taken
at cost) and (ii) 5% of such total assets (taken at current value);
(6) Pledge, mortgage or hypothecate more than 10% of its total assets
(taken at cost);
(7) Invest more than 5% of its total assets (taken at current value) in
securities of businesses (including predecessors) less than three years
old;
(8) Purchase or retain securities of any issuer if, to the knowledge of the
Fund, officers and Trustees of the Fund or officers and directors of
any investment adviser of the Fund who individually own beneficially
more than 1/2 of 1% of the securities of that issuer, together own
beneficially more than 5%;
(9) Make loans, except by purchase of debt obligations in which the Fund
may invest consistent with its objective and investment policies. This
restriction does not apply to repurchase agreements;
(10) Buy or sell oil, gas or other mineral leases, rights or royalty
contracts, commodities or commodity contracts or real estate. This
restriction does not prevent the Fund from purchasing securities of
companies investing in real estate or of companies which are not
principally engaged in the business of buying or selling such leases,
rights or contracts;
(11) Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an
underwriter under the federal securities laws;
(12) Make investments for the purpose of exercising control or management;
(13) Participate on a joint or joint and several basis in any trading
account in securities. (The "bunching" of orders for the purchase or
sale of portfolio securities with other accounts under the management
of Back Bay Advisors to reduce acquisition costs, to average prices
among them, or to facilitate such transactions, is not considered
participating in a trading account in securities);
(14) Write or purchase puts, calls or combinations thereof; or
(15) Invest in the securities of other investment companies, except in
connection with a merger, consolidation or similar transaction.
Except as otherwise stated, the foregoing percentages 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.
TAX EXEMPT MONEY MARKET TRUST
The Fund will not:
(1) Purchase any security if, as a result, more than 5% of the Fund's total
assets (based on current value) would then be invested in the
securities of a single issuer. This limitation does not apply to U.S.
Government Securities. The limitation applies to securities subject to
credit enhancement, but guarantors, insurers, issuers of puts and
letters of credit and other parties providing credit enhancement are
not considered issuers for purposes of the restriction, although
investment in such securities may be limited by applicable regulatory
restrictions. The restriction also applies to securities subject to
repurchase agreements but not to the repurchase agreements themselves.
(The SEC staff currently takes the position that only fully
collateralized repurchase agreements may be excluded from such
restriction);
(2) Purchase voting securities or make investments for the purpose of
exercising control or management;
6
<PAGE>
(3) Invest more than 25% of its total assets in industrial development
bonds which are based, directly or indirectly, on the credit of private
entities in any one industry or in securities of private issuers in any
one industry. (In the utilities category, gas, electric, water and
telephone companies will be considered as being in separate
industries.);
(4) Participate on a joint or joint and several basis in any trading
account in securities;
(5) Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Fund may obtain short-term
credits as necessary for the clearance of securities transactions;
(6) Borrow money except for temporary or emergency purposes and then only
in an amount not exceeding 10% of its total assets taken at cost,
except that the Fund may enter into reverse repurchase agreements. The
Fund will not, however, borrow or enter into reverse repurchase
agreements if the value of the Fund's assets would be less than 300% of
its borrowing and reverse repurchase agreement obligations. In
addition, when borrowings (other than reverse repurchase agreements)
exceed 5% of the Fund's total assets (taken at current value), the Fund
will not purchase additional portfolio securities. Permissible
borrowings and reverse repurchase agreements will be entered into
solely for the purpose of facilitating the orderly sale of portfolio
securities to accommodate redemption requests;
(7) Make loans, except that the Fund may purchase or hold debt instruments
in accordance with its investment objective and policies and may enter
into loan participations and repurchase agreements;
(8) Pledge, mortgage or hypothecate its assets except in connection with
reverse repurchase agreements and except to secure temporary borrowings
permitted by restriction (6) above in aggregate amounts not to exceed
10% of its net assets taken at cost at the time of the incurrence of
such borrowings;
(9) Act as an underwriter of securities of other issuers except that, in
the disposition of portfolio securities, it may be deemed to be an
underwriter under the federal securities laws;
(10) Invest in securities of other investment companies, except by purchases
in the open market involving only customary brokers' commissions, or in
connection with a merger, consolidation, reorganization 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;
(11) Purchase or retain securities of an issuer if, to the knowledge of the
Fund, officers, Trustees or directors of the Fund or any investment
adviser of the Fund who individually own beneficially more than 1/2 of
1% of the shares or securities of that issuer together own beneficially
more than 5% of such shares or securities;
(12) Purchase securities of any company which has (with predecessor
businesses and entities) a record of less than three years' continuing
operation or purchase securities whose source of repayment is based,
directly or indirectly, on the credit of such a company, except (i)
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities, or (ii) Municipal Securities which are
rated by at least two nationally recognized municipal bond rating
services, if as a result more than 5% of the total assets of the Fund
(taken at current value) would be invested in such securities;
(13) Buy or sell oil, gas or other mineral leases, rights or royalty
contracts, commodities or commodity contracts or real estate (except
that the Fund may buy Municipal Securities or other permitted
investments secured by real estate or interests therein); or
(14) Write or purchase puts, calls, warrants, straddles, spreads or
combinations thereof, except that the Fund may purchase puts as
described under "Investment Objectives and Policies -- Tax Exempt Money
Market Trust -- Purchase of Securities with Rights to Put Securities to
Seller" and may purchase Municipal Securities on a "when-issued" basis
as described above under "Investment Objectives and Policies -- Tax
Exempt Money Market Trust -- When-Issued Securities";
Except as otherwise stated, the foregoing percentages 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.
7
<PAGE>
For the purpose of the foregoing investment restrictions, the
identification of the "issuer" of Municipal Securities which are not general
obligation bonds (see Appendix B) is made by Back Bay Advisors on the basis of
the characteristics of the obligation, the most significant of which is the
source of funds for the payment of principal and interest on such securities. If
the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government of such
subdivision, and the obligation is based solely on the assets and revenues of
such subdivision, such subdivision would be regarded as the sole issuer.
Similarly, in the case of industrial development bonds (see Appendix B), if the
bond is backed only by the assets and revenues of the non-governmental user, the
non-governmental user would be regarded as the sole issuer.
BOTH FUNDS
No Fund will purchase any security restricted as to disposition under
federal securities laws if, as a result, more than 10% of such Fund's net assets
would be invested in such securities or in other securities that are illiquid.
The Funds have implemented procedures to determine the liquidity of Section 4(2)
commercial paper purchased by the Funds for purposes of determining whether the
Fund's limit on the purchases of illiquid securities has been met.
The staff of the SEC is currently of the view that repurchase agreements
maturing in more than seven days are "illiquid" securities. Each Fund currently
intends to conduct its operations in a manner consistent with this view. In
addition, certain loan participations may be "illiquid" securities for this
purpose.
--------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
--------------------------------------------------------------------------------
The Funds are governed by a Board of Trustees, which is responsible for
generally overseeing the conduct of Fund business and for protecting the
interests of shareholders. The Trustees meet periodically throughout the year to
oversee the Funds' activities, review contractual arrangements with companies
that provide services to the Funds and review the Funds' performance.
Trustees
--------
The Trustees of the Trusts, their position with the Trusts (underlined),
and their ages (in parentheses), addresses and principal occupations during at
least the past five years are listed below. Those marked with an asterisk (*)
may be deemed to be an "interested person" of the Trusts 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 Trusts; Douglas Dillon Professor and Director for the
Belfer Center of Science and International Affairs, John F. Kennedy
School of Government, Harvard University; 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;
Chairman of the Audit Committee for the Trusts; President and CEO, Cain
Brothers & Company, Incorporated (investment banking); Trustee,
Universal Health Realty Income Trust (NYSS), eBenX, Inc. (NASDAQ); and
Board Member, Norman Rockwell Museum; Sharon Hospital, National
Committee for Quality Healthcare, and Columbia University School of
Business.
KENNETH J. COWAN -- TRUSTEE (68); One Beach Drive, S.E. #2103, St. Petersburg,
Florida 33701; Chairman of the Contract Review and Governance Committee
for the Trusts; 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 (57); 1001 Pennsylvania Avenue, N.W., Washington, D.C.
20004; Member of the Contract Review and Governance Committee for the
Trusts; Partner, The Carlyle Group (investments); Public Service
Professor, John F. Kennedy School of Government, Harvard University;
8
<PAGE>
Trustee, Council for Excellence in Government (not-for-profit);
Director, Frontier Ventures (personal investment); Director, Telcom
Ventures (telecommunications); 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).
SANDRA O. MOOSE -- TRUSTEE (58); Exchange Place, Boston, Massachusetts 02109;
Member of the Audit Committee for the Trusts; Senior Vice President and
Director, The Boston Consulting Group, Inc. (management consulting);
Director, Verizon Communications (communication 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, Alfred P. Sloan
Foundation, Harvard Graduate School Society Council; Member, Visiting
Committee, Harvard School of Public Health.
JOHN A. SHANE -- TRUSTEE (67); 200 Unicorn Drive, Woburn, Massachusetts
01801; Member of the Audit Committee for the Trusts; President, Palmer
Service Corporation (venture capital organization); 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); Director, President and Chief Executive Officer, CDC Asset
Management - North America; Director, Nvest Services Company; Director,
Nvest Distribution Corporation; Director of various affiliates of Nvest
Funds Management, L.P. ("Nvest Management"); formerly, Board Member,
Investment Company Institute and United Way of Massachusetts Bay;
Committee Member, New York Stock Exchange listed Company Advisory
Committee.
PENDLETONP. WHITE -- TRUSTEE (69); 6 Breckenridge Lane, Savannah, Georgia
31411; Member of the Contract Review and Governance Committee for the
Trusts; 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 Nvest Funds is comprised
solely of disinterested Trustees and considers matters relating to advisory,
subadvisory and distribution arrangements, potential conflicts of interest
between the adviser or subadviser and the Funds, and governance matters relating
to the Funds.
The Audit Committee of the Nvest Funds is comprised solely of disinterested
Trustees and considers matters relating to the scope and results of the Funds'
audits and serves as a forum in which the independent accountants can raise any
issues or problems identified in the audit with the Board of Trustees. This
Committee also reviews and monitors compliance with stated investment objectives
and policies, regulations of the SEC and Internal Revenue Service (the "IRS") as
well as operational issues relating to the transfer agent.
Officers
--------
Officers of the Trusts, in addition to Mr. Voss, and their positions
with the Trusts (underlined), their ages (in parentheses) and principal
occupations during at least the past five years are listed below.
JOHN T. HAILER -- PRESIDENT (39); Executive Vice President, Nvest
Distribution Corporation; President and Chief Executive Officer, the
Distributor; and President and Chief Executive Officer, Nvest
Management; formerly, Senior Vice President, International Division and
Head of Strategic Marketing, Fidelity Investments.
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 (36); Director, Nvest Distribution
Corporation; Senior Vice President, General Counsel, Secretary and
Clerk, the Distributor; Senior Vice President, General Counsel,
Secretary and Clerk, Nvest Management; Executive Vice President,
General Counsel, Secretary and Clerk, Nvest Services Company; formerly,
Senior Vice President and General Counsel, Funds Distributor, Inc.
(mutual fund service company); formerly, Vice
9
<PAGE>
President and General Counsel, Boston Institutional Group (mutual funds
service company); formerly, Senior Vice President and General Counsel,
Financial Research Corporation.
Each person listed above holds the same position(s) with both Trusts.
Previous positions during the past five years with the Distributor, 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 Trustees is also a director or Trustee of several other
investment companies for which the Distributor acts as principal underwriter.
Except as indicated above, the address of each Trustee and officer of the
Trusts is 399 Boylston Street, Boston, Massachusetts 02116.
Trustee Fees
------------
Neither Trust pays compensation to its officers, or to its Trustees who are
"interested persons" of the Trusts as defined in the 1940 Act.
Each Trustee who is not an interested person of the Trusts receives, in the
aggregate for serving on the Board of Trustees of the Trusts, Nvest Funds Trust
I, Nvest Funds Trust II and Nvest Funds Trust III (all five trusts collectively,
the "Nvest Funds Trusts"), comprising as of March 31, 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 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 fiscal year ended June 30, 2000, the Trustees of the Trusts
received the amounts set forth in the following table for serving as a trustee
of the Trusts; and during the year ended December 31, 1999, such persons
received the amounts set forth below for serving as Trustee of the Trusts and
for also serving as Trustees of the other Nvest Funds Trusts.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Aggregate Aggregate Retirement or
Compensation Compensation from Benefits Accrued Total Compensation
from Nvest Cash Nvest Tax Exempt as Part of Fund Estimated from the Nvest
Management Trust Money Market Trust Expenses in the Annual Funds Trusts in the
in the Year Ended in the Year Ended Year Ended Benefits Upon Year Ended
Name of Trustee June 30, 2000* June 30, 2000* June 30, 2000* Retirement December 31, 1999
--------------- -------------- -------------- -------------- ---------- -----------------
Graham T. Allison, Jr. $5,462 $1,090 $0 $0 $60,000
Daniel M. Cain $5,847 $1,151 $0 $0 $64,000
Kenneth J. Cowan $5,847 $1,151 $0 $0 $64,000
Richard Darman $5,462 $1,090 $0 $0 $60,000
Sandra O. Moose $5,462 $1,090 $0 $0 $60,000
John A. Shane $5,462 $748 $0 $0 $60,000
Pendleton P. White $5,462 $1,090 $0 $0 $60,000
<FN>
*Amounts include payments deferred by Trustees for the fiscal year ended June
30, 2000. The total amount of deferred compensation accrued for all of the Nvest
Funds Trusts as of June 30, 2000 for the Trustees follows: Allison: $819,969;
Cain: $46,813; Cowan: $80,000; Darman: $42,645.
</FN>
</TABLE>
The Funds provide no pension or retirement benefits to Trustees, but have
adopted a deferred payment arrangement under which each Trustee may elect not to
receive fees from each 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. Each 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.
As of July 31, 2000, the officers and Trustees of the Trusts as a group
owned less than 1% of the outstanding shares of each Fund.
10
<PAGE>
--------------------------------------------------------------------------------
INVESTMENT ADVISORY, SUBADVISORY, DISTRIBUTION AND OTHER SERVICES
--------------------------------------------------------------------------------
Investment Advisory and Subadvisory Agreements
----------------------------------------------
Pursuant to separate advisory agreements, each dated August 30, 1996, as
amended May 1, 1998 (the "Advisory Agreements"), Nvest Management has agreed,
subject to the supervision of the Board of Trustees of the relevant Trust, to
manage the investment and reinvestment of the assets of each Fund and to provide
a range of administrative services, including executive and other personnel, to
each Fund. In addition to overseeing the management of the Funds, Nvest
Management provides executive and other personnel for the management of the
Trusts. For the services described in the advisory agreements, each Fund has
agreed to pay Nvest Management a management fee set forth in the following
table, reduced by the amount of any subadvisory fee payable by the Fund to Back
Bay Advisors (as described below):
Management fee payable by Fund to Nvest Management
--------------------------------------------------
(includes any subadviser fees paid)
----------------------------------
Fund (as a percentage of average daily net assets of the Fund)
---- ---------------------------------------------------------
Cash Management Trust 0.425% of the first $500 million
- Money Market Series 0.400% of the next $500 million
0.350% of the next $500 million
0.300% of the next $500 million
0.250% of amounts in excess of $2 billion
Tax Exempt Money Market Trust 0.400% of the first $100 million
0.300% of amounts in excess of $100 million
The Advisory Agreements each provide that Nvest Management may delegate its
responsibilities thereunder to other parties. Pursuant to separate subadvisory
agreements, each dated August 30, 1996, as amended May 1, 1998 (the "Subadvisory
Agreements"), Nvest Management has delegated responsibilities for managing the
investment and reinvestment of each Fund to Back Bay Advisors as subadviser. For
providing such subadvisory services to the Funds, each Fund pays Back Bay
Advisors the following fee:
Subadvisory fee payable by the Fund
-----------------------------------
Fund (as a percentage of average daily net assets of the Fund)
---- ---------------------------------------------------------
Cash Management Trust 0.205% of the first $500 million
- Money Market Series 0.180% of the next $500 million
0.160% of the next $500 million
0.140% of the next $500 million
0.120% of amounts in excess of $2 billion
Tax Exempt Money Market Trust 0.200% of the first $100 million
0.150% of amounts in excess of $100 million
From January 2, 1996 to May 1, 1998, Nvest Management served as adviser and
Back Bay Advisors served as subadviser to each Fund pursuant to separate
advisory and subadvisory agreements providing for the same management and
subadvisory fees as are currently in effect for the Funds; except that Nvest
Management, and not the Fund, paid Back Bay Advisors for the services it
rendered to each Fund.
For the fiscal years ended June 30, 1998, 1999 and 2000, the Cash
Management Trust - Money Market Series paid management fees of $1,535,052,
$1,713,918 and $1,827,365 to Nvest Management. During this period, Back Bay
Advisors received subadvisory fees of $1,380,613, $1,527,291 and $1,620,119.
From January 2, 1996 to August 31, 2000 Nvest Management and Back Bay
Advisors each agreed to proportionately reduce their fee and/or pay the charges,
expenses and fees of Tax Exempt Money Market Trust (not including fees payable
to the Trustees who are not "interested persons" of the Trust as defined in the
1940 Act) to the extent necessary to limit the Fund's expenses to an annual rate
of 0.65% of average net assets. For the fiscal years ended June 30, 1998, 1999
and 2000,
11
<PAGE>
gross management fees (which include gross subadvisory fees) payable to Nvest
Management of $274,666, $310,993 and $318,953 were reduced by $165,118, $118,782
and $109,957, respectively, resulting in net management fees of $109,548,
$192,211 and $208,996 respectively, and gross subadvisory fees payable to Back
Bay Advisors of $137,333, $155,496 and $159,476 were reduced by $82,559, $59,391
and $54,978, respectively, resulting in net subadvisory fees, of $54,774,
$96,105 and $104,498 respectively, as a result of this expense limitation.
In addition to the management fees paid to Nvest Management and the
subadvisory fees paid to Back Bay Advisors, each Fund pays the Distributor for
providing certain accounting and administrative services. The amount of the
payments is based on the allocated costs that the Distributor incurs in
providing these services.
In General.
-----------
Nvest Management, formed in 1995, is a limited partnership whose sole
general partner, Nvest Distribution Corporation, is a wholly-owned subsidiary of
Nvest Holdings, L.P. ("Nvest Holdings"), which in turn is a wholly-owned
subsidiary of CDC Asset Management - North America. Nvest Distribution
Corporation is also the sole general partner of the Distributor, and the sole
shareholder of Nvest Services Company, Inc., the transfer and dividend
disbursing agent of the Funds. CDC Asset Management - North America owns the
entire limited partnership interest in each of Nvest Management and the
Distributor. Nvest Services Company, Inc. has subcontracted certain of its
obligations as the transfer and dividend disbursing agent of the Funds to Boston
Financial Data Services, Inc. Nvest Services Company, Inc. will also do business
as Nvest Services Company and Nvest Services Co.
CDC Asset Management - North America is part of the investment management
arm of France's Caisse des Depots et Consignations ("CDC"), a major diversified
financial institution. CDC Asset Management - North America is owned by CDC AM -
North America, which is wholly-owned by CDC Asset Management, a French entity
that is part of Caisse des Depots et Consignations.
Back Bay Advisors, formed in 1986, is a limited partnership whose sole
general partner, Back Bay Advisors, Inc., is a wholly-owned subsidiary of Nvest
Holdings. CDC Asset Management - North America owns the entire limited
partnership interest in Back Bay Advisors. Back Bay Advisors specializes in
fixed-income management and provides investment management services to
institutional clients, including other registered investment companies and
accounts of New England Financial and its affiliates.
Each Fund pays all expenses not borne by Nvest Management or Back Bay
Advisors including, but not limited to, the charges and expenses of the Fund's
custodian and transfer agent, independent auditors and legal counsel for the
Funds and the Trusts' 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 each of the Fund's adviser, subadviser(s) or their affiliates,
other than affiliated registered investment companies. Each Fund also pays Nvest
Management for certain legal and accounting services provided to the Fund by
Nvest Management.
Each Fund's Advisory Agreement and Subadvisory 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 of the relevant Trust or by vote of a majority of the
outstanding voting securities of the relevant Fund and (ii) by vote of a
majority of the Trustees who are not "interested persons" of the relevant 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. Each Fund has received an exemptive
order from the Securities and Exchange Commission, which permits Nvest
Management to amend or continue existing subadvisory agreements without
shareholder approval when approved by the Fund's Board of Trustees. The
exemption also permits Nvest Management to enter into new subadvisory agreements
with subadvisers that are not affiliated with Nvest Management, if approved by
the Fund's Board of Trustees. Shareholders will be notified of any subadviser
changes. Each Advisory Agreement and Subadvisory Agreement may be terminated
without penalty by vote of the Board of Trustees of the relevant Trust or by
vote of a majority of the outstanding voting securities of the relevant Fund,
upon 60 days' written notice, or by the Fund's adviser upon 90 days' written
notice, and each terminates automatically in the event of its assignment. Each
Subadvisory Agreement also may be terminated by the Fund's subadviser upon 90
days' notice and automatically terminates upon termination of the related
Advisory Agreement.
12
<PAGE>
Each Fund's Advisory Agreement and Subadvisory Agreement provides that
Nvest Management or Back Bay Advisors 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.
Certain officers and employees of Back Bay Advisors have responsibility for
portfolio management of other advisory accounts and clients of Back Bay Advisors
(including other registered investment companies and accounts of affiliates of
Back Bay Advisors) that may invest in securities in which the Funds also invest.
If Back Bay Advisors determines that an investment purchase or sale opportunity
is appropriate and desirable for more than one advisory account, purchase and
sale orders may be executed separately or may be combined and, to the extent
practicable, allocated by Back Bay Advisors to the participating accounts. Where
advisory accounts have competing interests in a limited investment opportunity,
Back Bay Advisors will allocate an investment purchase opportunity based on the
relative time the competing accounts have had funds available for investment,
and the relative amounts of available funds, and will allocate an investment
sale opportunity based on relative cash requirements and the time the competing
accounts have had investments available for sale. It is Back Bay Advisors'
policy to allocate, to the extent practicable, investment opportunities to each
client over a period of time on a fair and equitable basis relative to its other
clients. It is believed that the ability of the Funds to participate in larger
volume transactions in this manner will in some cases produce better executions
for the Funds. However, in some cases, this procedure could have a detrimental
effect on the price and amount of a security available to a Fund or the price at
which a security may be sold. The Trustees are of the view that the benefits of
retaining Back Bay Advisors as subadviser to each of the Funds outweigh the
disadvantages, if any, that may result from participating in such transactions.
Distribution Agreement
----------------------
Under separate agreements with each Fund, the Distributor, 399 Boylston
Street, Boston, Massachusetts 02116, acts as the distributor of each class of
the Funds' shares, which are sold at net asset value without any sales charge.
The Distributor receives no compensation from the Funds or purchasers of Fund
shares for acting as distributor. Under these agreements, the Distributor
conducts a continuous offering and is not obligated to sell a specific number of
shares. Under the agreements, the Distributor pays promotion and distribution
expenses relating to the sale of Fund shares, including the cost of preparing,
printing and distributing prospectuses used in offering shares of the Funds for
sale. Each Fund pays the cost of registering and qualifying its shares under
state and federal securities laws.
The Distributor pays investment dealers a service fee in order to
compensate them for services they provide and expenses they incur in connection
with the establishment or maintenance of shareholder accounts in the Funds. The
service fee is paid quarterly at an annual rate equal to the following
percentages of average Fund net assets, including reinvested dividends, in
accounts serviced by the investment dealer during the year. THE DISTRIBUTOR PAYS
THE SERVICE FEE; THE FEE IS NOT A DIRECT OR INDIRECT EXPENSE OF THE FUNDS OR
THEIR SHAREHOLDERS AND DOES NOT AFFECT THE FUNDS' YIELDS.
Average Daily Net Asset Balance Fee
------------------------------- ---
$0 - 5 million none
$ over 5 million to 10 million .05%
$ over 10 million .10%
The Distributor controls the words "Nvest" in the names of the Trusts and
the Funds and if it should cease to be the distributor, Nvest Cash Management
Trust, Nvest Tax Exempt Money Market Trust or the affected Fund may be required
to change their names and delete these words or letters. The Distributor also
acts as general distributor for Kobrick Capital Fund, Kobrick Emerging Growth
Fund, Kobrick Growth Fund, Nvest Funds Trust I, Nvest Trust II and Nvest Funds
Trust III.
The Distributor may publish information about the Funds in the media
described in Appendix D and may include information in advertising and sales
literature as described in Appendix E.
Independent Accountants
-----------------------
The Trusts' independent accountants are PricewaterhouseCoopers LLP, 160
Federal Street, Boston, Massachusetts 02110. The independent accountants conduct
an annual audit of each Fund's financial statements, assist in the preparation
of federal and state income tax returns and consult with the Trusts as to
matters of accounting and federal and state income taxation. The information
concerning financial highlights in the Prospectuses, and financial statements
contained in the Funds' annual reports for the year ended June 30, 2000 and
incorporated by reference into this Statement, have been so included in reliance
on the reports of each Trust's independent accountants, given on the authority
of said firm as experts in auditing and accounting.
13
<PAGE>
Custodial Arrangements
----------------------
State Street Bank and Trust Company ("State Street Bank"), 225 Franklin
Street, Boston, Massachusetts 02110, is the Trusts' custodian. As such, State
Street Bank holds in safekeeping certificated securities and cash belonging to
each Fund and, in such capacity, is the registered owner of securities in
book-entry form belonging to each Fund. Upon instruction, State Street Bank
receives and delivers cash and securities of each Fund in connection with Fund
transactions and collects all dividends and other distributions made with
respect to each Fund's portfolio securities. State Street Bank also maintains
certain accounts and records of the Trusts and calculates the total net asset
value, total net income and net asset value per share of each Fund on a daily
basis.
Other Arrangements
------------------
Pursuant to a contract between the Funds and Nvest Services Company, Nvest
Services Company acts as shareholder servicing and transfer agent for the Funds
and is responsible for services in connection with the establishment,
maintenance and recording of shareholder accounts, including all related tax and
other reporting requirements and the implementation of investment and redemption
arrangements offered in connection with the sale of the Funds' shares. The Funds
pay, at a minimum, an annual per account fee to Nvest Services Company for these
services in the amount of $22.00, which may be increased with the approval of
each Trust's Board of Trustees. The aggregate amount of fees paid by the Funds
to Nvest Services Company for these services during the three most recent fiscal
years of the Funds were as follows:
Fund Fiscal Year Ended June 30,
--------------------------------------------------------------------------------
1998 1999 2000
---- ---- ----
Cash Management Trust
- Money Market Series $1,685,387 $1,672,122 $1,507,132
Tax Exempt Money Market Trust $73,566 $69,140 $72,061
Nvest Services Company has subcontracted with State Street Bank for it to
provide, through its subsidiary, Boston Financial Data Services, Inc. ("BFDS"),
transaction processing, mail and other services. For these services, Nvest
Services Company pays BFDS a monthly per account fee. Class Y shares of Cash
Management Trust - Money Market Series bear a sub-transfer agent fee of 0.10% of
average daily net assets charged by National Financial Services Corporation.
In addition, during the fiscal year ended June 30, 2000, Nvest Services
Company performed certain accounting and administrative services for the Funds,
pursuant to an Administrative Services Agreement (the "Administrative
Agreement"). Under the Administrative Agreement, Nvest Services Company provides
the following services to the Funds: (i) expenses for personnel performing
bookkeeping, accounting, internal auditing and financial reporting functions and
clerical functions relating to the Fund, (ii) expenses for services required in
connection with the preparation of registration statements and prospectuses,
registration of shares in various states, shareholder reports and notices, proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities and reports and questionnaires for SEC compliance, and (iii)
registration, filing and other fees in connection with requirements of
regulatory authorities. For these services, the Nvest Funds pay Nvest Services
Company a group fee equal to the annual rate of 0.035% of the first $5 billion
of the Funds' average daily net assets, 0.0325% of the next $5 billion of the
Funds' average daily net assets and 0.03% of the Funds' average daily net assets
in excess of $10 billion.
For these services, Nvest Services Company received fees from the Funds for
the following fiscal years ending June 30, 1998, 1999 and 2000:
Fund Fiscal Year Ended June 30,
--------------------------------------------------------------------------------
1998 1999 2000
---- ---- ----
Cash Management Trust
- Money Market Series $100,532 $191,303 $264,886
Tax Exempt Money Market Trust $23,386 $32,738 $28,480
14
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
--------------------------------------------------------------------------------
In General
----------
In placing orders for the purchase and sale of portfolio securities for
each Fund, Back Bay Advisors will always seek the best price and execution. It
is expected that the Funds' portfolio transactions will generally be with
issuers or dealers in money market instruments acting as principal. Accordingly,
the Funds do not anticipate that they will pay significant brokerage
commissions. During the fiscal years ended June 30, 1998, 1999 and 2000, the
Funds did not incur any brokerage fees in connection with portfolio
transactions.
Some of the portfolio transactions for each Fund are placed with dealers
who provide Back Bay Advisors with supplementary investment and statistical
information or furnish market quotations to the Funds or other investment
companies advised by Back Bay Advisors. The business would not be so placed if
the Funds would not thereby obtain the best price and execution. Although it is
not possible to assign an exact dollar value to these research services, they
may, to the extent used, tend to reduce the expenses of Back Bay Advisors. The
research services may also be used by Back Bay Advisors in connection with its
other advisory accounts and in some cases may not be used with respect to the
Funds.
The Board of Trustees of each Trust has requested that Back Bay Advisors
seek to reduce underwriting commissions or similar fees on Fund portfolio
transactions through certain methods currently available. It is not expected
that these methods will result in material reductions. The Boards have not
requested that Back Bay Advisors or its affiliates attempt to join underwriting
syndicates to reduce underwriting commissions or fees.
Tax Exempt Money Market Trust
-----------------------------
It is expected that the Tax Exempt Money Market Trust's portfolio
securities will normally be purchased directly from an underwriter or in the
over-the-counter market from the principal dealers in such securities, unless it
appears that a better price or execution may be obtained elsewhere. Purchases
from underwriters will include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers will include the spread between the
bid and asked price.
--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------
From time to time, the Funds may use performance data in advertisements and
promotional material. These results may include comparisons to the average daily
yields of money market funds reporting to IBC/Donoghue's Money Fund Report
("Donoghue's"), including comparisons of such average yields for funds
considered by Donoghue's to be in the same category as each of the Funds. See
"Net Income, Dividends and Valuation" below for an explanation of how the Funds
calculate yield and "effective" (or "compound") yield.
The Funds' advertising and sales literature may refer to historical,
current and prospective political, social, economic and financial trends and
developments that affect domestic and international investment as it relates to
any of the Nvest Funds. The Funds' advertising and sales literature may include
historical and current performance and total returns of investment alternatives
to the Nvest Funds. Articles, releases, advertising and literature may discuss
the range of services offered by the Trusts, the Distributor, and the transfer
agent of the Funds, with respect to investing in shares of the Funds and
customer service. Such materials may discuss the multiple classes of shares
available through the Trusts and their features and benefits, including the
details of the pricing structure.
The Distributor may make reference in its advertising and sales literature
to awards, citations and honor bestowed on it by industry organizations and
other observers and raters, including, but not limited to Dalbar's Quality
Tested Service Seal and Key Honors Award. Such reference may explain the
criteria for the award, indicate the nature and significance of the honor and
provide statistical and other information about the award and the Distributor's
selection, including, but not limited to, the scores and categories in which the
Distributor excelled, the names of funds and fund companies that have previously
won the award and comparative information and data about those against whom the
Distributor competed for the award, honor or citation.
15
<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.
The Funds may enter into arrangements with banks exempted from
broker-dealer registration under the Securities Exchange Act of 1934.
Advertising and sales literature developed to publicize such arrangements will
explain the relationship of such bank to the Nvest Funds and the Distributor as
well as the services provided by the bank relative to the Funds. The material
may identify the bank by name and discuss the history of the bank including, but
not limited to, the type of bank, its asset size, the nature of its business and
services and its status and standing in the industry.
In addition, sales literature may be published concerning topics of general
investor interest for the benefit of registered representatives and the Funds'
prospective shareholders. These materials may include, but are not limited to,
discussions of college planning, retirement planning and reasons for investing
and historical examples of the investment performance of various classes of
securities, securities markets and indicies.
--------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS AND OWNERSHIP OF SHARES
--------------------------------------------------------------------------------
Nvest Cash Management Trust was organized as a Massachusetts business trust
under the laws of Massachusetts by an Agreement and Declaration of Trust (a
"Declaration of Trust") dated June 5, 1980. The Trust commenced operations on
October 3, 1980 by acquiring all the assets and liabilities of NEL Cash
Management Account, Inc., which commenced operations on July 10, 1978. The Trust
was established with the same investment objective, policies, restrictions and
investment adviser as NEL Cash Management Account, Inc. then had. The Cash
Management Trust - Money Market Series is the only series of Nvest Cash
Management Trust currently in existence. The Fund has four classes of shares
(Classes A, B, C and Y) available for purchase. The Trust is a diversified,
open-end management investment company.
Nvest Tax Exempt Money Market Trust was organized as a Massachusetts
business trust under the laws of Massachusetts by a Declaration of Trust dated
January 18, 1983, and commenced operations on April 21, 1983. Only one series of
shares of Nvest Tax Exempt Money Market Trust is currently in existence; it has
two classes of shares (Classes A and B) available for purchase. The Trust is a
diversified, open-end management investment company.
Class A, B and C shares of the Cash Management Trust - Money Market Series
and Class A and B shares of the Tax Exempt Money Market Trust are identical
except that the classes have different exchange privileges, as set forth in
detail in the Prospectus. Class Y shares of the Cash Management Trust - Money
Market Series are offered only to certain qualified investors and have different
exchange privileges, as set forth in detail in the Prospectus. Class Y shares
bear their own transfer agency and/or prospectus printing costs and do not bear
any portion of those relating to other classes of shares. The Class A, Class B,
Class C and Class Y structure could be terminated should certain Internal
Revenue Service rulings be rescinded.
Each Declaration of Trust currently permits the relevant Trustees to issue
an unlimited number of full and fractional shares of each Fund. Each Fund is
represented by a particular series of shares. Each Declaration of Trust further
permits each Trust's 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 Trustees may determine. When you invest
in a Fund, you acquire freely transferable shares of beneficial interest that
entitle you to receive annual or quarterly dividends as determined by the
respective Trust's Board of Trustees and to cast a vote for each share you own
at stockholder meetings. The shares of each Fund have no pre-emptive rights.
Upon termination of any Fund, whether pursuant to liquidation of the Fund or
otherwise, shareholders of each series of shares are entitled to share pro rata
in the net assets belonging to that series then available for distribution to
such shareholders. Each Declaration of Trust also permits the Trustees to charge
shareholders directly for custodial, transfer agency and servicing expenses.
If a Trust were to issue shares of more than one series, the assets
received by each series of the Trust from the issue or sale of shares of each
series thereof and all income, earnings, profits, losses and proceeds therefrom,
subject only to the rights of creditors, are allocated to, and constitute the
underlying assets of, that series. The underlying assets of each series are
segregated and are charged with the expenses in respect of that series and with
a share of the general expenses of the Trust. Any general expenses of the Trust
not readily identifiable as belonging specifically to a particular series are
allocated by or under the direction of the Trustees in such manner as the
Trustees determine to be fair and equitable. While the
16
<PAGE>
expenses of the Trust are allocated to the separate books of account of each
series of the Trust, certain expenses may be legally chargeable against the
assets of both series.
Each Declaration of Trust also permits each Trust's Board of Trustees,
without shareholder approval, to subdivide any series or class of shares into
various sub-series or sub-classes participating in the same portfolio with such
dividend preferences and other rights as the Trustees may designate. While each
Trust'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. Each Trust's Board of Trustees may also, without
shareholder approval, establish one or more additional series or classes or
merge two or more series or classes. At such time as the Trustees of the Trusts
create another series, the Trusts would become a "series" company as that term
is used in Section 18(f) of the 1940 Act.
Each Declaration of Trust provides for the perpetual existence of the
Trusts. Either Trust or any Fund, however, may be terminated at any time by vote
of at least two-thirds of the outstanding shares of the Fund affected.
Similarly, any class within a Fund may be terminated by vote of at least
two-thirds of the outstanding shares of such class. While each Declaration of
Trust further provides that the Board of Trustees may also terminate the
relevant Trust upon written notice to its shareholders, the 1940 Act requires
that the Trust receive the authorization of a majority of its outstanding shares
in order to change the nature of its business so as to cease to be an investment
company.
Voting Rights
-------------
Shareholders are entitled to one vote for each full share held (with
fractional votes for fractional shares held) and may vote (to the extent
described below) in the election of Trustees and the termination of the Funds
and on other matters submitted to the vote of shareholders.
The Declaration of Trust for each Trust provides that, on any matter
submitted to a vote of all Trust shareholders, all of a Trust's 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 Trust'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) each Trust
will hold a meeting of its shareholders 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, as a result of a vacancy in the Board of Trustees,
less than two-thirds of the Trustees holding office have been elected by the
shareholders, that vacancy may only be filled by a vote of the shareholders. In
addition, Trustees of the Tax Exempt Money Market Trust 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 the
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
$25,000 or constituting 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 Tax Exempt Money Market Trust has undertaken 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.
No amendment may be made to a Declaration of Trust without the affirmative
vote of a majority of the outstanding shares of the relevant Trust except (i) to
change the name of the Trust or a series thereof or to cure technical problems
in the
17
<PAGE>
Declaration of Trust, (ii) to establish and designate new series or classes of
Trust shares, and (iii) to establish, designate or modify new and existing
series or classes of Trust shares or modify other provisions relating to Trust
shares in response to applicable laws or regulations, or, in the case of the Tax
Exempt Money Market Trust, in order to convert the Fund into a "series" company.
If one or more new series of either Trust is established and designated by the
Trustees, the shareholders having beneficial interests in the Funds described in
this Statement shall not be entitled to vote on matters exclusively affecting
such new series, such matters including, without limitation, the adoption of or
any change in the investment objectives, policies or restrictions of the new
series and the approval of the investment advisory contracts of the new series.
Similarly, the shareholders of the new series shall not be entitled to vote on
any such matters as they affect the Funds.
Shareholder and Trustee Liability
---------------------------------
Under Massachusetts law, a Trust's shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declarations of Trust disclaim shareholder liability for acts or
obligations of a Fund and require that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by a Trust or
its Trustees. The Declarations of Trust provide for indemnification out of the
assets of a Fund for all loss and expense of any shareholder held personally
liable for the obligations of that 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.
Each Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declarations 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 each Trust provide for indemnification by the
Trust of the Trustees and the officers of the relevant 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 person may not be indemnified against any liability
to the Trust or its 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. Each Trust
offers only its own Funds' shares for sale, but it is possible that a Trust
might become liable for any misstatements in a Prospectus that relate to another
Trust. The Trustees of each Trust have considered this potential liability and
approved the use of the combined Prospectus for Funds of both Trusts.
Code of Ethics
--------------
The Funds, their advisers and the Distributor have adopted Codes of Ethics
pursuant to Rule 17j-1 under the 1940 Act. The Codes of Ethics permits employees
to invest in securities for their own accounts. The Codes of Ethics is on public
file with, and is available from, the SEC.
Ownership of Shares
-------------------
As of July 31, 2000, to the Trusts' knowledge, the following persons owned
of record or beneficially 5% or more of the outstanding shares of the indicated
classes set forth below. At July 31, 2000, the officers and trustees of the
Trusts as a group owned less than 1% of the outstanding shares of each Fund.
<TABLE>
<CAPTION>
<S> <C> <C>
Fund Shareholder and Address Ownership Percentage
---- ----------------------- --------------------
CASH MANAGEMENT TRUST - MONEY MARKET SERIES
Class C shares NTO LLC 7.37%
P.O. Box 55
Odum, GA 31555-0055
State Street Bank and Trust Co. 5.98%
Custodian for IRA Rollover of
Jack M. Jensen
805 Tipperary Road
Oregon, WI 53575-2641
State Street Bank and Trust Co. 5.69%
Custodian for IRA Rollover of
Roger L. Dahlin
18
<PAGE>
9111 Octavia Ct.
Sprinfield, VA 22153-1637
Class Y shares
National Financial Services Corp. 100%
For the Exclusive Benefit of Our
Customers
P.O. Box 3752
Church Street Station
New York, NY 10008-3752
TAX EXEMPT MONEY MARKET TRUST
Class A shares National Financial Services Corp. 22.42%
For the Exclusive Benefit of Our
Customers
P.O. Box 3752
Church Street Station
New York, NY 10008-3752
Class B shares Donaldson Lufkin Jenrette 11.17%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Fred Luntsford 36.18%
Ann Luntsford TOD
Paul K. Luntsford
Kathyrn Robinson
14155 Magnolia Blvd. #128
Sherman Oaks, CA 91433-1150
Judith A. Gizara 6.81%
56 Old County Rd
Mason, NH 03048-4308
Charles Joseph Wine 6.51%
Joann Gross Wine Trustees
CJ Wine TR
DTD 3/9/89
3117 Hickory Stick Rd
Oklahoma City, OK 73120-6001
Primevest Financial Services FBO 6.29%
Sheli A. Tieppo Trustee
7758592
400 First Street SO Suite 300
PO Box 283
St. Cloud, MN 56302-0283
Carruth Educational Trust I 5.62%
FBO Alicia Carruth
DTD 2/6/91
4605 Oak Springs Dr
Flower Mound, TX 75028-7329
</TABLE>
--------------------------------------------------------------------------------
HOW TO BUY SHARES
--------------------------------------------------------------------------------
19
<PAGE>
The procedures for purchasing shares of the Funds are summarized in the
Prospectus. Under certain conditions, exceptions may be made to the policies
listed here and in the Prospectus, subject to senior management approval. All
purchases made by check should be drawn on U.S. banks and payable in U.S.
dollars and made payable to Nvest Funds, or, in the case of a retirement
account, the custodian or Trustee. Shares of each Fund are offered for sale
continuously at their respective net asset values, which the Funds seek to
maintain at a constant $1 per share. See "Net Income, Dividends and Valuation"
in this Statement. There is no sales charge to purchase the Funds' shares. The
minimum initial investment is $2,500, with a $100 minimum for subsequent
investments. There are reduced initial investment minimums for certain
investments described below under "Shareholder Services."
Shares may also be purchased either in writing, by phone, by electronic
funds transfer using Automated Clearing House ("ACH"), or by exchange as
described in the Prospectus through firms that are members of the National
Association of Securities Dealers, Inc. and that have selling agreements with
the Distributor. You may also use Nvest Funds Personal Access Line(R)
(800-225-5478, press 1) or Nvest Funds Web site (www.nvestfunds.com) to purchase
Fund shares. For more information, see the section entitled "Shareholder
Services" in this Statement.
A shareholder may purchase additional shares electronically through the ACH
system so long as the shareholder's bank or credit union is a member of the ACH
system and the shareholder has a completed, approved ACH application on file.
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.
If you wish transactions in your account to be effected by another person
under a power of attorney from you, special rules as summarized in the
Prospectus may apply.
--------------------------------------------------------------------------------
SHAREHOLDER SERVICES
--------------------------------------------------------------------------------
Open Accounts
-------------
Except for investors who own shares through certain broker "street name" or
retirement plan arrangements, each shareholder's investment is automatically
credited to a separate open account maintained for the shareholder by State
Street Bank, and the shareholder will receive a daily statement disclosing the
current balance of shares owned in the shareholder's account and the details of
all transactions in that account for the day; however, if there were no
transactions other than dividend declarations during a month, the shareholder
will only receive a quarterly statement. After the close of each calendar year,
State Street Bank will send the shareholder a statement for each of his or her
accounts providing federal tax information on dividends and distributions paid
during the year including information as to that percentage, if any, of Tax
Exempt Money Market Trust dividends that are not exempt from federal income
taxation. Shareholders should retain this as a permanent record. Nvest Services
Company reserves the right to charge a fee for providing duplicate information.
The open account system provides for full and fractional shares expressed
to three decimal places and, by making the issuance and delivery of stock
certificates unnecessary, eliminates problems of handling and safekeeping, and
the cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates. Certificates will not be issued for Class B or Class C shares.
The costs of maintaining the open account system are paid by the Funds and
no direct charges are made to shareholders. Although the Funds have no present
intention of making such direct charges to shareholders, they each reserve the
right to do so. Shareholders will receive prior notice before any such charges
are made.
Automatic Investment Plans (Class A, B and C shares)
----------------------------------------------------
Subject to each Fund's investor eligibility requirements, investors may
automatically invest in additional shares of a Fund on a monthly basis by
authorizing the Distributor to draw checks on an investor's bank account. The
checks are drawn under the Investment Builder Program, a program designed to
facilitate such periodic payments, and are forwarded to Nvest Services Company
for investment in the Fund. A plan may be opened with an initial investment of
$100 or more and thereafter regular monthly checks of $100 or more will be drawn
on the investor's account. The reduced minimum initial investment pursuant to an
automatic investment plan is referred to in the Prospectus. An Investment
Builder application
20
<PAGE>
must be completed to open an automatic investment plan. An application may be
found in the Prospectus or may be obtained by calling the Distributor at
800-225-5478 or your investment dealer.
This program is voluntary and may be terminated at any time by Nvest
Services Company upon notice to existing plan participants.
The Investment Builder Program plan may be discontinued at any time by the
investor by written notice to Nvest Services Company, which must be received at
least five business days prior to any payment date. The plan may be discontinued
by State Street Bank at any time without prior notice if any check is not paid
upon presentation; or by written notice to you at least thirty days prior to any
payment date. State Street Bank is under no obligation to notify shareholders as
to the nonpayment of any check.
Retirement Plans Offering Tax Benefits - Cash Management Trust - Money Market
-----------------------------------------------------------------------------
Series (Class A, B and C shares)
--------------------------------
The federal tax laws provide for a variety of retirement plans offering tax
benefits. These plans may be funded with shares of the Cash Management Trust -
Money Market Series or with certain other investments. The plans include H.R. 10
(Keogh) plans for self-employed individuals and partnerships, individual
retirement accounts (IRAs), corporate pension and profit sharing plans,
including 401(k) plans, and retirement plans for public school systems and
certain tax exempt organizations (403(b) plans).
The reduced minimum initial investment available to retirement plans
offering tax benefits is referred to in the Prospectus. For these plans, initial
investments in the Fund must be at least $250 for each participant in corporate
pension and profit sharing plans and Keogh plans, at least $500 for IRAs and at
least $100 for any subsequent investments. There is a special initial and
subsequent investment minimum of $25 for payroll deduction investment programs
for SARSEP, SEP, SIMPLE Plans, 403(b) and certain other retirement plans. Income
dividends and capital gain distributions must be reinvested (unless the investor
is over age 59 1/2 or disabled). 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 either Fund's shares as a vehicle for funding a plan, in whole or
in part, under the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and as to the eligibility requirements for a specific plan and its
state as well as federal tax aspects.
Certain retirement plans may also be eligible to purchase Class Y shares.
See the Prospectus relating to Class Y shares.
Systematic Withdrawal Plans (Class A, B and C shares)
----------------------------------------------------
An investor owning a Fund's shares having a value of $5,000 or more may
establish a Systematic Withdrawal Plan providing for periodic payments of a
fixed or variable amount. An investor may terminate the plan at any time. A form
for use in establishing such a plan is available from the servicing agent or
your investment dealer. Withdrawals may be paid to a person other than the
shareholder if a signature guarantee is provided. Please consult your investment
dealer or the Distributor.
A shareholder under a Systematic Withdrawal Plan may elect to receive
payments monthly, quarterly, semiannually or annually for a fixed amount of not
less than $50 or a variable amount based on (1) the market value of a stated
number of shares, (2) a specified percentage of the account's market value or
(3) a specified number of years for liquidating the account (e.g., a 20-year
program of 240 monthly payments would be liquidated at a monthly rate of 1/240,
1/239, 1/238, etc.). The initial payment, under a variable payment option, may
be $50 or more.
On Systematic Withdrawal Plans for accounts subject to a contingent
deferred sales charge ("CDSC"), the amount or percentage you specify may not, on
an annualized basis, exceed 10% of the value, as of the time you make the
election, of your account with the Fund with respect to which you are electing
the plan.
All shares under the Plan must be held in an open (uncertificated) account.
Income dividends and capital gain distributions will be reinvested.
Since systematic withdrawal payments represent proceeds from the
liquidation of shares, withdrawals may reduce and possibly exhaust the value of
the account, particularly in the event of a period of low earnings. Accordingly,
a
21
<PAGE>
shareholder should consider whether a Systematic Withdrawal Plan and the
specified amounts to be withdrawn are appropriate in the circumstances. The
Funds and the Distributor make no recommendations or representations in this
regard. It may be appropriate for the shareholder to consult a tax adviser
before establishing such a Plan. See "Redemptions" and "Tax Status," below, for
certain information as to federal income taxes. Nvest Funds may modify or
terminate this program at any time.
Because of statutory restrictions this plan is not available to pension or
profit-sharing plans, IRAs or 403(b) plans that have State Street Bank as
Trustee.
Dividend Diversification Program
--------------------------------
You may also establish a Dividend Diversification Program, which allows you
to have all dividends and any other distributions automatically invested in
shares of the same class of a Nvest Fund or Money Market Fund, subject to the
investor eligibility requirements of that other Fund and to state securities law
requirements. Shares will be purchased at the selected Fund's net asset value
(plus an applicable sales charge or CDSC) on the dividend record date. A
dividend diversification account must be in the same registration (shareholder
name) as the distributing Fund account and, if a new account in the purchased
Fund is being established, the purchased Fund's minimum investment requirements
must be met. Before establishing a Dividend Diversification Program into any
other Nvest Fund or Money Market Fund, you must obtain and carefully read a copy
of that Fund's Prospectus.
Exchange Privilege
------------------
Class A shares of a Fund may be exchanged for shares of Class A, B or C of
the other Money Market Fund (if available) and Class B shares of a Fund may be
exchanged for Class B shares of the other Money Market Fund without a sales
charge or CDSC, subject to the investor eligibility requirements of the Fund
into which you are exchanging. Shareholders may also exchange their shares in
the Money Market Funds for shares of the same class of any other Nvest Fund
listed below, subject to those funds' eligibility requirements and sales
charges. Class A shares of a Money Market Fund may also be exchanged for Class C
shares of a Nvest Fund, subject to the applicable sales charge. If you own Class
Y shares, you may exchange those shares for Class Y shares of the Cash
Management Trust - Money Market Series. These options are summarized in the
Prospectus.
Shareholders of any of the Nvest Funds may exchange all or any portion of
their shares (including the proceeds of shares of the other funds redeemed
within 120 days before the exchange) for shares of the same class of the Money
Market Funds. However, Class A, Class B or Class C shares of a Money Market Fund
acquired by exchange either from the Nvest Funds or the other Money Market Fund
will be subject to a CDSC if, and to the extent as, the shares exchanged were
subject to a CDSC. Such exchanges may be made by telephoning or writing Nvest
Funds or certain investment dealers. An exchange of the Class B shares of the
Nvest Funds into Class B shares of a Money Market Fund stops the aging period
for purposes of determining the CDSC and conversion to Class A, and the aging
resumes only when an exchange is made back into a Nvest Fund.
Class C shares of a Fund may be exchanged for Class C shares of any of the
Nvest Funds which offer Class C shares on the basis of relative net asset value,
subject to the CDSC schedule of the Nvest Fund acquired. For purpose of
computing the CDSC payable upon redemption of shares acquired by such exchange,
the holding period of any Nvest Fund Class C shares that were exchanged for
Class C shares of the Fund is included, but the holding period of the Class C
shares of the Fund is not included.
Shares of any Fund acquired through an exchange from the Nvest Funds listed
below may be re-exchanged for shares of the same class of those Nvest Funds. Any
such exchange will be based on the respective current net asset values of the
shares involved and no sales charge will be imposed (unless you exchanged into a
Money Market Fund from Class A shares of the Nvest Intermediate Tax Free Fund of
California that you held for less than 6 months, which would subject you to pay
the difference between the sales charge previously paid on your California Fund
shares and the sales charge currently imposed on other Nvest Fund shares).
Shareholders making such exchanges must provide Nvest Funds with sufficient
information to permit verification of their prior ownership of shares.
An exchange may be effected, provided that neither the registered name nor
address of the accounts are different and provided that a certificate
representing the shares being exchanged has not been issued to the shareholder,
by (1) a telephone request to the Funds or Nvest Services Company at
800-225-5478 or (2) a written exchange request to the Funds or Nvest
22
<PAGE>
Services Company, P.O. Box 8551, Boston, MA 02266-8551. You must acknowledge
receipt of a current Prospectus for a Fund before an exchange for that Fund can
be effected. The minimum amount for an exchange is $1,000.
Except as otherwise permitted by SEC rule, shareholders will receive at
least 60 days advance notice of any material change to the exchange privilege.
Automatic Exchange Plan (Class A, B and C shares)
-------------------------------------------------
As described in the Prospectus following the caption "Additional Investor
Services", a shareholder may establish an Automatic Exchange Plan under which
shares of a Fund are automatically redeemed each month and immediately
reinvested in shares of the same class of one or more of the Nvest Funds listed
below, subject to the investor eligibility requirement of that other fund and
the exchange rules regarding Class A, Class B and Class C above. Also, proceeds
of automatic redemptions of Class A shares of the Funds may be reinvested in
Class C shares of those Nvest Funds' Stock or Bond Funds that offer Class C
shares. Registrations on all accounts must be identical. The two dates each
month on which exchanges may be made are the 15th or 28th (or the first business
day thereafter if the 15th or the 28th are not business days) and are made until
the account is exhausted or until Nvest Services Company is notified in writing
to terminate the plan. Exchanges may be made in amounts of $100 or more. A sales
charge will be imposed on such exchanges unless the shares being exchanged were
previously acquired through an exchange from one of the Nvest Funds listed
below. Complete the account application or the Service Options Form available
from Nvest Services Company or your financial representative to establish an
Automatic Exchange Plan.
Every exchange constitutes a sale of fund shares for federal income tax
purposes, on which an investor may realize a long- or short-term capital gain or
loss.
The investment objectives of the Nvest Funds (including the Kobrick Funds) as
set forth in the Prospectus are as follows:
STOCK FUNDS:
------------
NVEST GROWTH FUND seeks long-term growth of capital through investments in
equity securities of companies whose earnings are expected to grow at a faster
rate than the United States economy.
NVEST CAPITAL GROWTH FUND seeks long-term growth of capital.
NVEST BALANCED FUND seeks a reasonable long-term investment return from a
combination of long-term capital appreciation and moderate current income.
NVEST GROWTH AND INCOME FUND seeks opportunities for long-term growth of
capital and income.
NVEST INTERNATIONAL EQUITY FUND seeks total return from long-term growth of
capital and dividend income primarily through investment in a diversified
portfolio of marketable international equity securities.
NVEST STAR ADVISERS FUND seeks long-term growth of capital.
NVEST STAR WORLDWIDE FUND seeks long-term growth of capital.
NVEST STAR SMALL CAP FUND seeks capital appreciation.
NVEST STAR VALUE FUND seeks a reasonable long-term investment return from a
combination of market appreciation and dividend income from equity securities.
NVEST EQUITY INCOME FUND seeks current income and capital growth.
NVEST BULLSEYE FUND seeks long-term growth of capital.
KOBRICK FUNDS
-------------
KOBRICK CAPITAL FUND seeks maximum capital appreciation by investing
primarily in equity securities of companies with small, medium and large
capitalizations.
23
<PAGE>
KOBRICK EMERGING GROWTH FUND seeks to provide growth of capital by
investing primarily in equity securities of emerging growth companies, with an
emphasis on companies with small capitalizations.
KOBRICK GROWTH FUND seeks long-term growth of capital by investing
primarily in equity securities of companies with large capitalizations that may
have better than average long-term growth potential.
BOND FUNDS:
-----------
NVEST GOVERNMENT SECURITIES FUND seeks a high level of current income
consistent with safety of principal by investing in U.S. Government Securities
and engaging in transactions involving related options, futures and options on
futures.
NVEST LIMITED TERM U.S. GOVERNMENT FUND seeks a high current return
consistent with preservation of capital.
NVEST SHORT TERM CORPORATE INCOME FUND seeks a high level of current income
consistent with preservation of capital.
NVEST STRATEGIC INCOME FUND seeks high current income with a secondary
objective of capital growth.
NVEST BOND INCOME FUND seeks a high level of current income consistent with
what the Fund considers reasonable risk.
NVEST HIGH INCOME FUND seeks high current income plus the opportunity for
capital appreciation to produce a high total return.
NVEST MUNICIPAL INCOME FUND seeks as high a level of current income exempt
from federal income taxes as is consistent with reasonable risk and protection
of shareholders' capital.
NVEST MASSACHUSETTS TAX FREE INCOME FUND seeks as high a level of current
income exempt from federal income tax and Massachusetts personal income taxes as
the Fund's subadviser believes is consistent with preservation of capital.
NVEST INTERMEDIATE TERM TAX FREE FUND OF CALIFORNIA seeks as high a level
of current income exempt from federal income tax and its state personal income
tax as is consistent with preservation of capital.
As of June 30, 2000, the net assets of the Nvest Funds (including the Kobrick
Funds) and the Money Market Funds totaled over $8 billion.
Self-Servicing Your Account with Nvest Funds Personal Access Line(R)and Web site
--------------------------------------------------------------------------------
Nvest Funds shareholders may access account information, including share
balances and recent account activity online, by visiting our Web site at
www.nvestfunds.com. Transactions may also be processed online for certain
accounts (restrictions may apply). Such transactions include purchases,
redemptions and exchanges, and shareholders are automatically eligible for these
features. Nvest Funds has taken measures to ensure the security of shareholder
accounts, including the encryption of data and the use of personal
identification (PIN) numbers. In addition, you may restrict these privileges
from your account by calling Nvest Funds at 800-225-5478, or writing to us at
P.O. Box 8551, Boston, MA 02116. More information regarding these features may
be found on our Web site at www.nvestfunds.com.
Investor activity through these mediums is subject to the terms and conditions
outlined in the following NVEST FUNDS ONLINE AND TELEPHONIC CUSTOMER AGREEMENT.
This agreement is also posted on our Web site. The initiation of any activity
through the Nvest Funds Personal Access Line(R), or Web site at
www.nvestfunds.com by an investor shall indicate agreement with the following
terms and conditions:
NVEST FUNDS ONLINE AND TELEPHONIC CUSTOMER AGREEMENT
NOTE: ACCESSING OR REQUESTING ACCOUNT INFORMATION OR TRANSACTIONS THROUGH THIS
SITE CONSTITUTES AND SHALL BE DEEMED TO BE AN ACCEPTANCE OF THE FOLLOWING TERMS
AND CONDITIONS.
24
<PAGE>
The accuracy, completeness and timeliness of all mutual fund information
provided is the sole responsibility of the mutual fund company which provides
the information. No party which provides a connection between this web site and
a mutual fund or its transfer agency system can verify or ensure the receipt of
any information transmitted to or from a mutual fund or its transfer agent, or
the acceptance by, or completion of any transaction with, a mutual fund.
The online acknowledgments or other messages which appear on your screen for
transactions entered do not mean that the transactions have been received,
accepted or rejected by the mutual fund. These acknowledgments are only an
indication that the transactional information entered by you has either been
transmitted to the mutual fund, or that it cannot be transmitted. It is the
responsibility of the mutual fund to confirm to you that it has received the
information and accepted or rejected a transaction. It is the responsibility of
the mutual fund to deliver to you a current prospectus, confirmation statement
and any other documents or information required by applicable law.
NO TRANSACTION SHALL BE DEEMED ACCEPTED UNTIL YOU RECEIVE A WRITTEN CONFIRMATION
FROM THE FUND COMPANY.
You are responsible for reviewing all mutual fund account statements received by
you in the mail in order to verify the accuracy of all mutual fund account
information provided in the statement and transactions entered through this
site. You are also responsible for promptly notifying the mutual fund of any
errors or inaccuracies relating to information contained in, or omitted from
your mutual fund account statements, including errors or inaccuracies arising
from the transactions conducted through this site.
TRANSACTIONS ARE SUBJECT TO ALL REQUIREMENTS, RESTRICTIONS AND FEES AS SET FORTH
IN THE PROSPECTUS OF THE SELECTED FUND.
THE CONDITIONS SET FORTH IN THIS AGREEMENT EXTEND NOT ONLY TO TRANSACTIONS
TRANSMITTED VIA THE INTERNET BUT TO TELEPHONIC TRANSACTIONS INITIATED THROUGH
THE NVEST FUNDS PERSONAL ACCESS LINE(R).
You are responsible for the confidentiality and use of your personal
identification numbers, account numbers, social security numbers and any other
personal information required to access the site or transmit telephonically. Any
individual that possesses the information required to pass through all security
measures will be presumed to be you. All transactions submitted by an individual
presumed to be you will be solely your responsibility.
You agree that Nvest Funds does not have the responsibility to inquire as to the
legitimacy or propriety of any instructions received from you or any person
believed to be you, and is not responsible or liable for any losses that may
occur from acting on such instructions.
Nvest Funds is not responsible for incorrect data received via the Internet or
telephonically from you or any person believed to be you. Transactions submitted
over the Internet and telephonically are solely your responsibility and Nvest
Funds makes no warranty as to the correctness, completeness, or the accuracy of
any transmission. Similarly Nvest Funds bears no responsibility for the
performance of any computer hardware, software, or the performance of any
ancillary equipment and services such as telephone lines, modems, or Internet
service providers.
The processing of transactions over this site or telephonically will involve the
transmission of personal data including social security numbers, account numbers
and personal identification numbers. While Nvest Funds has taken reasonable
security precautions including data encryption designed to protect the integrity
of data transmitted to and from the areas of our Web site that relate to the
processing of transactions, we disclaim any liability for the interception of
such data.
You agree to immediately notify Nvest Funds if any of the following occurs:
1. You do not receive confirmation of a transaction submitted via the
Internet or telephonically within five (5) business days.
2. You receive confirmation of a transaction of which you have no
knowledge and was not initiated or authorized by you.
3. You transmit a transaction for which you do not receive a confirmation
number.
25
<PAGE>
4. You have reason to believe that others may have gained access to your
personal identification number (PIN) or other personal data.
5. You notice an unexplained discrepancy in account balances or other
changes to your account, including address changes, and banking
instructions on any confirmations or statements.
Any costs incurred in connection with the use of the Nvest Funds Personal Access
Line(R) or the Nvest Funds Internet site including telephone line costs, and
Internet service provider costs are solely your responsibility. Similarly Nvest
Funds makes no warranties concerning the availability of Internet services, or
network availability.
Nvest Funds reserves the right to suspend, terminate or modify the Internet
capabilities offered to shareholders without notice.
YOU HAVE THE ABILITY TO RESTRICT INTERNET AND TELEPHONIC ACCESS TO YOUR ACCOUNTS
BY NOTIFYING NVEST FUNDS OF YOUR DESIRE TO DO SO.
Written notifications to Nvest Funds should be sent to:
Nvest Funds
PO Box 8551
Boston, MA 02266-8551
Notification may also be made by calling 800-225-5478 during normal business
hours.
--------------------------------------------------------------------------------
REDEMPTIONS
--------------------------------------------------------------------------------
The procedures for redemption of Fund shares are summarized in the
Prospectus. Under certain conditions, exceptions may be made to the policies
listed here and in the Prospectus, subject to senior management approval. As
described in the Prospectus, a CDSC may be imposed in certain instances upon the
redemption of Fund shares that were acquired through an exchange of shares of
the Nvest Funds. For purposes of the CDSC, an exchange of shares from one Fund
to another Fund is not considered a redemption or purchase. For federal tax
purposes, however, such an exchange is considered a sale and a purchase and,
therefore, would be considered a taxable event on which you may recognize a gain
or loss. Any applicable CDSC will be calculated in the manner described in the
relevant prospectus of the Nvest Funds and the related Statement of Additional
Information.
Signatures on redemption requests must be guaranteed by an "Eligible
Guarantor Institution" as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934. However, a signature guarantee will not be required if the proceeds
of the redemption do not exceed $100,000 and the proceeds check is made payable
to the registered owner(s) and mailed to the record address.
If you select the telephone redemption service in the manner described in
the next paragraph, shares of a Fund may be redeemed by calling toll free
800-225-5478. A wire fee, currently $5.00, will be deducted from the proceeds.
Telephone redemption requests must be received by the close of regular trading
on the New York Stock Exchange (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.
In order to redeem shares by telephone, a shareholder must either select
this service when completing the Fund application or must do so subsequently on
the Service Options Form, available from Nvest Services Company or your
investment dealer. When selecting the service, a shareholder must designate a
bank account to which the redemption proceeds should be sent. Any change in the
bank account so designated may be made by furnishing to Nvest Services Company
or your investment dealer a completed Service Options Form with a signature
guarantee. Whenever the Service Options Form is used, the shareholder's
signature must be guaranteed as described above. Telephone redemptions may only
be made if the designated bank is a member of the Federal Reserve System or has
a correspondent bank that is a member of the System. If the account is with a
savings bank, it must have only one correspondent bank that is a member of the
System. The Funds, the Distributor and State Street Bank are not responsible for
the authenticity of withdrawal instructions received
26
<PAGE>
by telephone, subject to established verification procedures. Nvest Services
Company, as agreed to with the Funds, 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.
In order to redeem shares electronically through the ACH system, a
shareholder's bank or credit union must be a member of the ACH system and the
shareholder must have a completed, approved ACH application on file. In
addition, the telephone request must be received no later than 4:00 p.m.
(Eastern Time). Upon receipt of the required information, the appropriate number
of shares will be redeemed and the monies forwarded to the bank designated on
the shareholder's application through the ACH system. The redemption will be
processed the day the telephone call is made and the monies generally will
arrive at the shareholder's bank within three business days. The availability of
these monies will depend on the individual bank's rules.
Checkwriting is available on Class A shares of the Funds. To elect
checkwriting for your account, select the checkwriting option on your
application and complete the attached signature card. To add checkwriting to an
existing account, please call 800-225-5478 for our Service Options Form. The
Funds will send you checks drawn on State Street Bank. You will continue to earn
dividends on shares redeemed by check until the check clears. Each check must be
written for $250 or more. The checkwriting privilege does not apply to shares
for which you have requested share certificates be issued. Checkwriting is not
available for investor accounts containing Class A shares subject to a CDSC. If
you use withdrawal checks, you will be subject to State Street Bank's rules
governing checking accounts. The Funds and the Distributor are in no way
responsible for any checkwriting account established with State Street Bank. You
may not close your account by withdrawal check because the exact balance of you
account will not be known until after the check is received by State Street
Bank.
The redemption price will be the net asset value per share (less any
applicable CDSC) next determined after the redemption request and any necessary
special documentation are received by State Street Bank or your investment
dealer in proper form. Payment normally will be made by State Street Bank on
behalf of the Fund within seven days thereafter. However, in the event of a
request to redeem shares for which the Fund has not yet received good payment,
the Funds reserve the right to withhold payments of redemption proceeds if the
purchase of shares was made by a check which was deposited less than fifteen
days prior to the redemption request (unless the Fund is aware that the check
has cleared).
The Funds will normally redeem shares for cash; however, the Funds reserve
the right to pay the redemption price wholly or partly in kind if the relevant
Trust's Board of Trustees determines it to be advisable and in the interest of
the remaining shareholders of a Fund. The redemptions in kind will be selected
by the Fund's subadviser in light of the Fund's objective and will not generally
represent a pro rata distribution of each security held in the Fund's portfolio.
If portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities. However, the Funds have elected to be governed by Rule 18f-1 under
the 1940 Act, pursuant to which the Funds are obligated to redeem shares solely
in cash for any shareholder during any 90-day period up to the lesser of
$250,000 or 1% of the total net asset value of the relevant Fund at the
beginning of such period. The Funds do not currently intend to impose any
redemption charge (other than the CDSC imposed by the Funds' distributor),
although it reserves the right to charge a fee not exceeding 1% of the
redemption price. A redemption constitutes a sale of shares for federal income
tax purposes on which the investor may realize a long- or short-term capital
gain or loss. See the sections "Net Income, Dividends and Valuation" and "Taxes"
below.
The Funds may also close your account and send you the proceeds if the
balance in your account falls below a minimum amount set by each Trust's Board
of Trustees (currently $1,000 for all accounts except Keogh, pension and profit
sharing plans, automatic investment plans, IRA accounts and accounts that have
fallen below the minimum solely because of fluctuations in the net asset value
per share). Shareholders who are affected by this policy will be notified of the
Fund's intention to close the account and will have 60 days immediately
following the notice to bring the account up to the minimum.
--------------------------------------------------------------------------------
NET INCOME, DIVIDENDS AND VALUATION
--------------------------------------------------------------------------------
27
<PAGE>
Determination of Net Income
---------------------------
The net income of each Fund is determined as of the close of regular
trading on the Exchange on each day that the Exchange is open for trading. The
Exchange is expected to be closed on the following holidays: New Year's Day,
Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. Net income includes (i) all
interest accrued and discount earned on the portfolio investments of the Fund,
minus (ii) amortized premium on such investments, plus or minus (iii) all
realized gains and losses on such investments, and minus (iv) all expenses of
the Fund.
Daily Dividends
---------------
As described in the Prospectus, the net income of each Fund is declared as
a dividend, at the closing of regular trading on the Exchange each day that the
Exchange is open. Dividends will be paid in cash to the shareholder if the
shareholder has notified State Street Bank in writing of the election on or
before payable date. The net income for Saturdays, Sundays and other days on
which the Exchange is closed is declared as a dividend on the immediately
preceding business day. Although the Funds do not expect to realize any
long-term capital gains, if such gains are realized they will be distributed
once a year. 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 be automatically changed and your future
dividends will be reinvested. No interest will accrue on amounts represented by
uncashed dividend or redemption checks.
Valuation of the Funds' Portfolio Investments
---------------------------------------------
The total net asset value of each Fund (the excess of the Fund's assets
over its liabilities) is determined by State Street Bank as of the close of
regular trading on the Exchange on each day the Exchange is open for trading.
(See "Determination of Net Income.") The portfolio securities of each Fund are
valued at their fair value as determined in good faith by the relevant Trust's
Board of Trustees or persons acting at their direction. Under normal market
conditions, portfolio securities will be valued at amortized cost as described
below. Expenses of each Fund are paid or accrued each day.
Under the amortized cost method of valuation, securities are valued at cost
on the date of purchase. Thereafter, the value of securities purchased at a
discount or premium is increased or decreased incrementally each day so that at
maturity the purchase discount or premium is fully amortized and the value of
the security is equal to its principal amount. Due to fluctuations in interest
rates, the amortized cost value of the securities of a Fund may at times be more
or less than their market value.
By using amortized cost valuation, the Funds seek to maintain a constant
net asset value of $1.00 per share despite minor shifts in the market value of
their portfolio securities. The yield on a shareholder's investment may be more
or less than that which would be recognized if the net asset value per share
were not constant and were permitted to fluctuate with the market value of the
portfolio securities of each Fund. However, as a result of the following
procedures, it is believed that any difference will normally be minimal. The
Trustees monitor quarterly the deviation between the net asset value per share
of each Fund as determined by using available market quotations and its
amortized cost price per share. Back Bay Advisors makes such comparisons at
least weekly and will advise the Trustees promptly in the event of any
significant deviation. If the deviation exceeds 1/2 of 1% for any Fund, the
relevant Board of Trustees will consider what action, if any, should be
initiated to provide fair valuation of the portfolio securities of that Fund and
prevent material dilution or other unfair results to shareholders. Such action
may include redemption of shares in kind; selling portfolio securities prior to
maturity; withholding dividends; or using a net asset value per share as
determined by using available market quotations. There is no assurance that each
Fund will be able to maintain its net asset value at $1.00.
Determination of Yield
----------------------
YIELD. Each Fund's yield, as it may appear in advertisements or written
sales material, represents the net change, exclusive of capital changes, in the
value of a hypothetical account having a balance of one share at the beginning
of the period for which yield is determined (the "base period"). Current yield
for the base period (for example, seven calendar days) is calculated by dividing
(i) the net change in the value of the account for the base period by (ii) the
number of days in the base period. The resulting number is then multiplied by
365 to determine the net income on an annualized basis. This amount is divided
by the value of the account as of the beginning of the base period, normally $1,
in order to state the current yield as a percentage. Yield may also be
calculated on a compound basis ("effective" or "compound" yield) which assumes
28
<PAGE>
continual reinvestment throughout an entire year of net income earned at the
same rate as net income is earned by the account for the base period.
Each Fund's yield for the seven days ended June 30, 2000 and effective
yield based on such seven-day period were, respectively, 5.76% and 5.93% (Cash
Management Trust - Money Market Series) and 3.77% and 3.84% (Tax Exempt Money
Market Trust). The yield is based on the expenses paid by Class A, B, and C
shares.
Yield is calculated without regard to realized and unrealized gains and
losses. The yield of each Fund will vary depending on prevailing interest rates,
operating expenses and the quality, maturity and type of instruments held in the
portfolio of that Fund. Consequently, no yield quotation should be considered as
representative of what the yield of the applicable Fund may be for any future
period. The Funds' yields are not guaranteed. At any time in the future, yields
and total return may be higher or lower than past yields and there can be no
assurance that any historical results will continue.
Investors in the other Nvest Funds are specifically advised that share
prices, expressed as the net asset values per share, will vary just as yield
will vary. An investor's focus on the yield of a Fund to the exclusion of the
consideration of the share price of that Fund may result in the investor's
misunderstanding the total return he or she may derive from the Fund.
Shareholders comparing a Fund's yield with that of alternative investments
(such as savings accounts, various types of bank deposits, and other money
market funds) should consider such things as liquidity, minimum balance
requirements, checkwriting privileges, the differences in the periods and
methods used in the calculation of the yields being compared, and the impact of
taxes on alternative types of investments.
Yield information may be useful in reviewing each Fund's performance and
providing a basis for comparison with other investment alternatives. However,
unlike bank deposits, traditional corporate or municipal bonds or other
investments which pay a fixed yield for a stated period of time, money market
and tax exempt money market fund yields fluctuate.
TAXABLE-EQUIVALENT YIELD. The Tax Exempt Money Market Trust may also
advertise a taxable-equivalent yield or taxable-equivalent effective yield,
calculated as described above, except that, for any given tax bracket, net
investment income will be calculated using as gross investment income an 3.77%
amount equal to the sum of (i) any taxable income of the Fund plus (ii) the tax
exempt income of the Fund divided by the difference between 1 and the effective
federal income tax rate for taxpayers in that tax bracket.
Taxable-Equivalent Yield and Taxable-Equivalent
Effective Yield for the 7 day period ended June 30, 2000
--------------------------------------------------------
7 day yield: 3.77%
7 day effective: 3.84%
Federal Taxable-Equivalent Taxable-Equivalent
Tax Rate Yield Effective Yield
-------- ----- ---------------
15% 4.44% 4.52%
28% 5.24% 5.33%
31% 5.46% 5.57%
36% 5.89% 6.00%
39.6% 6.24% 6.36%
Calculation of Total Return.
---------------------------
Total return is a measure of the change in value of an investment in a Fund
over the period covered, which assumes that any dividends or capital gains
distributions are automatically reinvested in shares of the same class of that
Fund rather than paid to the investor in cash. Each Fund may show each class's
average annual total return for the one-year, five-year and ten-year periods (or
for the life of the class, if shorter) through the end of the most recent
calendar quarter. The formula for total return used by the Funds is prescribedby
the SEC and includes three steps: (1) adding to the total number of shares of
the particular class that would be purchased by a hypothetical $10,000
investment in the Fund (with or without giving effect to the deduction of sales
charge or CDSC, if applicable) all additional shares that would have been
purchased if all dividends and distributions paid or distributed during the
period had been automatically reinvested; (2) calculating the value of the
hypothetical initial investment as of the end of the period by multiplying the
total number of shares owned at the end
29
<PAGE>
of the period by the net asset value per share of the relevant class on the last
trading day of the period; (3) dividing this account value for the hypothetical
investor by the amount of the initial investment, and annualizing the result for
periods of less than one year. Total return may be stated with or without giving
effect to any expense limitations in effect for a Fund. If a Fund presents
returns reflecting an expense limitation or waiver, its total return would have
been lower if no limitation or waiver were in effect.
--------------------------------------------------------------------------------
TAX-FREE INVESTING
--------------------------------------------------------------------------------
The table below compares taxable and tax-free yields, based on tax rates
for 2000:
<TABLE>
<CAPTION>
Federal
Marginal
Tax
Taxable Income* Rate If Tax Exempt Yield Is
--------------------------------------------------- --------------------------------------------------------------
<S><C> <C> <C> <C> <C> <C> <C> <C>
Single Joint (2000) 2% 3% 4% 5% 6%
Return Return Then the Equivalent Taxable Yield Would Be
------------------------------------------------------------------------------------------------------------------------------
$0 - $25,750 $0 - $43,050 15% 2.35% 3.53% 4.71% 5.88% 7.06%
$25,751 - $62,450 $43,051 - $104,050 28% 2.78% 4.17% 5.56% 6.94% 8.33%
$62,451 - $130,250 $104,051 - $158,550 31% 2.90% 4.35% 5.80% 7.25% 8.70%
$130,251 - $283,150 $158,551 - $283,150 36% 3.13% 4.69% 6.25% 7.81% 9.38%
$283,151 and over $283,151 and over 39.6% 3.31% 4.97% 6.62% 8.28% 9.93%
<FN>
* This amount represents taxable income as defined in the Internal Revenue
Code.
</FN>
</TABLE>
The table above does not take into account the effect of state and local
taxes, if any, or federal income taxes on social security benefits which may
arise as a result of receiving tax exempt income.
--------------------------------------------------------------------------------
TAXES
--------------------------------------------------------------------------------
In General
----------
The tax status of the Funds and the distributions that each Fund may make
are summarized in the section of the Prospectus entitled "Tax Consequences."
Each Fund intends to qualify as a regulated investment company under the Code.
This means that the Fund will not be subject to federal income tax on net income
and net realized capital gains distributed to shareholders provided it (i)
distributes annually substantially all its net investment income and net
realized short-term capital gains; (ii) derives at least 90% of its gross income
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; and (iii) diversifies its holdings so that at the end of each fiscal
quarter (a) at least 50% of the value of its total assets consists of cash, U.S.
Government Securities, securities of other regulated investment companies, and
other securities limited generally, with respect to any one issuer, to no more
than 5% of the value of the Fund's total assets and 10% of the outstanding
voting securities of such issuer, and (b) not more than 25% of the value of its
assets is invested in the securities (other than those of the U.S. government or
other regulated investment companies) of any one issuer or of two or more
issuers which the Fund controls and which are engaged in the same, similar or
related trades or businesses.
30
<PAGE>
To avoid certain excise taxes, each Fund must distribute by December 31
each year virtually all of its ordinary income realized in that year, and any
previously undistributed capital gains it realized in the twelve months ended on
October 31 of that year. Certain dividends declared by a Fund in October,
November or December but not actually received by you until January will be
treated for federal tax purposes as though you had received them on December 31
of the year in which declared.
Cash Management Trust - Money Market Series
-------------------------------------------
It is not expected that the Fund will realize any long-term capital gains.
However, to the extent that distributions of any net realized 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) are
made to shareholders of the Fund, such gains are taxable to such shareholders as
long-term capital gains, whether received in cash or additional shares and
regardless of how long shareholders have held their shares. Such distributions
are not eligible for the dividends received deduction for corporations.
Distributions derived from short-term capital gains and investment income are
generally taxable to you at ordinary income rates.
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 a Fund is notified that you have
underreported income in the past, or if you fail to certify to a Fund that you
are not subject to such withholding. If you are a tax-exempt shareholder,
however, these backup withholding rules will not apply so long as you furnish
the Fund with an appropriate certification.
Tax Exempt Money Market Trust
-----------------------------
The Fund intends to have at least 50% of its total assets invested in
Municipal Securities at the close of each quarter of its taxable year so that
dividends paid by the Fund which are derived from interest on Municipal
Securities will be "exempt-interest dividends" within the meaning of the Code.
Exempt-interest dividends may be treated by shareholders as interest excludable
from gross income under Section 103(a) of the Code. Dividends derived from
income which is not exempt from federal income tax, including interest earned on
investments in taxable money market securities or in repurchase agreements and
any net short-term capital gains realized by the Fund, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
Determination of the taxability status of dividends is made using the average
annual method. The percentage of income designated as tax-exempt for any
particular distribution may be substantially different from the percentage of
the Fund's income that was tax-exempt during the period covered by the
distribution. The interest on certain types of Municipal Securities, known as
"private activity" bonds, is an item of tax preference, subject to the federal
alternative minimum tax with a maximum rate of 28%. The Fund has instituted
procedures to avoid investment in "private activity" Municipal Securities in
order to reduce the possibility that Fund dividends will constitute an item of
tax preference. However, there can be no assurance that these procedures will be
totally effective. The Fund intends to continue these procedures so long as it
deems them necessary and prudent. Shareholders should be aware that, while these
procedures are in effect, the Fund will not be able to invest in the full range
of issues available in the Municipal Securities market. The Fund's investments
in Municipal Securities that are subject to the federal alternative minimum tax,
together with other investments the interest on which is subject to the
alternative minimum tax, will not normally exceed 20% of Fund investments. See
the Prospectus for information regarding certain other limitations on the
tax-exempt status of interest on Municipal Securities.
The interest on Municipal Securities issued after August 15, 1986 is
retroactively taxable from the date of issuance if the issuer does not comply
with certain requirements concerning the use of bond proceeds and the
application of earnings on bond proceeds.
Net long-term capital gain distributions, if any, will be taxable to
shareholders as long-term capital gains, regardless of the length of time the
shareholder has held shares of the Fund.
None of the Fund's dividends or distributions are expected to be eligible
for the dividends-received deduction available to corporations.
Under the Code, investors may not deduct interest on indebtedness incurred
or continued to purchase or carry shares of an investment company paying
exempt-interest dividends, such as the Fund. (See Section 264 (a)(4) of the
Code.) Further, entities or persons who are "substantial users" (or persons
related to "substantial users") of facilities financed by industrial development
bonds (see Appendix B) should consult their tax advisers before purchasing
shares of the Fund.
31
<PAGE>
Shareholders are advised to consult their own tax advisers for more
detailed information concerning the federal income taxation of the Fund and the
income tax consequences to its shareholders.
Both Funds
----------
The sale, exchange or redemption of Fund shares may give rise to a gain or
loss. In general, any gain or loss realized upon a taxable disposition of shares
will be treated as long-term capital gain or loss if the shares have been held
for more than 12 months. Otherwise the gain or loss on the sale, exchange or
redemption of fund shares will be treated as short-term capital gain or loss.
However, if a shareholder sells shares at a loss within six months of purchase,
any loss will be disallowed for federal income tax purposes to the extent of any
exempt-interest dividends received on such shares. In addition, any loss (not
already disallowed as provided in the preceding sentence) realized upon a
taxable disposition of shares held for six months or less will be treated as
long-term, rather than short-term, to the extent of any long-term capital gain
distributions received by the shareholder with respect to shares. All or a
portion of any loss realized upon a taxable disposition of fund shares will be
disallowed if other shares of the same fund are purchased within 30 days before
or after the disposition. In such a case, the basis of the newly purchased
shares will be adjusted to reflect the disallowed loss.
For taxable years beginning after December 31, 2000, the maximum capital
gains tax rates for capital assets (including Fund shares) held by a
noncorporate shareholder for more than 5 years will be 8 percent and 18 percent
(rather than 10 percent and 20 percent). The 18-percent rate applies only to
assets the holding period for which begins after December 31, 2000 (including by
way of an election to mark the asset to the market, and to pay the tax gain
thereon, as of January, 2, 2001). The mark-to-market election may be
disadvantageous from a federal tax perspective, and shareholders should consult
their tax advisors before making such an election.
The foregoing relates only to federal income taxation of individuals and
corporations. Prospective shareholders should consult their tax advisers as to
the possible application of state and local income tax laws to Fund dividends
and capital gain distributions and the tax consequences of retirement plans
offering tax benefits. Information regarding the tax status of distributions
made by the Funds will be sent to shareholders shortly after the end of each
calendar year.
--------------------------------------------------------------------------------
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The Financial Statements of each of the Funds and the related reports of
the independent accountants included in the annual reports of the Funds for the
year ended June 30, 2000 are incorporated herein by reference. Each Fund's
annual and semi-annual report is available upon request and without charge. Each
Fund will send a single copy of its annual and semi-annual reports to an address
at which more than one shareholder of record with the same last name has
indicated that mail is to be delivered. Shareholders may request additional
copies of any annual or semi-annual report by telephone at (800) 225-5478 or by
writing to the Funds at: Nvest Funds Distributor, L.P., 399 Boylston Street,
Boston, Massachusetts 02116.
32
<PAGE>
--------------------------------------------------------------------------------
APPENDIX A
--------------------------------------------------------------------------------
DESCRIPTION OF CERTAIN NVEST CASH MANAGEMENT TRUST - MONEY MARKET SERIES
INVESTMENTS:
OBLIGATIONS BACKED BY FULL FAITH AND CREDIT OF THE U.S. GOVERNMENT -- are
bills, certificates of indebtedness, notes and bonds issued by (i) the U.S.
Treasury or (ii) agencies, authorities and instrumentalities of the U.S.
Government or other entities and backed by the full faith and credit of the U.S.
Government. Such obligations include, but are not limited to, obligations issued
by the Government National Mortgage Association, the Farmers' Home
Administration and the Small Business Administration.
OTHER U.S. GOVERNMENT OBLIGATIONS -- are bills, certificates of
indebtedness, notes and bonds issued by agencies, authorities and
instrumentalities of the U.S. Government which are supported by the right of the
issuer to borrow from the U.S. Treasury or by the credit of the agency,
authority or instrumentality itself. Such obligations include, but are not
limited to, obligations issued by the Tennessee Valley Authority, the Bank for
Cooperatives, Federal Home Loan Banks, Federal Intermediate Credit Banks,
Federal Land Banks and the Federal National Mortgage Association.
REPURCHASE AGREEMENTS -- are agreements by which the Fund purchases a
security (usually a U.S. Government Obligation) and obtains a simultaneous
commitment from the seller (a member bank of the Federal Reserve System or, to
the extent permitted by the 1940 Act, a recognized securities dealer) 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 an
opportunity for the Fund to earn a return on temporarily available cash at
minimal market risk, although the Fund may be subject to various delays and
risks of loss if the seller is unable to meet its obligation to repurchase.
CERTIFICATES OF DEPOSIT -- are certificates issued against funds deposited
in a bank, are for a definite period of time, earn a specified rate of return
and are normally negotiable.
BANKERS' ACCEPTANCES -- are short-term credit instruments used to finance
the import, export, transfer or storage of goods. They are termed "accepted"
when a bank guarantees their payment at maturity.
YANKEEDOLLAR OBLIGATIONS -- obligations of U.S. branches of foreign banks.
EURODOLLAR OBLIGATIONS -- dollar-denominated obligations of foreign banks
(including U.S. and London branches of foreign banks) and foreign branches of
U.S. banks.
COMMERCIAL PAPER -- refers to promissory notes issued by corporations in
order to finance their short-term credit needs. (See Appendix C.)
CORPORATE OBLIGATIONS -- include bonds and notes issued by corporations in
order to finance longer-term credit needs. (See Appendix C.)
A-1
<PAGE>
--------------------------------------------------------------------------------
APPENDIX B
--------------------------------------------------------------------------------
DESCRIPTION OF CERTAIN NVEST TAX EXEMPT MONEY MARKET TRUST INVESTMENTS
The three principal classifications of Municipal Securities are "Notes,"
"Bonds" and "Commercial Paper."
MUNICIPAL NOTES. Municipal Notes are generally issued to finance short-term
capital needs and generally have maturities of one year or less. Municipal Notes
include:
1. PROJECT NOTES. Project Notes are issued by public bodies (called "local
issuing agencies") created under the laws of a state, territory or U.S.
possession. They have maturities that range up to one year from the date of
issuance. These Notes provide financing for a wide range of financial assistance
programs for housing, redevelopment and related needs (such as low-income
housing programs and urban renewal programs). While they are the primary
obligations of the local public housing agencies or the local urban renewal
agencies, they are also backed by the full faith and credit of the U.S.
Government. Accordingly, investment restriction (1) of Nvest Tax Exempt Money
Market Trust is not applicable to Project Notes. See "Investment Restrictions."
2. TAX ANTICIPATION NOTES. Tax Anticipation Notes are issued to finance working
capital needs of states, counties, municipalities and other public bodies that
have the legal power to tax. Generally, they are issued in anticipation of
various seasonal tax revenues, such as real and personal property, income,
sales, use and business taxes, and are payable from some or all of these
specific future taxes.
3. REVENUE ANTICIPATION NOTES. Revenue Anticipation Notes are issued to provide
interim financing in expectation of receipt of various types of non-tax revenue,
such as revenues available to the issuer under various federal revenue sharing
programs. In some cases, Revenue Anticipation Notes may be payable additionally
from tax revenues.
4. BOND ANTICIPATION NOTES. Bond Anticipation Notes are issued to provide
interim financing until long-term financing can be arranged. In most cases, the
long-term bonds, when sold and issued, then provide the money for repayment of
the Notes.
5. CONSTRUCTION LOAN NOTES. Construction Loan Notes are sold to provide
construction financing. After successful completion and acceptance, many
projects receive permanent financing through the Federal Housing Administration
under "Fannie Mae" (the Federal National Mortgage Association) or "Ginnie Mae"
(the Government National Mortgage Association) programs.
MUNICIPAL BONDS. Municipal Bonds, which meet longer-term capital needs and
generally have maturities of more than one year when issued, have two principal
classifications: General Obligation Bonds and Limited Obligation or Revenue
Bonds. One type of Municipal Revenue Bonds is referred to as Industrial
Development Bonds. These three are discussed below.
1. GENERAL OBLIGATION BONDS. Issuers of General Obligation Bonds include states,
counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind General Obligation Bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. General Obligation Bonds are not payable from any
particular fund or source. The characteristics and method of enforcement of
General Obligation Bonds vary according to the law applicable to the particular
issuer and payment may be dependent upon an appropriation by the issuer's
legislative body. The taxes that can be levied for the payment of debt service
may be limited or unlimited as to rate or amount. Such bonds may be additionally
secured by special assessments.
B-1
<PAGE>
2. LIMITED OBLIGATION OR REVENUE BONDS. The principal source for repayment of a
Revenue Bond is generally the net revenues derived from a particular facility or
group of facilities or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue Bonds have been or may be issued to finance a
wide variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges and tunnels; port facilities; colleges and
universities; and hospitals. Although the principal security behind these bonds
may vary, many provide additional security in the form of a debt service reserve
fund whose money may be used to make principal and interest payments on the
issuer's obligations. Housing finance authorities have a wide range of security,
including partially or fully insured mortgages, rent subsidies and/or
collateralized mortgages, and/or the net revenues from housing or other public
projects. Some authorities provide further security in the form of a state's
ability (without obligation) to make up deficiencies in the debt service reserve
fund.
3. INDUSTRIAL DEVELOPMENT BONDS. Prior to the Tax Reform Act of 1986, certain
debt obligations known as Industrial Development Bonds could be issued by or on
behalf of public authorities to raise money to finance various
privately-operated facilities for business and manufacturing, housing, sports
and pollution control; such obligations are included within the term Municipal
Bonds if the interest paid thereon is, in the opinion of bond counsel, exempt
from federal income tax. These bonds also have been or may be used to finance
public facilities, which may be privately used and operated, such as airports,
mass transit systems, ports and parking. The payment of the principal and
interest on such bonds is dependent solely on the ability of the facility's user
to meet its financial obligations and the pledge, if any, of real or personal
property so financed as security for such payment. The Tax Reform Act of 1986
eliminated some types of industrial revenue bonds but retained others under the
general category of "private activity bonds."
TAX-EXEMPT COMMERCIAL PAPER. Tax-Exempt Commercial Paper is a short-term
obligation with a stated maturity of 365 days or less. It is issued by agencies
of state and local governments to finance seasonal working capital needs or as
short-term financing in anticipation of longer term financing. Tax-Exempt
Commercial Paper is often renewed or refunded at its maturity by the issuance of
other short or long-term obligations.
OTHER TYPES OF MUNICIPAL SECURITIES. The foregoing describes types of
Municipal Securities which are presently available. Nvest Tax Exempt Money
Market Trust may, to the extent consistent with its investment objective,
policies and restrictions, invest in other types of Municipal Securities as they
become available in the future.
B-2
<PAGE>
--------------------------------------------------------------------------------
APPENDIX C
--------------------------------------------------------------------------------
RATINGS OF CORPORATE AND MUNICIPAL BONDS, COMMERCIAL PAPER AND
SHORT-TERM TAX-EXEMPT OBLIGATIONS
Set forth below are descriptions of the highest ratings of Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Ratings Group ("S&P") for
corporate and municipal bonds, commercial paper and short-term tax-exempt
obligations. Ratings for commercial paper have been included since certain of
the obligations which the Funds are authorized to purchase have characteristics
of commercial paper and have been rated as such by Moody's and S&P.
MOODY'S RATINGS
Corporate and Municipal Bonds
-----------------------------
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Short-Term Municipal Notes
--------------------------
The two highest ratings of Moody's for short-term municipal notes are MIG-1 and
MIG-2: MIG-1 denotes "best quality, enjoying strong protection from established
cash flows;" MIG-2 denotes "high quality," with margins of protection ample
although not so large as in the preceding group.
Commercial Paper
----------------
The rating P-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity; (5) amount and
quality of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of a parent company and the relationships which exist with
the issuer; and (8) recognition by the management of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations.
Issuers rated Prime-1 are judged to be of the best quality. Their short-term
debt obligations carry the smallest degree of investment risk. Margins of
support for current indebtedness are large or stable with cash flow and asset
protection well assured. Current liquidity provides ample coverage of near-term
liabilities and unused alternative financing arrangements are generally
available. While protective elements may change over the intermediate or long
term, such changes are most unlikely to impair the fundamentally strong position
of short-term obligations.
C-1
<PAGE>
S&P RATINGS
Corporate and Municipal Bonds
-----------------------------
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA -- Bonds rated AA also qualify as high quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
Short-Term Municipal Notes
--------------------------
S&P does not rate short-term municipal notes as such.
Commercial Paper
----------------
Commercial paper rated A-1 by S&P has the following characteristics: Liquidity
ratios are adequate to meet cash requirements. Long-term senior debt is rated
"A" or better. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. Commercial paper within the A-1 category
which has overwhelming safety characteristics is denoted "A-1+."
<PAGE>
--------------------------------------------------------------------------------
APPENDIX D
--------------------------------------------------------------------------------
MEDIA THAT MAY CONTAIN FUND INFORMATION
ABC and affiliates Fitch Insights
Adam Smith's Money World Forbes
America Online Fort Worth Star-Telegram
Anchorage Daily News Fortune
Atlanta Constitution Fox Network and affiliates
Atlanta Journal Fund Action
Arizona Republic Fund Decoder
Austin American Statesman Global Finance
Baltimore Sun (the) Guarantor
Bank Investment Marketing Hartford Courant
Barron's Houston Chronicle
Bergen County Record (NJ) INC
Bloomberg Indianapolis Star
Business News Individual Investor
B'nai B'rith Jewish Monthly Institutional Investor
Bond Buyer International Herald Tribune
Boston Business Journal Internet
Boston Globe Investment Advisor
Boston Herald Investment Company Institute
Broker World Investment Dealers Digest
Business Radio Network Investment Profiles
Business Week Investment Vision
CBS and affiliates Investor's Business Daily
CFO IRA Reporter
Changing Times Journal of Commerce
Chicago Sun Times Kansas City Star
Chicago Tribune KCMO (Kansas City)
Christian Science Monitor KOA-AM (Denver)
Christian Science Monitor News Service Los Angeles Times
Cincinnati Enquirer Leckey, Andrew (syndicated column)
Cincinnati Post Lear's
CNBC Life Association News
CNN Lifetime Channel
Columbus Dispatch Miami Herald
CompuServe Milwaukee Sentinel
Dallas Morning News Money
Dallas Times-Herald Money Maker
Denver Post Money Management Letter
Des Moines Register Morningstar
Detroit Free Press Mutual Fund Market News
Donoghues Money Fund Report Mutual Funds Magazine
Dorfman, Dan (syndicated column) National Public Radio
Dow Jones News Service National Underwriter
Economist NBC and affiliates
FACS of the Week New England Business
Fee Adviser New England Cable News
Financial News Network New Orleans Times-Picayune
Financial Planning New York Daily News
Financial Planning on Wall Street New York Times
Financial Research Corp. Newark Star Ledger
Financial Services Week Newsday
Financial World
D-1
<PAGE>
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment 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
<PAGE>
--------------------------------------------------------------------------------
APPENDIX E
--------------------------------------------------------------------------------
ADVERTISING AND PROMOTIONAL LITERATURE
References may be included in Nvest Funds' advertising and promotional
literature to CDC Asset Management - North America and to its affiliates that
perform advisory and subadvisory functions for Nvest Funds including, but not
limited to: Back Bay Advisors, L.P., Harris Associates, L.P., Loomis, Sayles &
Company, L.P., Capital Growth Management Limited Partnership, Westpeak
Investment Advisors, L.P., Jurika & Voyles, L.P., Vaughan, Nelson, Scarborough &
McCullough, L.P. and Kobrick Funds LLC. Reference also may be made to the Funds
of their respective fund groups, namely, the Loomis Sayles Funds and the Oakmark
Funds advised by Harris Associates, L.P.
References may be included in Nvest Funds' advertising and promotional
literature to other CDC Asset Management - North America affiliates including,
but not limited to AEW Capital Management, L.P., Synder Capital Management,
L.P., Reich & Tang Capital Management, Reich and Tang Funds and their fund
groups.
References to subadvisers unaffiliated with CDC Asset Management - North
America that perform subadvisory functions on behalf of Nvest Funds may be
contained in Nvest Funds' advertising and promotional literature including, but
not limited to, Janus Capital Corporation, Montgomery Asset Management, LLC and
RS Investment Management, L.P.
Nvest Funds' advertising and promotional material will include, but is not
limited to, discussions of the following information about both affiliated and
unaffiliated entities:
o Specific and general assessments and forecasts regarding U.S. and world
economies, and the economies of specific nations and their impact on the
Nvest Funds;
o Specific and general investment emphasis, specialties, fields of expertise,
competencies, operations and functions;
o Specific and general investment philosophies, strategies, processes,
techniques and types of analysis;
o Specific and general sources of information, economic models, forecasts and
data services utilized, consulted or considered in the course of providing
advisory or other services;
o The corporate histories, founding dates and names of founders of the
entities;
o Awards, honors and recognition given to the entities;
o The names of those with ownership interest and the percentage of ownership
interest;
o The industries and sectors from which clients are drawn and specific client
names and background information on current individual, corporate and
institutional clients, including pension and profit sharing plans;
o Current capitalizations, levels of profitability and other financial and
statistical information;
o Identification of portfolio managers, researchers, economists, principals
and other staff members and employees;
o The specific credentials of the above individuals, including, but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors;
o Specific and general reference to past and present notable and renowned
individuals including reference to their field of expertise and/or specific
accomplishments;
o Current and historical statistics regarding:
E-1
<PAGE>
-total dollar amount of assets managed
-Nvest Funds' assets managed in total and by fund
-the growth of assets
-asset types managed
-numbers of principal parties and employees, and the length of
their tenure, including officers, portfolio managers, researchers,
economists, technicians and support staff
-the above individuals' total and average number of years of
industry experience and the total and average length of their
service to the adviser or subadviser;
o The general and specific strategies applied by the subadvisers in the
management of Nvest Funds portfolios including, but not limited to:
-the pursuit of growth, value, income oriented, risk management or other
strategies
-the manner and degree to which the strategy is pursued
-whether the strategy is conservative, moderate or extreme and an
explanation of other features and attributes
-the types and characteristics of investments sought and specific
portfolio holdings
-the actual or potential impact and result from strategy implementation
-through its own areas of expertise and operations, the value added
by sub-advisers to the management process
-the disciplines it employs, e.g., in the case of Loomis, Sayles &
Company, L.P., the strict buy/sell guidelines and focus on sound
value it employs, and goals and benchmarks that it establishes in
management, e.g., Capital Growth Management Limited Partnership pursues
growth 50% above the S&P 500
-the systems utilized in management, the features and characteristics
of those systems and the intended results from such computer analysis,
e.g., Westpeak Investment Advisors, L.P.'s efforts to identify
overvalued and undervalued issues; and
o Specific and general references to portfolio managers and funds that they
serve as portfolio manager of, other than Nvest Funds, and those families
of funds, other than Nvest Funds. Any such references will indicate that
Nvest Funds and the other funds of the managers differ as to performance,
objectives, investment restrictions and limitations, portfolio composition,
asset size and other characteristics, including fees and expenses.
References may also be made to industry rankings and ratings of the Funds
and other funds managed by the Funds' advisers and subadvisers, including,
but not limited to, those provided by Morningstar, Lipper, Inc., Forbes and
Worth.
In addition, communications and materials developed by Nvest Funds will
make reference to the following information about CDC Asset Management - North
America and its affiliates:
CDC Asset Management - North America is a subsidiary of CDC Asset
Management. CDC Asset Management is part of the investment management arm of
France's Caisse des Depots et Consignations ("CDC"), a major diversified
financial institution. As of June 30, 2000 CDC Asset Management (formerly Nvest
Companies, L.P.) had more than $130 billion in assets under management. In
addition, promotional materials may include:
o Specific and general references to Nvest Funds multi-manager approach
through CDC Asset Management - North America's affiliates and outside firms
including, but not limited to, the following:
-that each adviser/manager operates independently on a day-to-day basis
and maintains an image and identity separate from CDC Asset Management -
North America and the other investment managers
-other fund companies are limited to a "one size fits all" approach but
Nvest Funds draws upon the talents of multiple managers whose expertise
best matches the fund objective
-in this and other contexts reference may be made to Nvest Funds' slogan
"Where The Best Minds Meet"(R) and that Nvest Funds' ability to match the
talent to the task is one more reason it is becoming known as "Where The
Best Minds Meet."
-Nvest Management may distribute sales and advertising materials that
illustrate the Star Concept by using historical category comparisons of a
general nature. Categories from mutual fund ranking services, such as
Morningstar, Inc., are selected for each of the Fund segments based on
current investment styles and are subject to change with market
conditions. There will be differences between the performance of the
categories and the Nvest Star Fund being illustrated. The illustrations
are used for hypothetical purposes only as a general demonstration of how
the Star Concept works.
E-2
<PAGE>
Nvest Managed Account Services ("NMAS"), Nvest Advisor Services ("NAS") and
Nvest Retirement Services ("NRS"), divisions of CDC Asset Management - North
America, may be referenced in Fund advertising and promotional literature
concerning the marketing services it provides to CDC Asset Management - North
America affiliated fund groups including: Nvest Funds, Loomis Sayles Funds,
Jurika & Voyles, Back Bay Advisors, Oakmark Funds, Delafield Fund and Kobrick
Funds.
NMAS, NAS and NRS will provide marketing support to CDC Asset Management -
North America affiliated fund groups targeting financial advisers, financial
intermediaries and institutional clients who may transact purchases and other
fund-related business directly with these fund groups. Communications will
contain information including, but not limited to: descriptions of clients and
the marketplaces to which it directs its efforts; the mission and goals of NAS
and NRS and the types of services it provides which may include: seminars; its
1-800 number, web site, Internet or other electronic facilities; qualitative
information about the funds' investment methodologies; information about
specific strategies and management techniques; performance data and features of
the funds; institutional oriented research and portfolio manager insight and
commentary. Additional information contained in advertising and promotional
literature may include: rankings and ratings of the funds including, but not
limited to, those of Morningstar and Lipper, Inc.; 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 Nvest Funds' 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 other organizations involved in 401(k) and
retirement programs with whom Nvest Funds may or may not have a
relationship.
o Specific and general references to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the Nvest Funds as a
401(k) or retirement plan funding vehicle produced by, including, but not
limited to, Investment Company Institute and other industry authorities,
research organizations and publications.
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 as well as benefits of investing in mutual funds for
401(k) and retirement plans to both plan sponsors and participants,
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
E-3
<PAGE>
-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 role of the investment dealer and the
benefits and features of working with a financial professional including:
-access to expertise on investments
-assistance in interpreting past, present and future market trends and
economic events
-providing information to clients including participants during enrollment
and on an ongoing basis after participation
-promoting and understanding the benefits of investing, including
mutual fund diversification and professional management.
<PAGE>
Registration Nos. 2-81614
811-3658
NVEST TAX EXEMPT MONEY MARKET TRUST
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) Articles of Incorporation
(1) The Registrant's Second Amended and Restated Agreement and
Declaration of Trust dated September 10, 1993 (the "Agreement and
Declaration") is incorporated by reference to exhibit B (1) to
Post-Effective Amendment ("PEA") No. 22 to the Registration
Statement filed on August 23, 1996.
(2) Amendment No. 1 dated January 28, 1994 to the Agreement and
Declaration is incorporated by reference to exhibit B (1) to PEA
No. 22 to the Registration Statement filed on August 23, 1996.
(b) By-Laws
(1) The Registrant's By-Laws amended May 8, 1985 are incorporated by
reference to exhibit B (2) to PEA No. 22 to the Registration
Statement filed on August 23, 1996.
(2) Amendment to the By-Laws (adopted August 25, 2000) is filed
herewith.
(c) Instruments Defining Rights of Security Holders
Rights of shareholders are described in Article III, Section 6 of
the Registrant's Second Amended and Restated Agreement and
Declaration of Trust incorporated by reference to exhibit B (1) to
PEA No. 22 to the Registration Statement filed on August 23, 1996.
(d) Investment Advisory Contracts
(1) Advisory Agreement dated August 30, 1996 and amended May 1, 1998
between the Registrant and Nvest Funds Management, L.P. ("NFM") is
incorporated by reference to exhibit B(5)(a) to PEA No. 25 to the
Registration Statement filed on August 28, 1998.
<PAGE>
(2) Subadvisory Agreement dated August 30, 1996 and amended May 1,
1998 with the Registrant, NFM and Back Bay Advisors, L.P. ("Back
Bay Advisors") is incorporated by reference to exhibit B(5)(b) to
PEA No. 25 to the Registration Statement filed on August 28, 1998.
(e) Underwriting Contracts
(1) Distribution Agreement dated August 30, 1996 between the
Registrant and Nvest Funds Distributor, L.P. is filed herewith.
(2) Form of Dealer Agreement used by Nvest Funds Distributor, L.P. is
filed herewith.
(f) Bonus or Profit Sharing Contracts
None.
(g) Custodian Agreements
(1) Custodian Agreement dated April 21, 1983 between Registrant and
State Street Bank and Trust Company ("State Street Bank") is
incorporated by reference to exhibit B(8) to PEA No. 22 to the
Registration Statement filed on August 23, 1996.
(2) Amendments to Custodian Agreement dated April 21, 1983, each dated
September 12, 1991, between the Registrant and State Street Bank
are incorporated by reference to exhibit B (8) to PEA No. 22 to
the Registration Statement filed on August 23, 1996.
(3) Amendment dated February 28, 2000 to the Custodian Contract dated
April 21, 1983 is filed herewith.
(h) Other Material Contracts
(1) Transfer Agency and Services Agreement dated November 1, 1999
between the Registrant and Nvest Services Company is filed
herewith.
<PAGE>
(2) Administrative Services Agreement dated December 1, 1999 between
Registrant and Nvest Services Company, Inc. is filed herewith.
(i) Legal Opinion
Opinion and consent of Counsel relating to the Registrant is
incorporated by reference to exhibit B (10) to PEA No. 22 to the
Registration Statement filed on August 29, 1996.
(j) Other Opinions
(1) Consent of PricewaterhouseCoopers LLP is filed herewith.
(k) Omitted Financial Statements
None.
(l) Initial Capital Agreements
Not applicable.
(m) Rule 12b-1 Plans
Not applicable.
(n) Rule 18f-3 Plan
(1) Plan pursuant to Rule 18f-3(d) under the Investment Company
<PAGE>
Act of 1940, as amended, effective March 1, 1998 is incorporated
herein by reference to Exhibit (n) to Post-Effective Amendment No.
27 to this Registration Statement filed on June 15, 1999.
(p) Code of Ethics
(1) Code of Ethics dated August 25, 2000 of Registrant is filed
herewith.
(2) Code of Ethics dated July 1, 2000 for NFM and Nvest Funds
Distributor, L.P. is filed herewith.
(3) Code of Ethics dated April 1, 2000 of Back Bay Advisors, L.P. is
filed herewith.
Item 24. Persons Controlled by or Under Common Control with Registrant
None.
Item 25. Indemnification
Under Article 4 of the Registrant's By-laws , any past or present
Trustee or officer of the Registrant (hereinafter referred to as a
"Covered Person") shall be indemnified to the fullest extent
permitted by law against all liability and all expenses reasonably
incurred by him or her in connection with any claim, action, suit
or proceeding to which he or she may be a party or otherwise
involved by reason of his or her being or having been a Covered
Person. That provision does not authorize indemnification when it
is determined that such covered person would otherwise be liable
to the Registrant or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
his or her duties. This description is modified in its entirety by
the provision of Article 4 of the Registrant's By-laws contained
in the PEA No. 22 to the Registration Statement filed on August
23, 1996 as exhibit B (1) and is incorporated by reference.
<PAGE>
The Distribution Agreement, the Custodian Contract, the
Transfer Agency and Service Agreement and the Administrative
Services Agreement (the "Agreements") contained herein and in
various post-effective amendments and incorporated herein by
reference, provide for indemnification. The general effect of
these provisions is to indemnify entities contracting with the
Trust against liability and expenses in certain circumstances.
This description is modified in its entirety by the provisions of
the Agreements as contained in this Registration Statement and
incorporated herein by reference.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended (the "Securities Act"), may
be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant
of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in connection with the successful defense
of any claim, action, suit or proceeding) is asserted against the
Registrant by such Trustee, officer or controlling person in
connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
Registrant and its Trustees, officers and employees are
insured, under a policy of insurance maintained by the Registrant
in conjunction with Nvest Companies, L.P. and its affiliates,
within the limits and subject to the limitations of the policy,
against certain expenses in connection with the defense of
actions, suits or proceedings, and certain liabilities that might
be imposed as a result of such actions, suits or proceedings, to
which they are parties by reason of being or having been such
Trustees or officers. The policy expressly excludes coverage for
any Trustee or officer for any claim arising out of any fraudulent
act or omission, any dishonest act or omission or any criminal act
or omission of the Trustee or officer.
Item 26. Business and Other Connections of Investment Adviser
<PAGE>
(a) Back Bay Advisors is the subadviser of the Registrant. Back Bay
Advisors serves as investment adviser to a number of other
registered investment companies.
The list required by this Item 26 regarding any other business,
profession, vocation or employment of a substantial nature engaged
in by officers and directors of Back Bay Advisors during the past
two years is incorporated herein by reference to schedules A and D
of Form ADV filed by Back Bay Advisors pursuant to the Advisers
Act (SEC File No. 801-27694).
(b) NFM, a wholly owned subsidiary of Nvest, L.P., serves as
investment adviser to the Registrant. NFM was organized in 1995.
The list required by this Item 26 regarding any other business,
profession or employment of a substantial nature engaged in by
officers and directors of NFM during the past two years is
incorporated herein by reference to schedules A and D of Form ADV
filed by NFM pursuant to the Advisers Act (SEC File No.
801-48408).
Item 27. Principal Underwriter
(a) Nvest Funds Distributor, L.P., the principal underwriter of the
Registrant, also serves as principal underwriter for:
Nvest Cash Management Trust
Nvest Funds Trust II
Nvest Funds Trust I
Nvest Funds Trust III
Nvest Kobrick Investment Trust
(b) The general partner and officers of the Registrant's principal
underwriter, Nvest Funds Distributor, L.P., and their addresses
are as
<PAGE>
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Positions and Offices Positions and Offices
Name with Principal Underwriter with Registrant
John T. Hailer President and Chief Executive Officer President
-------------- ------------------------------------- ---------
John E. Pelletier Senior Vice President, General Counsel, Secretary and Clerk
----------------- ---------------------------------------- -------------------
Scott E. Wennerholm Senior Vice President, Treasurer, Chief None
------------------- ---------------------------------------- ----
Christine Howe Controller None
-------------- ---------- ----
Frank S. Maselli Senior Vice President None
---------------- --------------------- ----
Kirk Williamson Senior Vice President None
--------------- --------------------- ----
Daniel Lynch Vice President None
------------ -------------- ----
Marla McDougall Vice President None
--------------- -------------- ----
</TABLE>
The principal business address of all the above persons or
entities is 399 Boylston Street, Boston, MA 02116.
(c) Not applicable.
Item 28. Location of Accounts and Records
The following companies maintain possession of the documents
required by the specified rules:
(i) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(ii) Nvest Services Company, Inc.
399 Boylston Street
Boston, MA 02116
(iii) Nvest Funds Distributor, L.P.
399 Boylston Street
Boston, Massachusetts 02116
(iv) Nvest Funds Management, L.P.
399 Boylston Street
Boston, MA 02116
(v) Back Bay Advisors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Item 29. Management Services
None.
Item 30. Undertakings
(a) The Registrant undertakes to provide the annual report of any of
its series to any person who receives a prospectus for such series
and who requests the annual report.
NVEST TAX EXEMPT MONEY MARKET TRUST
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Post-Effective Amendment No. 28 to its Registration
Statement under Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment No. 28 to its Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized, in the City of Boston
and the Commonwealth of Massachusetts on the 28th day of August, 2000.
Nvest Tax Exempt Money Market Trust
By: PETER S. VOSS*
-------------
Peter S. Voss
Chief Executive Officer
*By: /s/ JOHN E. PELLETIER
---------------------
John E. Pelletier
Attorney-In-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
--------------------------------------------------------------------------------
PETER S. VOSS* Chairman of the Board; Chief August 28, 2000
--------------
Peter S. Voss
/s/ THOMAS P. CUNNINGHAM Treasurer August 28, 2000
------------------------
Thomas P. Cunningham
GRAHAM T. ALLISON, JR.* Trustee August 28, 2000
-----------------------
Graham T. Allison, Jr.
DANIEL M. CAIN* Trustee August 28, 2000
---------------
Daniel M. Cain
KENNETH J. COWAN* Trustee August 28, 2000
-----------------
Kenneth J. Cowan
RICHARD DARMAN* Trustee August 28, 2000
---------------
Richard Darman
SANDRA O. MOOSE* Trustee August 28, 2000
----------------
Sandra O. Moose
JOHN A. SHANE* Trustee August 28, 2000
--------------
John A. Shane
PENDLETON P. WHITE* Trustee August 28, 2000
-------------------
Pendleton P. White
*By: /s/ JOHN E. PELLETIER
---------------------
John E. Pelletier
Attorney-In-Fact
August 28, 2000
<PAGE>
NVEST TAX EXEMPT MONEY
MARKET TRUST
EXHIBIT INDEX
EXHIBITS FOR ITEM 23 OF FORM
N-1A
EXHIBIT EXHIBIT DESCRIPTION
(b)(2) Amendment to the By-Laws
(e)(1) Distribution Agreement
(e)(2) Dealer Agreement
(g)(3) Amendment to Custodian Contract
(h)(1) Transfer Agency and Service Agreement
(h)(2) Administrative Services Agreement
(j)(1) Consent of PricewaterhouseCoopers LLP
(p)(1) Code of Ethics of Nvest Tax Exempt Money Market Trust
(p)(2) Code of Ethics of Nvest Funds Management, L.P. and Nvest Funds
Distributor, L.P.
(p)(3) Code of Ethics of Back Bay Advisors, L.P.
<PAGE>
