<PAGE>
Registration Nos. 2-98326
811-4323
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 42 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ ]
Amendment No. 43 [X]
(Check appropriate box or boxes.)
NVEST FUNDS TRUST I
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
399 Boylston Street, Boston, Massachusetts 02116
------------------------------------------------------------
(Address of Principal Executive Offices, including Zip Code)
(617) 578-1132
----------------------------------------------------
(Registrant's Telephone Number, including Area Code)
John E. Pelletier, Esq.
Nvest Funds Distributor, L.P.
399 Boylston Street
Boston, Massachusetts 02116
(Name and address of agent for service)
Copy to:
John M. Loder, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
NVESTFUNDS(SM)
Where The Best Minds Meet(R)
- --------------------------------------------------------------------------------
Nvest
STOCK FUNDS
(graphic omitted]
- --------------------------------------------------------------------------------
LARGE-CAP EQUITY
Nvest Capital Growth Fund
Westpeak Investment Advisors, L.P.
Nvest Growth Fund
Capital Growth Management
Limited Partnership
Nvest Growth and Income Fund
Westpeak Investment Advisors, L.P.
Nvest Balanced Fund
Loomis, Sayles & Company, L.P.
ALL-CAP EQUITY
Nvest Equity Income Fund
Vaughan, Nelson, Scarborough & McCullough, L.P
INTERNATIONAL EQUITY
Nvest International Equity Fund
Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved any Fund's
shares or determined whether this Prospectus is accurate or complete. Anyone
who tells you otherwise is committing a crime.
For general information on the Funds or any of their services and for
assistance in opening an account, contact your financial representative or
call Nvest Funds.
PROSPECTUS
May 1, 2000
WHAT'S INSIDE
Goals, Strategies & Risks
[GRAPHIC OMITTED] Page 1
- --------------------------------------------------------------------------------
Fund Fees & Expenses
[GRAPHIC OMITTED] Page 13
- --------------------------------------------------------------------------------
Management Team
[GRAPHIC OMITTED] Page 16
- --------------------------------------------------------------------------------
Fund Services
[GRAPHIC OMITTED] Page 19
- --------------------------------------------------------------------------------
Fund Performance
[GRAPHIC OMITTED] Page 31
- --------------------------------------------------------------------------------
Nvest Funds
399 Boylston Street, Boston, Massachusetts 02116
800-225-5478
www.nvestfunds.com
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GOALS, STRATEGIES & RISKS
- --------------------------------------------------------------------------------
Nvest Capital Growth Fund ................................................. 1
Nvest Growth Fund ......................................................... 3
Nvest Growth and Income Fund .............................................. 5
Nvest Balanced Fund ....................................................... 7
Nvest Equity Income Fund .................................................. 9
Nvest International Equity Fund ........................................... 11
- --------------------------------------------------------------------------------
FUND FEES & EXPENSES
- --------------------------------------------------------------------------------
Fund Fees & Expenses ...................................................... 13
- --------------------------------------------------------------------------------
MORE ABOUT RISK
- --------------------------------------------------------------------------------
More About Risk ........................................................... 15
- --------------------------------------------------------------------------------
MANAGEMENT TEAM
- --------------------------------------------------------------------------------
Meet the Funds' Investment Advisers and Subadvisers ....................... 16
Meet the Funds' Portfolio Managers ........................................ 17
- --------------------------------------------------------------------------------
FUND SERVICES
- --------------------------------------------------------------------------------
Investing in the Funds .................................................... 19
How Sales Charges Are Calculated .......................................... 20
Ways to Reduce or Eliminate Sales Charges ................................. 21
It's Easy to Open an Account .............................................. 22
Buying Shares ............................................................. 23
Selling Shares ............................................................ 24
Selling Shares in Writing ................................................. 25
Exchanging Shares ......................................................... 26
Restrictions on Buying, Selling and Exchanging Shares ..................... 26
How Fund Shares Are Priced ................................................ 27
Dividends and Distributions ............................................... 28
Tax Consequences .......................................................... 28
Compensation to Securities Dealers ........................................ 29
Additional Investor Services .............................................. 30
- --------------------------------------------------------------------------------
FUND PERFORMANCE
- --------------------------------------------------------------------------------
Nvest Capital Growth Fund ................................................. 31
Nvest Growth Fund ......................................................... 32
Nvest Growth and Income Fund .............................................. 33
Nvest Balanced Fund ....................................................... 34
Nvest Equity Income Fund .................................................. 35
Nvest International Equity Fund ........................................... 36
Glossary of Terms ......................................................... 37
If you have any questions about any of the terms used in this Prospectus, please
refer to the "Glossary of Terms."
To learn more about the possible risks of investing in a Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Funds may engage. Please read this section carefully
before you invest.
Fund shares are not bank deposits and are not guaranteed, endorsed or insured by
the Federal Deposit Insurance Corporation or any other government agency, and
are subject to investment risks, including possible loss of the principal
invested.
<PAGE>
<TABLE>
<S> <C> <C> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- -----------------------
NVEST CAPITAL GROWTH FUND Stability Income Growth
High X
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") --------- ------ ------
SUBADVISER: Westpeak Investment Advisors, L.P. ("Westpeak") Mod. X
MANAGER: Gerald H. Scriver --------- ------ ------
CATEGORY: Large-Cap Equity Low X
TICKER SYMBOL: CLASS A CLASS B CLASS C
------- ------- -------
NEFCX NECBX NECGX
</TABLE>
INVESTMENT GOAL
The Fund seeks long-term capital growth.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all of its
assets in common stock of U.S. large and mid-capitalization companies in any
industry.
Westpeak constructs a portfolio of large and mid-capitalization stocks that
exhibit reasonable growth potential. Westpeak believes risk and return can be
accurately measured and controlled through thoughtful portfolio construction.
Therefore its focus will be on the aggregate characteristics of the portfolio
and not just individual stocks. The portfolio emphasizes the characteristics
that Westpeak believes are most likely to be rewarded by the market in the
period ahead based upon current and historical probabilities. Westpeak will seek
to construct a portfolio of growth stocks with reasonable relative valuation.
The Fund's industry weightings will not vary significantly from the Russell 1000
Growth Index.
Using proprietary quantitative research based on macroeconomic, market and
company-specific information, Westpeak analyzes each stock and ranks it based on
characteristics such as:
x earnings growth
x potential earnings surprises
x earnings-to-price
x earnings momentum
In selecting investments for the Fund's portfolio, Westpeak employs the
following process:
o It starts with the Russell 3000 Growth Index of about 1,800 stocks and
generally eliminates stocks of companies below a $600 million market
capitalization threshold. This creates an overall universe of about 1,200
stocks, with approximately 90% of its capitalization from the Russell 1000
Growth Index (comprised of large and medium capitalization companies) and 10%
from the Russell 2000 Growth Index (comprised of small capitalization
companies).
o Next, it screens these stocks using fundamental growth and value criteria and
calculates a "fundamental rank" for each stock. This rank reflects a
historical analysis of the company using approximately 70 growth, value and
industry characteristics.
o All of the stocks are then screened using various Wall Street analysts'
historical and projected earnings estimates for the company and each is
assigned an "expectations rank." This rank accounts for the company's recent
and historical earnings revisions and the potential for "positive earnings
surprises" (whether its business has the potential to improve in the near
future).
o The fundamental and expectations rank for each stock are placed in a valuation
matrix to evaluate whether to buy, sell or hold a stock.
o The final step is the use of proprietary methodology to arrange the selected
stocks into an optimal portfolio using their respective fundamental and
expectation ranks and risk characteristics.
The desired result is a diversified portfolio of 75 to 125 stocks that Westpeak
believes will produce the highest long-term returns and characteristics similar
to that of the Fund's benchmark, the Russell 1000 Growth Index.
The Fund may:
o Hold up to 10% of its assets in smaller capitalization companies.
o Engage in active and frequent trading of securities. Frequent trading may
produce higher transaction costs and a higher level of capital gains, which
may lower your return.
o Purchase money market or high quality debt securities for temporary defensive
purposes in response to adverse market, economic or political conditions.
These investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in a stock's value or periods of
below-average performance in a given stock or in the stock market as a whole.
Growth stocks are generally more sensitive to market movements than other
types of stocks, primarily because their stock prices are based heavily on
future expectations. Small capitalization companies may be subject to more
abrupt price movements, limited markets and less liquidity than larger, more
established companies, which could adversely affect the value of the
portfolio."
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Capital Growth Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual returns for one-year,
five-year and since-inception periods compare with those of a broad measure of
market performance and those of indices of funds with similar objectives. The
Fund's past performance does not necessarily indicate how it will perform in the
future. The Fund's current subadviser assumed that function on February 16,
1998. This chart and table reflect results achieved by the previous subadviser
using different investment principles for periods prior to February 16, 1998.
The bar chart shows the Fund's total returns for Class A shares for each
calendar year since its first full year of operations. The returns for the other
classes of shares offered by this Prospectus differ from the Class A returns
shown in the bar chart, depending upon the respective expenses of each class.
The chart does not reflect any sales charge that you may be required to pay when
you buy or redeem the Fund's shares. A sales charge will reduce your return.
(total return)
1993 7.89%
1994 -1.64%
1995 30.76%
1996 17.05%
1997 17.23%
1998 29.08%
1999 24.74%
/\ Highest Quarterly Return: Fourth Quarter 1998, up 24.26%.
\/ Lowest Quarterly Return: Third Quarter 1998, down 11.67%.
The table below shows the Fund's average annual total returns for the one-year,
five-year and since-inception periods compared to those of the Russell 1000
Growth Index, an unmanaged subset of stocks from the larger Russell 1000 Index,
selected for their greater growth orientation. They are also compared to the
Morningstar Large Growth and Lipper Multi-Cap Growth Averages, each an average
of the total returns of all mutual funds with an investment style similar to
that of the Fund as calculated by Morningstar, Inc. and Lipper, Inc. The Fund
previously compared its returns to the broad Lipper category in which the Fund
was categorized. In 1999, Lipper Inc. narrowed their existing categories and
created additional categories and the Fund falls within the Lipper Multi-Cap
Growth Average, one of the newly created categories. You may not invest directly
in an index. The Fund's total returns reflect its expenses and the maximum sales
charge that you may pay when you buy or redeem the Fund's shares. The Russell
1000 Growth Index returns have not been adjusted for ongoing management,
distribution and operating expenses and sales charges applicable to mutual fund
investments. The Morningstar Large Growth Average and Lipper Multi-Cap Growth
Average returns have been adjusted for these expenses but do not reflect any
sales charges.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999) SINCE CLASS
PAST 1 YEAR PAST 5 YEARS INCEPTION
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nvest Capital Growth Fund: Class A (inception 8/3/92) 17.57% 22.17% 17.58%
Russell 1000 Growth Index 33.16% 32.41% 22.82%
Morningstar Large Growth Average (calculated from 7/31/92) 38.63% 28.74% 21.78%
Lipper Multi-Cap Growth Average (calculated from 7/31/92) 52.30% 28.55% 21.67%
Nvest Capital Growth Fund: Class B (inception 9/13/93) 18.81% 22.41% 17.77%
Russell 1000 Growth Index 33.16% 32.41% 26.48%
Morningstar Large Growth Average (calculated from 9/30/93) 38.63% 28.74% 23.07%
Lipper Multi-Cap Growth Average (calculated from 9/30/93) 52.30% 28.55% 21.73%
Nvest Capital Growth Fund: Class C (inception 12/30/94) 22.81% 22.59% 22.58%
Russell 1000 Growth Index 33.16% 32.41% 32.41%
Morningstar Large Growth Average 38.63% 28.74% 29.66%
Lipper Multi-Cap Growth Average 52.30% 28.55% 28.55%
- ----------------------------------------------------------------------------------------------------------------
For actual past expenses of Class A, B and C shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- -----------------------
NVEST GROWTH FUND Stability Income Growth
High X
ADVISER: Capital Growth Management Limited Partnership ("CGM") --------- ------ ------
MANAGER: G. Kenneth Heebner Mod.
CATEGORY: Large-Cap Equity --------- ------ ------
Low X X
TICKER SYMBOL: CLASS A CLASS B CLASS C
-----------------------------
NEFGX NEBGX NEGCX
</TABLE>
INVESTMENT GOAL
The Fund seeks long-term growth of capital through investment in equity
securities of companies whose earnings are expected to grow at a faster rate
than the United States economy.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all of its
assets in a focused portfolio of equity securities. The Fund will generally
invest in common stock of large capitalization companies that CGM expects will
grow at a faster rate than the United States economy. When CGM believes that
market conditions warrant, however, CGM may select stocks based upon overall
economic factors such as the general economic outlook, the level and direction
of interest rates and potential impact of inflation. The Fund will not invest in
small capitalization companies.
In general, CGM seeks companies with the following characteristics, although not
all of the companies selected will have these attributes:
x well-established with records of above-average growth
x promise of maintaining their leadership positions in their industries
x likely to benefit from internal revitalization or innovations, changes in
consumer demand, or basic economic forces
Rather than following a particular style, CGM employs a flexible approach and
seeks to take advantage of opportunities as they arise. In making an investment
decision, CGM generally employs the following methods:
o It uses a top-down approach, meaning that it analyzes the overall economic
factors that may affect a potential investment.
o CGM then conducts a thorough analysis of certain industries and companies,
evaluating the fundamentals of each on a case-by-case basis and focusing on
companies that it determines are attractively valued.
o CGM's ultimate decision to purchase a security results from a thorough
assessment of all of the information that CGM deems to be relevant at the time
of investment.
o CGM will sell a stock if it determines that its investment expectations are
not being met, if better opportunities are identified or if its price
objective has been attained.
The Fund may:
o Invest in foreign securities.
o Invest in other investment companies.
o Engage in active and frequent trading of securities. Frequent trading may
produce higher transaction costs and a higher level of taxable capital gains,
which may lower your return.
o Purchase money market or high quality debt securities for temporary defensive
purposes in response to adverse market, economic or political conditions.
These investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in value or periods of
below-average performance in a given stock or in the stock market as a whole.
Although the Fund is diversified, its focused approach means that its
relatively small number of holdings may result in greater share price
fluctuations than a more diversified mutual fund. Growth stocks are generally
more sensitive to market movements than other types of stocks, primarily
because their stock prices are based heavily on future expectations.
INVESTMENTS IN OTHER INVESTMENT COMPANIES: May incur extra costs in addition to
its own expenses.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Capital Growth Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual returns for one-year,
five-year and since-inception periods compare with those of a broad measure of
market performance and those of indices of funds with similar objectives. The
Fund's past performance does not necessarily indicate how it will perform in the
future.
The bar chart shows the Fund's total returns for Class A shares for each
calendar year since its first full year of operations. The returns for the other
classes of shares offered by this Prospectus differ from the Class A returns
shown in the bar chart, depending upon the respective expenses of each class.
The chart does not reflect any sales charge that you may be required to pay when
you buy or redeem the Fund's shares. A sales charge will reduce your return.
(total return)
1990 5.26%
1991 56.72%
1992 -6.63%
1993 11.29%
1994 -7.05%
1995 38.06%
1996 20.88%
1997 23.54%
1998 33.40%
1999 15.18%
/\ Highest Quarterly Return: Fourth Quarter 1998, up 28.51%
\/ Lowest Quarterly Return: Third Quarter 1998, down 18.07%
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' inception if shorter)
compared to those of the Standard & Poor's Composite Index of 500 Stocks ("S&P
500"), a market value-weighted, unmanaged index of common stock prices for 500
selected stocks. They are also compared to the Morningstar Large Blend and
Lipper Large-Cap Core Averages, each an average of the total returns of all
mutual funds with an investment style similar to that of the Fund as calculated
by Morningstar, Inc. and Lipper, Inc. The Fund previously compared its returns
to the broad Lipper category in which the Fund was categorized. In 1999, Lipper
Inc. narrowed their existing categories and created additional categories and
the fund falls within Lipper Large-Cap Core Average, one of the newly created
categories.You may not invest directly in an index. The Fund's total returns
reflect its expenses and the maximum sales charges that you may pay when you buy
or redeem the Fund's shares. The S&P 500 returns have not been adjusted for
ongoing management, distribution and operating expenses and sales charges
applicable to mutual fund investments. The Morningstar Large Blend Average and
Lipper Large-Cap Core Average returns have been adjusted for these expenses but
do not reflect any sales charges.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------- *Since
AVERAGE ANNUAL TOTAL RETURNS class
(for the periods ended December 31, 1999) inception
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
<S> <C> <C> <C>
Nvest Growth Fund: Class A (inception 11/27/68) 8.59% 24.46% 16.88%
S&P 500 21.04% 28.56% 18.21%
Morningstar Large Blend Average 19.47% 23.89% 15.71%
Lipper Large-Cap Core Average 22.29% 25.53% 16.66%
Nvest Growth Fund: Class B (inception 2/28/97) 9.59% 20.72%*
S&P 500 21.04% 26.24%*
Morningstar Large Blend Average 19.47% 21.92%*
Lipper Large-Cap Core Average 22.29% 24.19%*
Nvest Growth Fund: Class C (inception 9/1/98) 13.42% 28.59%*
S&P 500 21.04% 39.83%*
Morningstar Large Blend Average
(calculated from 8/31/98) 19.47% 35.62%*
Lipper Large-Cap Core Average
(calculated from 8/31/98) 22.29% 40.97%*
- ----------------------------------------------------------------------------------------------------
For actual past expenses of Class A, B and C shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- -----------------------
NVEST GROWTH Stability Income Growth
AND INCOME FUND High X
--------- ------ ------
ADVISER: Nvest Funds Management, L.P. ("Nvest Mangement") Mod. X
SUBADVISER: Westpeak Investment Advisors, L.P. ("Westpeak") --------- ------ ------
MANAGER: Gerald H. Scriver Low X
CATEGORY: Large-Cap Equity
TICKER SYMBOL: CLASS A CLASS B CLASS C
-----------------------------
NEFOX NEGBX NECOX
</TABLE>
INVESTMENT GOAL
The Fund seeks opportunities for long-term capital growth and income.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all its
assets in common stock of large and mid-capitalization companies in any
industry.
Westpeak constructs a portfolio of recognizable, large and mid-capitalization
stocks that exhibit good relative value and reasonable growth potential.
Westpeak believes risk and return can be accurately measured and controlled
through thoughtful portfolio construction. Therefore its focus will be on the
aggregate characteristics of the portfolio and not just individual stocks. The
portfolio emphasizes the characteristics that Westpeak believes are most likely
to be rewarded by the market in the period ahead based upon current and
historical probabilities. At times the portfolio may be biased toward value; at
other times toward growth as determined by the characteristics Westpeak favors.
The Fund's industry weightings will not vary significantly from the S&P 500.
Using proprietary quantitative research based on macroeconomic, market and
company-specific information, Westpeak analyzes each stock and ranks it based on
characteristics such as:
x earnings-to-price
x earnings growth
x potential earnings surprises
x book-to-price
In selecting investments for the Fund, Westpeak employs the following process:
o It starts with an initial universe of approximately 2,100 stocks of mainly
large capitalization companies and eliminates stocks of companies below a $1.6
billion market capitalization threshold. This creates an overall universe of
about 1,000 stocks.
o Next, it screens these stocks using fundamental growth and value criteria and
calculates a "fundamental rank" for each stock. This rank reflects a
historical analysis of the company using approximately 70 growth, value and
industry-specific characteristics.
o All of the stocks are then screened using various Wall Street analysts'
historical and projected earnings estimates for the company and each is
assigned an "expectations rank." This rank accounts for the company's recent
and historical earnings revisions and the potential for "positive earnings
surprises" (whether its business has the potential to improve in the near
future).
o The fundamental and expectations ranks for each stock are placed in a
valuation matrix to evaluate whether to buy, sell or hold a stock.
o The final step is the use of proprietary methodology to arrange the selected
stocks into an optimal portfolio using their respective fundamental and
expectation ranks and risk characteristics.
The desired result is a diversified portfolio of 75 to 150 stocks, with risk
characteristics that approximate that of the benchmark, the S&P 500 Index, which
Westpeak believes will produce the highest long-term returns consistent with the
portfolio's risk parameters.
The Fund may:
o Invest in foreign securities traded in U.S. markets (through American
Depositary Receipts ("ADRs") or stocks sold in U.S. dollars).
o Engage in active and frequent trading of securities. Frequent trading may
produce higher transaction costs and a higher level of taxable capital gains,
which may lower your return.
o Purchase money market or high quality debt securities for temporary defensive
purposes in response to adverse market, economic or political conditions.
These investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in value or periods of
below-average performance in a given stock or in the stock market as a whole.
Growth stocks are generally more sensitive to market movements than other
types of stocks, primarily because their stock prices are based heavily on
future expectations. Value stocks present the risk that they may fall out of
favor with investors and underperform growth stocks during given periods.
FOREIGN SECURITIES: ADRs may be more volatile than U.S. securities and carry
political, economic and information risks that are associated with foreign
securities."
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Growth and Income Fund by showing changes in the Fund's performance
from year to year and by showing how the Fund's average annual returns for the
one-, five- and ten-year (since inception if shorter) periods compare with those
of a broad measure of market performance and those of indices of funds with
similar objectives. The Fund's past performance does not necessarily indicate
how it will perform in the future. The Fund's current subadviser assumed that
function on May 1, 1995. This chart and table reflect results achieved by the
previous subadviser using different investment principles for periods prior to
May 1, 1995.
The bar chart shows the Fund's total returns for Class A shares for each of the
last ten calendar years. The returns for the other classes of shares offered by
this Prospectus differ from the Class A returns shown in the bar chart,
depending upon the respective expenses of each class. The chart does not reflect
any sales charge that you may be required to pay when you buy or redeem the
Fund's shares. A sales charge will reduce your return.
(total return)
1990 -4.26%
1991 30.61%
1992 9.28%
1993 7.95%
1994 0.99%
1995 35.11%
1996 17.21%
1997 33.43%
1998 23.93%
1999 9.45%
/\ Highest Quarterly Return: Fourth Quarter 1998, up 19.13%.
\/ Lowest Quarterly Return: Third Quarter 1990, down 13.59%.
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' inception if shorter)
compared to those of the S&P 500, a market value-weighted, unmanaged index of
common stock prices of 500 selected stocks. They are also compared to the
Morningstar Large-Cap Value and Lipper Multi-Cap Core Averages, each an average
of the total returns of all mutual funds with an investment style similar to
that of the Fund as calculated by Morningstar, Inc. and Lipper, Inc. The Fund
previously compared its returns to the broad Lipper category in which the Fund
was categorized. In 1999, Lipper Inc. narrowed their existing categories and
created additional categories and the Fund falls within Lipper Multi-Cap Core
Average, one of the newly created categories. You may not invest directly in an
index. The Fund's total returns reflect its expenses and the maximum sales
charge that you may pay when you buy or redeem the Fund's shares. The S&P 500
returns have not been adjusted for ongoing management, distribution and
operating expenses and sales charges applicable to mutual fund investments. The
Morningstar Large-Cap Value Average and Lipper Multi-Cap Core Average returns
have been adjusted for these expenses but do not reflect any sales charges.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------- *Since
AVERAGE ANNUAL TOTAL RETURNS class
(for the periods ended December 31, 1999) inception
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
<S> <C> <C> <C>
Nvest Growth and Income Fund: Class A
(inception 5/6/31) 3.16% 21.98% 14.94%
S&P 500 21.04% 28.56% 18.21%
Morningstar Large-Cap Value Average 6.59% 19.31% 13.95%
Lipper Multi-Cap Core Average 22.50% 23.07% 15.51%
Nvest Growth and Income Fund: Class B
(inception 9/13/93) 4.03% 22.40% 17.75%*
S&P 500 21.04% 28.56% 22.96%*
Morningstar Large-Cap Value Average
(calculated from 9/30/93) 6.59% 19.31% 15.60%*
Lipper Multi-Cap Core Average
(calculated from 9/30/93) 22.50% 23.07% 18.29%*
Nvest Growth and Income Fund: Class C
(inception 5/1/95) 7.71% 21.42%*
S&P 500 21.04% 27.49%*
Morningstar Large-Cap Value Average
(calculated from 4/30/95) 6.59% 18.24%*
Lipper Multi-Cap Core Average
(calculated from 4/30/95) 22.50% 22.31%*
- ----------------------------------------------------------------------------------------------------
For actual past expenses of Class A, B and C shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- -----------------------
NVEST BALANCED FUND Stability Income Growth
High
ADVISER: Nvest Funds Management, L.P. ("Nvest Mangement") --------- ------ ------
SUBADVISER: Loomis, Sayles & Company, L.P. ("Loomis Sayles") Mod. X X X
MANAGERS: Equity (Value Component): --------- ------ ------
Jeff Wardlow and Gregg Watkins Low
Equity (Growth Component):
Mark Baribeau, Pamela Czekanski,
Richard Skaggs
Fixed Income: John Hyll
CATEGORY: Large-Cap Equity
TICKER SYMBOL: CLASS A CLASS B CLASS C
-----------------------------
NEFBX NEBBX NEBCX
</TABLE>
INVESTMENT GOAL
The Fund seeks a reasonable long-term investment return from a combination of
long-term capital appreciation and moderate current income.
PRINCIPAL INVESTMENT STRATEGIES
The Fund principally invests in common stocks of quality, large to mid-market
capitalization companies of any industry and investment grade bonds. Generally,
the Fund will invest approximately 65% of its assets in equity securities and
approximately 35% of its assets in fixed-income securities. Nvest Management
allocates capital invested in the Fund's equity securities equally between a
growth and a value component. Loomis Sayles uses a flexible approach to seek
investments with some of the following characteristics, although not all of the
companies selected will have all of these attributes:
EQUITY SECURITIES (growth or value component):
x discounted price compared to its current value for future growth prospects
(growth/value)
x leading position within industry (growth)
x superior earnings growth potential (growth)
x below-average price-to-earnings ratios (value)
x competitive current and estimated dividend yield (value)
FIXED-INCOME SECURITIES:
x greater yield-to-maturity than appropriate benchmarks
x maturities typically between 1 and 30 years
x controlled duration variance compared to index
In order to maintain a balanced, flexible portfolio of investments, Loomis
Sayles employs the following strategy:
o Depending on Loomis Sayles' view of the economic outlook, the Fund may invest
more heavily in either equity or fixed-income securities. However, the Fund
will always invest a minimum of 50% of its assets in equity securities and a
minimum of 25% of its assets in fixed-income securities.
o For the value component, it selects stocks from a universe of approximately
1,400 companies. It then uses a proprietary valuation model to rank stocks
based on valuation, earnings estimate revisions and quality. Fundamental
research is then used to identify what Loomis Sayles believes are the most
attractive 60 to 75 stocks for purchase by the Fund.
o For the growth component, Loomis Sayles selects stocks from a universe of
approximately 500 companies. It then uses fundamental analysis to identify
companies with leading market positions. Valuation analysis follows to find
undervalued companies with positive growth catalysts. Portfolio construction
then balances opportunities with risks to produce a portfolio of about 50
stocks.
o It selects bonds by placing a greater emphasis on security and sector
selection than interest rate anticipation. It conducts extensive research and
credit analysis of over 600 corporate issuers and assigns each a proprietary
rating. It combines these ratings with internal policy limitations to select
bonds for the Fund.
o Loomis Sayles will sell a stock when its price objective has been attained,
its fundamentals deteriorate or when more attractive opportunities are
identified. It sells bonds depending on expected credit deterioration or when
it identifies other securities with better total returns going forward.
The Fund may also invest in:
o Foreign securities and related currency hedging transactions; Rule 144A
securities; Mortgage- and asset-backed securities; Zero-coupon bonds and
when-issued securities.
o Money market or high quality debt securities for temporary defensive purposes
in response to adverse market, economic or political conditions. These
investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in value or periods of
below-average performance in a given stock or in the stock market as a whole.
Growth stocks are generally more sensitive to market movements than other
types of stocks, primarily because their stock prices are based heavily on
future expectations. Value stocks present the risk that they may fall out of
favor with investors and underperform growth stocks during given periods. Rule
144A securities may be more illiquid than other equity securities.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency.
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise. Zero-coupon
bonds may be subject to these risks to a greater extent than other
fixed-income securities.
MORTGAGE- AND ASSET-BACKED SECURITIES: Subject to prepayment risk. With
prepayment, the Fund may reinvest the prepaid amounts in securities with lower
yields than the prepaid obligations. The Fund may also incur a realized loss
when there is a prepayment of securities that were purchased at a premium."
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Balanced Fund by showing changes in the Fund's performance from year to
year and by showing how the Fund's average annual returns for one-, five- and
ten-year (since inception if shorter) periods compare with those of a broad
measure of market performance and those of indices of funds with similar
objectives. The Fund's past performance does not necessarily indicate how it
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. The returns for the other classes of shares offered by
this Prospectus differ from the Class A returns shown in the bar chart,
depending upon the respective expenses of each class. The chart does not reflect
any sales charge that you may be required to pay when you buy or redeem the
Fund's shares. A sales charge will reduce your return.
(total return)
1990 -10.60%
1991 29.21%
1992 13.93%
1993 14.18%
1994 -2.67%
1995 26.31%
1996 17.12%
1997 17.53%
1998 8.18%
1999 -3.75%
/\ Highest Quarterly Return: First Quarter 1991, up 15.31%.
\/ Lowest Quarterly Return: Third Quarter 1990, down 15.86%.
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' inception if shorter)
compared to those of a blend of the Standard & Poor's Composite Index of 500
stocks ("S&P 500") and the Lehman Government/ Corporate Bond Index ("S&P/Lehman
G/C Blend"). This index is represented by a 65% weighting in the S&P 500 and a
35% weighting in the Lehman G/C Index. Indices are rebalanced to 65%/35% at
the end of each year. They are also compared to the Morningstar Domestic Hybrid
and Lipper Balanced Averages, each an average of the total returns of all mutual
funds with an investment style similar to that of the Fund as calculated by
Morningstar, Inc. and Lipper, Inc. You may not invest directly in an index. The
Fund's total returns reflect its expenses and the maximum sales charges that you
may pay when you buy or redeem the Fund's shares. The S&P/Lehman G/C Blend
returns have not been adjusted for ongoing management, distribution and
operating expenses and sales charges applicable to mutual fund investments. The
Morningstar Domestic Hybrid Average and Lipper Balanced Average returns have
been adjusted for these expenses but do not reflect any sales charges.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------- *Since
AVERAGE ANNUAL TOTAL RETURNS class
(for the periods ended December 31, 1999) inception
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
<S> <C> <C> <C>
Nvest Balanced Fund: Class A
(inception 11/27/68) -9.26% 11.27% 9.57%
S&P/Lehman G/C Blend 12.92% 21.23% 14.51%
Morningstar Domestic Hybrid Average 8.77% 15.60% 11.37%
Lipper Balanced Average 8.72% 16.24% 11.82%
Nvest Balanced Fund: Class B (inception 9/13/93) -8.75% 11.49% 9.19%*
S&P/Lehman G/C Blend
(Lehman calculated from 9/30/93) 12.92% 21.23% 16.81%*
Morningstar Domestic Hybrid Average
(calculated from 9/30/93) 8.77% 15.60% 11.74%*
Lipper Balanced Average (calculated from 9/30/93) 8.72% 16.24% 12.69%*
Nvest Balanced Fund: Class C (inception 12/30/94) -5.31% 11.72% 11.71%*
S&P/Lehman G/C Blend 12.92% 21.23% 21.23%*
Morningstar Domestic Hybrid Average 8.77% 15.60% 15.13%*
Lipper Balanced Average 8.72% 16.24% 16.24%*"
- ----------------------------------------------------------------------------------------------------
For actual past expenses of Class A, B and C shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- -----------------------
NVEST EQUITY INCOME FUND Stability Income Growth
High
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") --------- ------ ------
SUBADVISER: Vaughan, Nelson, Scarborough & Mod. X X X
McCullough, L.P. ("VNSM") --------- ------ ------
MANAGERS: Margaret M. Buescher and Jean Malo Low
CATEGORY: All-Cap Equity
TICKER SYMBOL: CLASS A CLASS B CLASS C
-----------------------------
NEEIX NEBIX NECEX
</TABLE>
INVESTMENT GOAL
The Fund seeks current income and capital growth.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all of its
assets in dividend-paying common stock of medium to large capitalization
companies. The Fund is designed to offer an income stream, however, the ability
of the Fund to pay dividends depends on the assets and expenses of the Fund.
VNSM uses rigorous fundamental research and active management to analyze a broad
selection of company or industry sectors and to seek companies with the
following characteristics, although not all of the companies selected will have
these attributes:
x Higher gross dividend yields compared to the Standard & Poor's Composite Index
of 500 Stocks ("S&P 500")
x Higher profitability (return-on-equity) than the market
x Strong and growing cash flows and dividends-to-cash flow ratio
x Low price-to-sales ratio
In selecting investments for the Fund, VNSM employs the following strategy:
o It uses a value-driven investment philosophy that selects stocks selling at a
relatively low value based primarily on its dividend yield over time. It
selects companies that VNSM believes are out-of-favor or misunderstood and
that may provide a growing stream of dividends.
o VNSM starts with an investment universe of 5,000 securities. VNSM then uses
value-driven quantitative screens to seek those companies that generally have
a market capitalization in excess of $2 billion and relative dividend yields
above their 10-year average. These screens create a research universe of 300
to 400 companies.
o VNSM then uses fundamental analysis to build a portfolio of 40 to 50
securities consisting of quality companies in the opinion of VNSM. This
fundamental analysis focuses on the strength of a company's balance sheet,
cash flow growth, dividend coverage and management.
o VNSM will generally sell a stock when its absolute yield falls below 80% of
the S&P 500 yield, when its relative yield falls below its 10-year average,
when the company shows a deteriorating financial condition, or when it has
repeated negative earnings surprises.
The Fund may also invest in:
o Convertible and non-convertible preferred stock.
o Convertible and non-convertible investment grade bonds.
o Foreign securities including American Depositary Receipts ("ADRs"), which
are foreign investments issued by a U.S. bank.
o Money market or high quality debt securities for temporary defensive purposes
in response to adverse market, economic or political conditions. These
investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in a stock's value or periods of
below-average performance in a given stock or in the stock market as a whole.
Value stocks present the risk that they may fall out of favor with investors
and underperform growth stock during given periods.
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Equity Income Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual returns for one-year
and since-inception periods compare with those of a broad measure of market
performance and those of indices of funds with similar objectives. The Fund's
past performance does not necessarily indicate how the Fund will perform in the
future. The Fund's current subadviser assumed that function on June 1, 1999.
This chart and table reflect results achieved by the previous subadviser under
different investment policies for periods prior to June 1, 1999.
The bar chart shows the Fund's total returns for Class A shares for each
calendar year since its first full year of operations. The returns for the other
classes of shares offered by this prospectus will differ from the Class A
returns shown in the bar chart, depending upon the respective expenses of each
class. The chart does not reflect any sales charge that you may be required to
pay when you buy or redeem the Fund's shares. A sales charge will reduce your
return.
(total return)
1996 26.61%
1997 22.64%
1998 2.67%
1999 -1.94%
/\ Highest Quarterly Return: Second Quarter 1999, up 12.75%.
\/ Lowest Quarterly Return: Third Quarter 1998, down 13.14%.
The table below shows the Fund's average annual total returns for the one-year
and since-inception periods compared to those of the Russell 1000 Value Index,
an unmanaged subset of stocks from the larger Russell 1000 Index, selected for
their greater value orientation. The returns are also compared to the
Morningstar Large Value and Lipper Equity Income Averages, each an average of
the total returns of all mutual funds with an investment style similar to that
of the Fund as calculated by Morningstar, Inc. and Lipper, Inc. You may not
invest directly in an index. The Fund's total returns reflect its expenses and
the maximum sales charges you may pay when you buy or redeem the Fund's shares.
The Russell 1000 Value Index returns have not been adjusted for ongoing
management, distribution and operating expenses and sales charges applicable to
mutual fund investments. The Morningstar Large Value Average and Lipper Equity
Income Average returns have been adjusted for these expenses but do not reflect
any sales charges.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
SINCE CLASS A SINCE CLASS B AND C
PAST 1 YEAR INCEPTION INCEPTION
<S> <C> <C> <C>
Nvest Equity Income Fund:
Class A (inception 11/28/95) -7.61% 10.79%
Class B (inception 9/15/97) -7.51% -0.03%
Class C (inception 9/15/97) -3.63% 1.29%
Russell 1000 Value Index 7.35% 19.84% 12.24%
Morningstar Large Value Average 6.59% 16.55%* 8.74%*
Lipper Equity Income Average 3.31% 14.41%* 7.06%*
- ---------------------------------------------------------------------------------------------------------
* The Russell, Lipper and Morningstar Averages were calculated from November 30, 1995 for Class A Shares
and September 30, 1997 for Class B and C Shares.
For actual past expenses of Class A, B and C shares, see the section entitled, "Fund Fees & Expenses."
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- -----------------------
NVEST INTERNATIONAL EQUITY Stability Income Growth
FUND High X
--------- ------ ------
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") Mod.
SUBADVISER: Loomis, Sayles & Company, L.P. ("Loomis Sayles") --------- ------ ------
MANAGERS: Alexander Muromcew, John Tribolet and Eswar Menon Low X X
CATEGORY: International Equity
TICKER SYMBOL: CLASS A CLASS B CLASS C
-----------------------------
NEFIX NEIBX NECIX
</TABLE>
INVESTMENT GOAL
The Fund seeks total return from long-term capital growth and dividend income.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest primarily in equity
securities of companies organized or headquartered outside of the United States.
The Fund will hold securities from at least 3 different countries including
those within emerging markets. The Fund will focus on securities with large
market capitalization but may invest in securities with any size capitalization.
Loomis Sayles uses a bottom-up, fundamental research process to build the Fund's
portfolio. Combining careful research with visits with management, Loomis Sayles
looks for growth oriented stocks of well-managed companies that are industry
leaders globally and possess strong competitive positions with pricing power and
strong distribution. Improving business or financial fundamentals are catalysts
for buy decisions while deteriorating fundamentals or better opportunities in
other companies will trigger sell decisions. In addition to its bottom-up
approach to security selection, an overlay of country and industry macro data is
used to provide guidelines for portfolio weighting with a view towards
minimizing portfolio risk. The strong Loomis Sayles research team is combined
with a global network of research contacts to provide a steady stream of
information and ideas. Together with discipline and a thorough decision-making
process, the Loomis Sayles research operation seeks to provide investors with a
successful investment strategy.
Loomis Sayles uses a "No-Walls Decision MakingSM" investment process, in which
the managers all meet in person to exchange ideas and make portfolio decisions;
each buy and sell decision is subject to intense scrutiny by the entire team;
and the skill and unique perspective of each manager on the team is leveraged.
The Fund may:
o Engage in active and frequent trading of its securities. Frequent trading may
produce higher transaction costs and a higher level of taxable capital gains,
which may lower your return.
o Purchase money market or high quality debt securities for temporary defensive
purposes in response to adverse market, economic or political conditions.
These investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in value or periods of
below-average performance in a given stock or in the stock market as a whole.
Growth stocks are generally more sensitive to market movements than other
types of stocks, primarily because their stock prices are based heavily on
future expectations. Small capitalization companies may be subject to more
abrupt price movements, limited markets and less liquidity than larger, more
established companies, which could adversely affect the value of the
portfolio.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency. Investments in emerging markets may
be subject to these risks to a greater extent than those in more developed
markets.
<PAGE>
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest International Equity Fund by showing changes in the Fund's performance
from year to year and by showing how the Fund's average annual returns for
one-year, five-year and since-inception periods compare with those of a broad
measure of market performance and those of indices of funds with similar
objectives. The Fund's past performance does not necessarily indicate how it
will perform in the future. The Fund's current subadviser assumed that function
on February 14, 1997. This chart and table reflect results achieved by the
previous subadviser under different investment policies for periods prior to
February 14, 1997.
The bar chart shows the Fund's total returns for Class A shares for each
calendar year since its first full year of operations. The returns for the other
classes of shares offered by this Prospectus differ from the Class A returns
shown in the bar chart, depending upon the respective expenses of each class.
The chart does not reflect any sales charge that you may be required to pay when
you buy or redeem the Fund's shares. A sales charge will reduce your return.
(total return)
1993 29.39%
1994 8.06%
1995 5.78%
1996 3.27%
1997 -7.56%
1998 6.69%
1999 87.59%
/\ Highest Quarterly Return: Fourth Quarter 1999, up 66.81%
\/ Lowest Quarterly Return: Third Quarter 1998, down 14.56%.
The table below shows the Fund's average annual total returns for the one-year,
five-year and since-inception periods compared to those of the Morgan Stanley
Capital International ("MSCI") Europe, Australasia and Far East Index ("EAFE"),
an arithmetical average of the performance of over 1,000 companies representing
stock markets in Europe, Australia, New Zealand and the Far East. The returns
are also compared to the Morningstar Foreign Stock and Lipper International
Averages, each an average of the total returns of all mutual funds with an
investment style similar to that of the Fund as calculated by Morningstar, Inc.
and Lipper, Inc. You may not invest directly in an index. The Fund's total
returns reflect its expenses and the maximum sales charge that you may pay when
you buy or redeem the Fund's shares. The MSCI EAFE returns have not been
adjusted for ongoing management, distribution and operating expenses and sales
charges applicable to mutual fund investments. The Morningstar Foreign Stock
Average and Lipper International Average returns have been adjusted for these
expenses but do not reflect any sales charges.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
SINCE CLASS
PAST 1 YEAR PAST 5 YEARS INCEPTION
<S> <C> <C> <C>
Nvest International Equity Fund: Class A
(inception 5/21/92) 76.80% 13.75% 12.97%
MSCI EAFE 26.96% 12.83% 12.42%
Morningstar Foreign Stock Average
(calculated from 5/31/92) 44.31% 15.11% 13.36%
Lipper International Average
(calculated from 5/28/92) 40.88% 15.05% 13.25%
Nvest International Equity Fund: Class B
(inception 9/13/93) 81.26% 14.08% 12.52%
MSCI EAFE 26.96% 12.83% 11.62%
Morningstar Foreign Stock Average
(calculated from 9/30/93) 44.31% 15.11% 14.08%
Lipper International Average
(calculated from 9/30/93) 40.88% 15.05% 13.46%
Nvest International Equity Fund: Class C
(inception 12/30/94) 85.23% 14.37% 14.36%
MSCI EAFE 26.96% 12.83% 12.83%
Morningstar Foreign Stock Average 44.31% 15.11% 15.92%
Lipper International Average 40.88% 15.05% 15.05%
- ---------------------------------------------------------------------------------------------------
For actual past expenses of Class A, B and C shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
[graphic omitted] Fund Fees & Expenses
--------------------
The following tables describe the fees and expenses that you may pay if you buy
and hold shares of each Fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
Class A Class B Class C
Maximum sales charge (load) imposed on
purchases (as a percentage of offering
price)(1)(2) 5.75% None None
Maximum deferred sales charge (load)
(as a percentage of original purchase
price or redemption proceeds, as
applicable)(2) (3) 5.00% 1.00%
Redemption fees None* None* None*
(1) A reduced sales charge on Class A shares applies in some cases. See "Ways to
Reduce or Eliminate Sales Charge" within the section entitled "Fund
Services."
(2) Does not apply to reinvested distributions.
(3) A 1.00% contingent deferred sales charge applies with respect to certain
purchases of Class A shares greater than $1,000,000 redeemed within 1 year
after purchase, but not to any other purchases or redemptions of Class A
shares. See "How Sales Charges are Calculated" within the section entitled
"Fund Services."
* Generally, a transaction fee will be charged for expedited payment of
redemption proceeds such as by wire or overnight delivery.
<TABLE>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, as a percentage of average daily net assets)
<CAPTION>
CAPITAL GROWTH FUND GROWTH FUND GROWTH AND INCOME FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 0.74% 0.74% 0.74% 0.67% 0.67% 0.67% 0.66% 0.66% 0.66%
Distribution and/or service
(12b-1) fees 0.25% 1.00%* 1.00%* 0.25% 1.00%* 1.00%* 0.25% 1.00%* 1.00%*
Other expenses 0.40% 0.40% 0.40% 0.20% 0.20% 0.20% 0.30% 0.30% 0.30%
Total annual fund operating
expenses 1.39% 2.14% 2.14% 1.12% 1.87% 1.87% 1.21% 1.96% 1.96%
<CAPTION>
BALANCED FUND INTERNATIONAL EQUITY FUND**
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management fees 0.73% 0.73% 0.73% 0.90% 0.90% 0.90%
Distribution and/or service
(12b-1) fees 0.25% 1.00%* 1.00%* 0.25% 1.00%* 1.00%*
Other expenses 0.35% 0.35% 0.35% 1.11% 1.11% 1.11%
Total annual fund operating
expenses 1.33% 2.08% 2.08% 2.26% 3.01% 3.01%
<CAPTION>
EQUITY INCOME FUND
CLASS A CLASS B CLASS C
- -------------------------------------------------------------
<S> <C> <C> <C>
Management fees 0.70% 0.70% 0.70%
Distribution and/or service
(12b-1) fees 0.25% 1.00%* 1.00%*
Other expenses 1.17% 1.17% 1.17%
Total annual fund operating
expenses 2.12% 2.87% 2.87%
Fee Waiver and/or expense
reimbursement 0.62%*** 0.62%*** 0.62%***
Net expenses 1.50% 2.25% 2.25%
* Because of the higher 12b-1 fees, long-term shareholders may pay more than the economic equivalent of the maximum front-end
sales charge permitted by rules of the National Association of Securities Dealers, Inc.
** Expense information in the table has been restated to reflect current fees.
*** Nvest Management has given a binding undertaking to the Fund to limit the amount of the Fund's total annual fund operating
expenses to 1.50%, 2.25% and 2.25% of the Fund's average daily net assets for Class A, B and C shares, respectively. This
undertaking is in effect until April 30, 2001 and will be reevaluated on an annual basis.
</TABLE>
<PAGE>
Fund Fees & Expenses [graphic omitted]
--------------------
EXAMPLE
This example is intended to help you compare the cost of investing in each Fund
with the cost of investing in other mutual funds.
The example assumes that:
o You invest $10,000 in the Fund for the time periods indicated;
o Your investment has a 5% return each year; and
o The Fund's operating expenses remain the same.
Although your actual costs and returns may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
CAPITAL GROWTH FUND GROWTH FUND GROWTH AND INCOME FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 709 $ 719 $ 219 $ 319 $ 219 $ 683 $ 692 $ 192 $ 292 $ 192 $ 692 $ 701 $ 201 $ 301 $ 201
3 years $ 992 $ 977 $ 677 $ 677 $ 677 $ 912 $ 893 $ 593 $ 593 $ 593 $ 939 $ 921 $ 621 $ 621 $ 621
5 years $1,296 $1,360 $1,160 $1,160 $1,160 $1,159 $1,219 $1,019 $1,019 $1,109 $1,205 $1,266 $1,066 $1,066 $1,066
10 years* $2,156 $2,299 $2,299 $2,492 $2,492 $1,865 $2,008 $2,008 $2,206 $2,206 $1,963 $2,106 $2,106 $2,302 $2,302
<CAPTION>
BALANCED FUND EQUITY INCOME FUND INTERNATIONAL EQUITY FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 703 $ 713 $ 213 $ 313 $ 213 $ 720 $ 731 $ 231 $ 331 $ 231 $ 793 $ 809 $ 309 $ 409 $ 309
3 years $ 975 $ 958 $ 658 $ 658 $ 658 $1,150 $1,141 $ 841 $ 841 $ 841 $1,248 $1,243 $ 943 $ 943 $ 943
5 years $1,266 $1,329 $1,129 $1,129 $1,129 $1,604 $1,677 $1,477 $1,477 $1,477 $1,727 $1,803 $1,603 $1,603 $1,603
10 years* $2,092 $2,235 $2,235 $2,429 $2,429 $2,857 $3,002 $3,002 $3,184 $3,184 $3,042 $3,187 $3,187 $3,365 $3,365
(1) Assumes redemption at end of period
(2) Assumes no redemption at end of period
* Class B shares automatically convert to Class A shares after 8 years; therefore, Class B amounts are calculated using Class A
expenses in years 9 and 10.
</TABLE>
<PAGE>
MORE ABOUT RISK
The Funds have principal investment strategies that come with inherent risks.
The following is a list of risks to which each Fund may be subject by investing
in various types of securities or engaging in various practices.
MARKET RISK (All Funds) The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably based upon change in a company's
financial condition as well as overall market and economic conditions.
RISK OF SMALL CAPITALIZATION COMPANIES (Capital Growth and International Equity
Funds) These companies carry special risks, including narrower markets, limited
financial and management resources, less liquidity and greater volatility than
large company stocks.
MANAGEMENT RISK (All Funds) The risk that a strategy used by a Fund's portfolio
management may fail to produce the intended result.
CREDIT RISK (All Funds) The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to honor a
financial obligation.
CURRENCY RISK (All Funds except Capital Growth and Growth and Income Funds) The
risk that fluctuations in the exchange rates between the U.S. dollar and foreign
currencies may negatively affect an investment.
EMERGING MARKETS RISK (International Equity Fund) The risk associated with
developing securities markets of smaller sizes or with short operating
histories. Emerging markets involve risks in addition to and greater than those
generally associated with investing in developed foreign markets. The extent of
economic development, political stability, market depth, infrastructure and
capitalization, and regulatory oversight in emerging market economies is
generally less than in more developed markets.
RISKS OF OPTIONS, FUTURES AND SWAP CONTRACTS (All Funds) These transactions are
subject to changes in the underlying security on which such transactions are
based. It is important to note that even a small investment in these types of
derivative securities can have a significant impact on a Fund's exposure to
stock market values, interest rates or the currency exchange rate. These types
of transactions will be used primarily for hedging purposes.
LEVERAGE RISK (All Funds) The risk associated with securities or practices (e.g.
borrowing) that multiply small index or market movements into large changes in
value. When a derivative security (a security whose value is based on another
security or index) is used as a hedge against an offsetting position that a Fund
also holds, any loss generated by the derivative security should be
substantially offset by gains on the hedged instrument, and vice versa. To the
extent that a Fund uses a derivative security for purposes other than as a
hedge, that Fund is directly exposed to the risks of that derivative security
and any loss generated by the derivative security will not be offset by a gain.
INTEREST RATE RISK (All Funds) The risk of market losses attributable to changes
in interest rates. In general, the prices of fixed-income securities rise when
interest rates fall, and fall when interest rates rise.
INFORMATION RISK (All Funds) The risk that key information about a security is
inaccurate or unavailable.
OPPORTUNITY RISK (All Funds) The risk of missing out on an investment
opportunity because the assets necessary to take advantage of it are tied up in
less profitable investments.
LIQUIDITY RISK (All Funds) The risk that certain securities may be difficult or
impossible to sell at the time and at the price that the seller would like. This
may result in a loss or may be costly to a Fund.
CORRELATION RISK (All Funds) The risk that changes in the value of a hedging
instrument will not match those of the asset being hedged.
EXTENSION RISK (Balanced and Equity Income Funds) The risk that an unexpected
rise in interest rates will extend the life of a mortgage- or asset-backed
security beyond the expected prepayment time, typically reducing the security's
value.
VALUATION RISK (All Funds) The risk that a Fund has valued certain securities at
a higher price than it can sell them for.
PREPAYMENT RISK (Balanced and Equity Income Funds) The risk that unanticipated
prepayments may occur, reducing the value of mortgage- or asset-backed
securities, or real estate investment trusts.
POLITICAL RISK (All Funds) The risk of losses directly attributable to
government or political actions.
EURO CONVERSION (All Funds except Capital Growth and Growth and Income Funds)
Many European countries have adopted a single European currency, the "euro." The
consequences of this conversion for foreign exchange rates, interest rates and
the value of European securities are unclear presently. Such consequences may
decrease the value and/or increase the volatility of securities held by a Fund.
<PAGE>
Management Team [graphic omitted]
---------------
MEET THE FUNDS' INVESTMENT ADVISERS
AND SUBADVISERS
The Nvest Funds family includes 25 mutual funds with a total of over $8 billion
in assets under management as of December 31, 1999. Nvest Funds are distributed
through Nvest Funds Distributor, L.P. (the "Distributor"). This Prospectus
covers Nvest Stock Funds (the "Funds" or each a "Fund"), which along with the
other Nvest Stock Funds, Nvest Bond Funds, Nvest Star Funds, Kobrick Funds and
Nvest State Tax-Free Funds, constitute the "Nvest Funds." Nvest Cash Management
Trust Money Market Series and Nvest Tax Exempt Money Market Trust constitute the
"Money Market Funds."
NVEST FUNDS MANAGEMENT, L.P.
NVEST MANAGEMENT, located at 399 Boylston Street, Boston, Massachusetts 02116,
serves as the adviser to each Fund except Growth Fund (for which CGM serves as
adviser). Nvest Management is a subsidiary of Nvest Companies, L.P. ("Nvest
Companies"), which is part of an affiliated group including Nvest, L.P., a
publicly-traded company listed on the New York Stock Exchange (the "Exchange").
Nvest Companies' 18 principal subsidiary or affiliated asset management firms,
collectively, had more than $133 billion in assets under management as of
December 31, 1999. Nvest Management oversees, evaluates and monitors the
subadvisory services provided to each Fund except Growth Fund. It also provides
general business management and administration to the Funds. Nvest Management
does not determine what investments will be purchased by the Funds. The
subadvisers listed below and CGM make the investment decisions for their
respective Funds.
The combined advisory and subadvisory fees paid by the Funds (except Growth
Fund) in 1999 as a percentage of each Fund's average daily net assets were 0.74%
for Capital Growth Fund, 0.66% for Growth and Income Fund, 0.73% for Balanced
Fund, 0.64% for International Equity Fund (after reimbursement)and 0.08% for
Equity Income Fund (after waiver or reimbursement).
SUBADVISERS
LOOMIS SAYLES, located at One Financial Center, Boston, Massachusetts 02111,
serves as subadviser to BALANCED AND INTERNATIONAL EQUITY Funds. Loomis Sayles
is a subsidiary of Nvest Companies. Founded in 1926, Loomis Sayles is one of
America's oldest investment advisory firms with over $67 billion in assets under
management as of December 31, 1999. Loomis Sayles is well known for its
professional research staff, which is one of the largest in the industry.
VAUGHAN, NELSON, SCARBOROUGH & MCCULLOUGH (VNSM), located at 6300 Chase Tower,
Houston, Texas 77002, serves as subadviser to EQUITY INCOME FUND. VNSM is a
subsidiary of Nvest Companies. Originally incorporated in 1970, VNSM focuses
primarily on managing equity and fixed-income funds for clients who consist of
foundations, university endowments and corporate retirement and
family/individual core funds. As of December 31, 1999, VNSM had approximately
$4.4 billion in assets under management.
WESTPEAK, located at 1011 Walnut Street, Boulder, Colorado 80302, serves as
subadviser to GROWTH AND INCOME Fund and CAPITAL GROWTH Fund. Westpeak is a
subsidiary of Nvest Companies. Founded in 1991, Westpeak has approximately $10
billion in assets under management as of December 31, 1999.
CAPITAL GROWTH MANAGEMENT LIMITED PARTNERSHIP (ADVISER)
CGM, located at One International Place, Boston, Massachusetts 02110, has served
as adviser to GROWTH FUND since CGM's inception in 1989. It also serves as
investment adviser to eight additional mutual funds and various institutional
investors. CGM is an affiliate of Nvest Companies and has grown to manage over
$8.2 billion in assets as of December 31, 1999. In 1999, Growth Fund paid 0.67%
of its average daily net assets to CGM in advisory fees.
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 the 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 Nvest Companies,
Nvest Management, CGM, Loomis Sayles, Westpeak or VNSM. In placing trades, CGM ,
Loomis Sayles, Westpeak or VNSM will seek to obtain the best combination of
price and execution, which involves a number of judgmental factors. Such
portfolio trades are subject to applicable regulatory restrictions and related
procedures adopted by the Fund's Board of Trustees.
<PAGE>
[graphic omitted] Management Team
---------------
MEET THE FUNDS' PORTFOLIO MANAGERS
GERALD H. SCRIVER
Gerald Scriver has managed GROWTH AND INCOME FUND since May 1995 and CAPITAL
GROWTH FUND since February 1998. Mr. Scriver is the President and Chief
Executive Officer of Westpeak Investment Advisors which he founded in 1991.
He also manages the Westpeak segment of Nvest Star Value Fund. Mr. Scriver is
a graduate of the State University of N.Y. at Buffalo and has over 34 years
of investment experience.
G. KENNETH HEEBNER
G. Kenneth Heebner has managed GROWTH FUND since 1976. In 1989, Mr. Heebner
co-founded and is currently senior portfolio manager of CGM. He is also a
Chartered Financial Analyst. Mr. Heebner received a B.S. from Amherst
College and an M.B.A. from Harvard Business School, and is a highly regarded
35 year veteran of the investment industry.
JEFFREY W. WARDLOW
Jeffrey Wardlow has co-managed the value component of the equity portion of
BALANCED FUND since August 1998. Mr. Wardlow, Vice President of Loomis
Sayles, joined the company over 10 years ago. He also co-manages the Loomis
Sayles segment of Nvest Star Value Fund. Mr. Wardlow, a Chartered Financial
Analyst, received both his B.B.A. and his M.B.A. from Michigan State
University and has over 17 years of investment experience.
GREGG WATKINS
Gregg Watkins has co-managed the value component the equity portion of
BALANCED FUND since August 1998. Mr. Watkins, Vice President of Loomis
Sayles, joined the company in 1991. He is also a Chartered Financial
Analyst. Mr. Watkins received his B.A. from Yale University and his M.B.A.
from Wayne State University and has over 15 years of investment experience.
MARK B. BARIBEAU
Mark B. Baribeau has co-managed the growth component of the equity portion of
BALANCED FUND since March 2000. Mr. Baribeau, Vice President of Loomis
Sayles, joined the company in 1989. He also serves as portfolio manager of
Loomis Sayles Growth Fund. Mr. Baribeau, a Chartered Financial Analyst,
received a M.A. from University of Maryland, a B.A. from University of
Vermont and has 14 years of investment experience.
PAMELA N. CZEKANSKI
Pamela N. Czekanski has co-managed the growth component of the equity portion
of BALANCED FUND since March 2000. Ms. Czekanski, Vice President of Loomis
Sayles, joined the company in 1995. She also serves as a portfolio manager
of Loomis Sayles Growth Fund. Ms. Czekanski, a Chartered Financial Analyst,
received a B.A. from Middlebury College and has 16 years of investment
experience.
RICHARD D. SKAGGS
Richard D. Skaggs has co-managed the growth component of the equity portion
of BALANCED FUND since March 2000. Mr. Skaggs, Vice President of Loomis
Sayles, joined the company in 1994. He also serves as a portfolio manager of
Loomis Sayles Growth Fund. Mr. Skaggs, a Chartered Financial Analyst
received a M.S.M. and a B.S. from Oakland University and has 13 years of
investment experience.
JOHN HYLL
John Hyll has served the fixed-income portion of BALANCED FUND as co-manager
from 1994 until August 1999 and as manager thereafter. Mr. Hyll, Vice
President of Loomis Sayles, joined the company in 1989. He received his B.A.
and his M.B.A. from Baldwin-Wallace College and has over 16 years of
investment experience.
MARGARET M. BUESCHER
Margaret M. Buescher has co-managed the EQUITY INCOME FUND since June 1999.
Ms. Buescher, Principal of VNSM, joined the company in 1994. She also
co-manages the VNSM segment of Star Value Fund. From 1980 to 1994, she was a
Managing Director and Senior Portfolio Manager for the Texas Commerce
Investment Management Company. Ms. Buescher is also a Chartered Financial
Analyst. She received a B.A. from Vanderbilt University and has over 25 years
of investment experience.
JEAN MALO
Jean Malo has co-managed the EQUITY INCOME FUND since June 1999. Mr. Malo is
Chief Investment Officer and a Principal of VNSM. He also co-manages the
VNSM segment of Star Value Fund. Previously, he was a Senior Vice President
at Daniel Breen & Co., which was bought by VNSM in 1997. Mr. Malo joined
Daniel Breen & Co. in 1989. He is also a Chartered Financial Analyst. Mr.
Malo received his M.B.A. from ESSEC in Paris, France and has over 22 years of
investment experience.
ALEXANDER MUROMCEW
Alexander Muromcew serves as co-portfolio manager for INTERNATIONAL EQUITY FUND,
concentrating on Asian markets. Mr. Muromcew, Vice President of Loomis Sayles,
joined the company in 1999. He also co-manages the Loomis Sayles segment of
Nvest Star Worldwide Fund, the International Equities sector of Loomis Sayles
Worldwide Fund, Loomis Sayles International Equity Fund and Loomis Sayles
Emerging Markets Fund. Prior to joining Loomis Sayles, Mr. Muromcew was a
portfolio manager at Nicholas Applegate Capital Management since 1996. Prior to
1996, Mr. Muromcew held positions with Jardine Fleming Securities in Japan,
Emerging Markets Investors Corporation and Teton Partners L.P. He received an
M.B.A. from Stanford University, a B.A. from Dartmouth College and has over 10
years of investment experience.
JOHN TRIBOLET
John Tribolet serves as co-portfolio manager for INTERNATIONAL EQUITY FUND,
concentrating on European markets. Mr. Tribolet, Vice President of Loomis
Sayles, joined the company in 1999. He also co-manages the Loomis Sayles segment
of Nvest Star Worldwide Fund, the International Equities sector of Loomis Sayles
Worldwide Fund, Loomis Sayles International Equity Fund and Loomis Sayles
Emerging Markets Fund. Prior to joining Loomis Sayles, Mr. Tribolet was a
portfolio manager for European Equities at Nicholas Applegate Capital Management
since 1997. From 1995 to 1997 he was a full time MBA student at the University
of Chicago. Prior to 1995, he spent three years in the investment banking
industry, most recently at Paine Webber Inc. He received his B.S. from Columbia
University and has over 8 years of investment experience."
ESWAR MENON
Eswar Menon serves as co-portfolio manager for INTERNATIONAL EQUITY FUND,
concentrating on emerging markets. Mr. Menon, Vice President of Loomis Sayles,
joined the company in 1999. He also co-manages the Loomis Sayles segment of
Nvest Star Worldwide Fund, the International Equities sector of Loomis Sayles
Worldwide Fund, Loomis Sayles International Equity Fund and Loomis Sayles
Emerging Markets Fund. Prior to joining Loomis Sayles, Mr. Menon was the
Portfolio Manager for Emerging Countries at Nicholas Applegate Capital
Management since 1995. Prior to his position at Nicholas Applegate Capital
Management, he spent five years with Koeneman Capital Management and Integrated
Device Technology. Mr. Menon received an M.B.A. from the University of Chicago,
an M.S. from the University of California, a B.S. from Indian Institute of
Technology, Madras, India and has over 10 years of investment experience.
<PAGE>
[graphic omitted] Fund Services
-------------
INVESTING IN THE FUNDS
CHOOSING A SHARE CLASS
Each Fund offers Class A, Class B and Class C shares to the public. Each class
has different costs associated with buying, selling and holding Fund shares,
which allow you to choose the class that best meets your needs. Which class you
choose will depend upon the size of your investment and how long you intend to
hold your shares. Class B shares, Class C shares and certain shareholder
features may not be available to you if you hold your shares in a street name
account. Your financial representative can help you decide which class of shares
is most appropriate for you.
CLASS A SHARES
o You pay a sales charge when you buy Fund shares. There are several ways to
reduce this charge. See the section entitled "Ways to Reduce or Eliminate
Sales Charges."
o You pay lower annual expenses than Class B and Class C shares, giving you the
potential for higher returns per share.
o You do not pay a sales charge on orders of $1 million or more, but you may pay
a charge on redemption if you redeem these shares within 1 year of purchase.
CLASS B SHARES
o You do not pay a sales charge when you buy Fund shares. All of your money goes
to work for you right away.
o You pay higher annual expenses than Class A shares.
o You will pay a charge on redemptions if you sell your shares within 6 years of
purchase, as described in the section "How Sales Charges are Calculated."
o Your Class B shares will automatically convert into Class A shares after 8
years, which reduces your annual expenses.
o We will not accept an order for $1 million or more of Class B shares. You may,
however, purchase $1 million or more of Class A shares, which will have no
sales charge as well as lower annual expenses. You may pay a charge on
redemption if you redeem these shares within 1 year of purchase.
CLASS C SHARES
o You do not pay a sales charge when you buy Fund shares. All of your money goes
to work for you right away.
o You pay higher annual expenses than Class A shares.
o You will pay a charge on redemptions if you sell your shares within 1 year of
purchase.
o Your Class C shares will not automatically convert into Class A shares. If you
hold your shares for longer than 8 years, you'll pay higher expenses than
other classes.
o We will not accept an order for $1 million or more of Class C shares. You may,
however, purchase $1 million or more of Class A shares, which will have no
sales charge as well as lower annual expenses. You may pay a charge on
redemption if you redeem these shares within 1 year of purchase.
For actual past expenses of Class A, B and C shares, see the section entitled
"Fund Fees & Expenses" in this Prospectus.
CERTIFICATES
Certificates will not be automatically issued for any class of shares. Upon
written request, you may receive certificates for Class A shares only.
<PAGE>
Fund Services [graphic omitted]
-------------
HOW SALES CHARGES ARE CALCULATED
CLASS A SHARES
The price that you pay when you buy Class A shares (the "offering price") is
their net asset value plus a sales charge (sometimes called a "front-end sales
charge") which varies depending upon the size of your purchase.
- --------------------------------------------------------------------------------
CLASS A SALES CHARGES
YOUR INVESTMENT AS A % OF OFFERING PRICE AS A % OF YOUR INVESTMENT
Less than $ 50,000 5.75% 6.10%
$ 50,000 - $ 99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,999 2.50% 2.56%
$500,000 - $999,999 2.00% 2.04%
$1,000,000 or more* 0.00% 0.00%
- --------------------------------------------------------------------------------
* For purchases of Class A shares of the Funds of $1 million or more or
purchases by Retirement Plans (Plans under Sections 401(a) or 401(k) of the
Internal Revenue Code with investments of $1 million or more or that have 100
or more eligible employees), there is no front-end sales charge, but a
contingent deferred sales charge of 1.00% may apply to redemptions of your
shares within one year of the date of purchase. See the section entitled "Ways
to Reduce or Eliminate Sales Charges."
CLASS B SHARES
The offering price of Class B shares is their net asset value, without a
front-end sales charge. However, there is a contingent deferred sales charge
("CDSC") on shares that you sell within 6 years of buying them. The amount of
the CDSC, if any, declines each year that you own your shares. The holding
period for purposes of timing the conversion to Class A shares and determining
the CDSC will continue to run after an exchange to Class B shares of another
Nvest Fund. The CDSC equals the following percentages of the dollar amounts
subject to the charge:
- --------------------------------------------------------------------------------
CLASS B CONTINGENT DEFERRED SALES CHARGES
YEAR SINCE PURCHASE CDSC ON SHARES BEING SOLD
1st 5.00%
2nd 4.00%
3rd 3.00%
4th 3.00%
5th 2.00%
6th 1.00%
thereafter 0.00%
- --------------------------------------------------------------------------------
CLASS C SHARES
The offering price of Class C shares is their net asset value, without a
front-end sales charge. However, Class C shares are subject to a CDSC of 1.00%
on redemptions made within one year of the date of purchase. The holding period
for determining the CDSC will continue to run after an exchange to Class C
shares of another Nvest Fund.
CLASS C CONTINGENT DEFERRED SALES CHARGES
YEAR SINCE PURCHASE CDSC ON SHARES BEING SOLD
- --------------------------------------------------------------------------------
1st 1.00%
thereafter 0.00%
- --------------------------------------------------------------------------------
HOW THE CDSC IS APPLIED TO YOUR SHARES
The CDSC is a sales charge you pay when you redeem certain Fund shares. The
CDSC:
o is calculated based on the number of shares you are selling;
o is based on either your original purchase price or the then-current net asset
value of the shares being sold, whichever is lower;
o is deducted from the proceeds of the redemption, not from the amount remaining
in your account; and
o for year one applies to redemptions through the day one year after the date on
which your purchase was accepted, and so on for subsequent years.
A CDSC WILL NOT BE CHARGED ON:
o increases in net asset value above the purchase price; or
o shares you acquired by reinvesting your dividends or capital gains
distributions.
To keep your CDSC as low as possible, each time that you place a request to sell
shares we will first sell any shares in your account that carry no CDSC. If
there are not enough of these shares available to meet your request, we will
sell the shares with the lowest CDSC.
EXCHANGES INTO SHARES OF A MONEY MARKET FUND
If you exchange shares of a Fund into shares of the Money Market Funds, the
holding period for purposes of determining the CDSC and conversion to Class A
shares stops until you exchange back into shares of another Nvest Fund. If you
choose to redeem those Money Market Fund shares, a CDSC may apply.
<PAGE>
[graphic omitted] Fund Services
-------------
WAYS TO REDUCE OR ELIMINATE SALES CHARGES
CLASS A SHARES
REDUCING SALES CHARGES
There are several ways you can lower your sales charge utilizing the chart on
the previous page, including:
o LETTER OF INTENT -- allows you to purchase Class A shares of any Nvest Fund
over a 13-month period but pay sales charges as if you had purchased all
shares at once. This program can save you money if you plan to invest $50,000
or more over 13 months. Purchases in Class B and Class C shares may be used
toward meeting the letter of intent.
o COMBINING ACCOUNTS -- allows you to combine shares of multiple Nvest Funds and
classes for purposes of calculating your sales charge. You may combine your
purchases with those of qualified accounts of a spouse, parents, children,
siblings, grandparents, grandchildren, in-laws, individual fiduciary accounts,
sole proprietorships, single trust estates and any other group of individuals
acceptable to the Distributor.
These privileges do not apply to the Money Market Funds unless shares are
purchased through an exchange from another Nvest Fund.
ELIMINATING SALES CHARGES AND CDSC
Class A shares may be offered without front-end sales charges or a CDSC to the
following individuals and institutions:
o Any government entity that is prohibited from paying a sales charge or
commission to purchase mutual fund shares;
o Selling brokers, sales representatives or other intermediaries;
o Fund trustees and other individuals who are affiliated with any Nvest Fund or
Money Market Fund (this also applies to any spouse, parents, children,
siblings, grandparents, grandchildren and in-laws of those mentioned);
o Participants in certain Retirement Plans with at least 100 eligible employees
(one-year CDSC may apply);
o Non-discretionary and non-retirement accounts of bank trust departments or
trust companies only if they principally engage in banking or trust
activities; and
o Investments of $25,000 or more in the Nvest Funds or Money Market Funds by
clients of an adviser or subadviser to any Nvest Fund or Money Market Fund.
REPURCHASING FUND SHARES
You may apply proceeds from redeeming Class A shares of the Funds WITHOUT
PAYING A SALES CHARGE to repurchase Class A shares of any Nvest Fund. To
qualify, you must reinvest some or all of the proceeds within 120 days after
your redemption and notify Nvest Funds or your financial representative at the
time of reinvestment that you are taking advantage of this privilege. You may
reinvest your proceeds either by returning the redemption check or by sending a
new check for some or all of the redemption amount. Please note: For federal
income tax purposes, A REDEMPTION IS A SALE THAT INVOLVES TAX CONSEQUENCES, EVEN
IF THE PROCEEDS ARE LATER REINVESTED. Please consult your tax adviser for how a
redemption would affect you.
If you repurchase Class A shares of $1 million or more within 30 days after you
redeem such shares, the Distributor will rebate the amount of the CDSC charged
on the redemption.
CLASS A, B OR C SHARES
ELIMINATING THE CDSC
As long as we are notified at the time you sell, the CDSC for any share class
may generally be eliminated in the following cases:
o to make distributions from a retirement plan (a plan termination or total plan
redemption may incur a CDSC);
o to make payments through a systematic withdrawal plan; or
o due to shareholder death or disability.
If you think you may be eligible for a sales charge elimination or reduction,
contact your financial representative or Nvest Funds. Check the Statement of
Additional Information for details.
<PAGE>
Fund Services [graphic omitted]
-------------
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 Act $2,500 $100 $100
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
- --------------------------------------------------------------------------------
* 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.
3. Complete the appropriate parts of the account application, carefully
tfollowing 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.
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.
By using these customer service options, you may:
o purchase, exchange or redeem shares in your existing accounts (certain
restrictions may apply);
o review your account balance, recent transactions, Fund prices and recent
performance;
o order duplicate account statements; and
o obtain tax information.
Please see the following pages for other ways to buy, exchange or sell your
shares.
<PAGE>
[graphic omitted] Fund Services
-------------
BUYING SHARES
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
THROUGH YOUR INVESTMENT DEALER
o Call your investment dealer for o Call your investment dealer for
information. information.
BY MAIL
[graphic omitted]
o Make out a check in U.S. dollars for o Make out a check in U.S. dollars for
the investment amount, payable to the investment amount, payable to
"Nvest Funds." Third party and "Nvest Funds." Third party and
"starter" checks will generally "starter" checks will generally
not be accepted. not be accepted.
o Mail the check with your completed o Fill out the detachable investment
application to Nvest Funds, P.O. Box slip from an account statement. If
8551, Boston, MA 02266-8551. no slip is available, include with
the check a letter specifying the
Fund name, your class of shares,
your account number and the
registered account name(s). To make
investing even easier, you can order
more investment slips by calling
800-225-5478.
BY EXCHANGE
[graphic omitted]
o The exchange must be for a minimum o The exchange must be for a minimum
of $1,000 or for all of your shares. of $1,000 or for all of your shares.
o Obtain a current prospectus for the o Call your investment dealer or Nvest
Fund into which you are exchanging Funds at 800-225-5478 or visit
by calling your investment dealer or nvestfunds.com to request an
Nvest Funds at 800-225-5478. exchange.
o Call your investment dealer or Nvest o See the section entitled "Exchanging
Funds to request an exchange. Shares"
o See the section entitled "Exchanging
Shares".
BY WIRE
[graphic omitted]
o Call Nvest Funds at 800-225-5478 to o Visit nvestfunds.com to add shares
obtain an account number and wire to your account by wire.
transfer instructions. Your bank may
charge you for such a transfer. o Instruct your bank to transfer funds
to State Street Bank & Trust
Company, ABA# 011000028, DDA#
99011538.
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
[graphic omitted]
o Indicate on your application that o Please call Nvest Funds at
you would like to begin an automatic 800-225-5478 for a Service Options
investment plan through Investment Form. A signature guarantee may be
Builder and the amount of the required to add this privilege.
monthly investment ($100 minimum).
o See the section entitled "Additional
o Send a check marked "Void" or a Investor Services."
deposit slip from your bank account
along with your application.
THROUGH AUTOMATED CLEARING HOUSE (ACH)
[graphic omitted]
o Ask your bank or credit union o Call Nvest Funds at 800-225-5478 or
whether it is a member of the ACH visit nvestfunds.com to add shares
system. to your account through ACH.
o Complete the "Telephone Withdrawal o If you have not signed up for the
and Exchange" and "Bank Information" ACH system, please call Nvest Funds
sections on your account for a Service Options Form. A
application. signature guarantee may be required
to add this privilege.
o Mail your completed application to
Nvest Funds, P.O. Box 8551, Boston,
MA 02266-8551.
<PAGE>
Fund Services [graphic omitted]
-------------
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
[graphic omitted]
o Write a letter to request a redemption specifying the name of the Fund, the
class of shares, your account number, the exact registered account name(s),
the number of shares or the dollar amount to be redeemed and the method by
which you wish to receive your proceeds. Additional materials may be required.
See the section entitled "Selling Shares in Writing."
o The request must be signed by all of the owners of the shares including the
capacity in which they are signing, if appropriate.
o Mail your request to Nvest Funds, P.O. Box 8551, Boston, MA 02266-8551.
o Your proceeds (less any applicable CDSC) will be delivered by the method
chosen in your letter. If you choose to have your proceeds delivered by mail,
they will generally be mailed to you on the business day after the request is
received. You may also choose to redeem by wire or through ACH (see below).
BY EXCHANGE
[graphic omitted]
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
[graphic omitted]
o Fill out the "Telephone Withdrawal and Exchange" and "Bank Information"
sections on your account application.
o Call Nvest Funds at 800-225-5478; visit nvestfunds.com 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)
[graphic omitted]
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 or visit nvestfunds.com 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
[graphic omitted]
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
[graphic omitted]
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.
<PAGE>
[graphic omitted] Fund Services
-------------
SELLING SHARES IN WRITING
If you wish to redeem your shares in writing, all owners of the shares must sign
the redemption request in the exact names in which the shares are registered and
indicate any special capacity in which they are signing. In certain situations,
you will be required to make your request to sell shares in writing. In these
instances, a letter of instruction signed by the authorized owner is necessary.
In certain situations we also may require a signature guarantee or additional
documentation.
A signature guarantee protects you against fraudulent orders and is necessary
if:
o your address of record has been changed within the past 30 days;
o you are selling more than $100,000 worth of shares and you are requesting the
proceeds by check; or
o a proceeds check for any amount is mailed to an address other than the address
of record or not payable to the registered owner(s).
A notary public CANNOT provide a signature guarantee. A signature guarantee can
be obtained from one of the following sources:
o a financial representative or securities dealer;
o a federal savings bank, cooperative or other type of bank;
o a savings and loan or other thrift institution;
o a credit union; or
o a securities exchange or clearing agency.
The table shows 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 signatures on the letter must include all
PROPRIETORSHIP, UGMA/UTMA persons authorized to sign, including title, if
(MINOR ACCOUNTS) applicable.
o Signature guarantee, if applicable (see above).
CORPORATE OR ASSOCIATION o The signatures on the letter must include all
ACCOUNTS persons authorized to sign, including title.
OWNERS OR TRUSTEES OF TRUST o The signature on the letter must include all
ACCOUNTS trustees authorized to sign, including title.
o If the names of the trustees are not
registered on the account, please provide a
copy of the trust document certified within
the past 60 days.
o Signature guarantee, if applicable (see above).
JOINT TENANCY WHOSE o The signatures on the letter must include all
CO-TENANTS ARE DECEASED surviving tenants of the account.
o Copy of the death certificate.
o Signature guarantee if proceeds check is
issued to other than the surviving tenants.
POWER OF ATTORNEY (POA) o The signatures on the letter must include the
attorney-in-fact, indicating such title.
o A signature guarantee.
o Certified copy of the POA document stating it
is still in full force and effect, specifying
the exact Fund and account number, and
certified within 30 days of receipt of
instructions.*
QUALIFIED RETIREMENT BENEFIT o The signature on the letter must include all
PLANS (EXCEPT NVEST FUNDS signatures of those authorized to sign,
PROTOTYPE DOCUMENTS) including title.
o Signature guarantee, if applicable (see
above).
EXECUTORS OF ESTATES, o The signature on the letter must include those
ADMINISTRATORS, GUARDIANS, authorized to sign, including capacity.
CONSERVATORS
o A signature guarantee.
o Certified copy of court document where signer
derives authority, e.g.: Letters of
Administration, Conservatorship, Letters
Testamentary.*
INDIVIDUAL RETIREMENT o Additional documentation and distribution
ACCOUNTS (IRAS) forms are required.
* Certification may be made on court documents by the court, usually certified
by the clerk of the court. POA certification may be made by a commercial bank,
broker/member of a domestic stock exchange or a practicing attorney.
<PAGE>
Fund Services [graphic omitted]
-------------
EXCHANGING SHARES
In general, you may exchange shares of your Fund for shares of the same class of
another Nvest Fund without paying a sales charge or a CDSC (see the sections
entitled "Buying Shares" and "Selling Shares"). The exchange must be for a
minimum of $1,000 (or the total net asset value of your account, whichever is
less), or $100 if made under the Automatic Exchange Plan (see the section
entitled "Additional Investor Services"). All exchanges are subject to the
eligibility requirements of the Nvest Fund or Money Market 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. For federal income tax purposes,
an exchange of Fund shares for shares of another Nvest Fund or Money Market Fund
is treated as a sale on which gain or loss may be recognized. Please refer to
the Statement of Additional Information (the "SAI") for more detailed
information on exchanging Fund shares.
RESTRICTIONS ON BUYING, SELLING AND EXCHANGING SHARES
PURCHASE AND EXCHANGE RESTRICTIONS
Although the Funds do not anticipate doing so, they reserve the right to suspend
or change the terms of purchasing or exchanging shares. The Funds and the
Distributor reserve the right to refuse or limit any purchase or exchange order
by a particular purchaser (or group of related purchasers) if the transaction
is deemed harmful to the best interest of the Fund's other shareholders or
would disrupt the management of the Fund. The Funds and the Distributor reserve
the right to restrict purchases and exchanges for the accounts of "market
timers" by limiting the transaction to a maximum dollar amount. An account will
be deemed to be one of a market timer if: (i) more than two exchange purchases
of a given Fund are made for the account in a calendar quarter or (ii) the
account makes one or more exchange purchases of a given Fund in a calendar
quarter in an aggregate amount in excess of 1% of the Fund's total net assets.
SELLING RESTRICTIONS
The table below describes restrictions placed on selling shares of any Fund
described in this Prospectus:
RESTRICTION SITUATION
The Fund may suspend the right of redemption or o When the New York Stock
postpone payment for more than 7 days: Exchange is closed (other
than a weekend/holiday)
o During an emergency
o Any other period permitted
by the SEC
The Fund reserves the right to suspend account o With a notice of a dispute
services or refuse transaction requests: between registered owners
o With suspicion/evidence of
a fraudulent act
The Fund may pay the redemption price in whole o When it is detrimental for
or part by a distribution in kind of readily a Fund to make cash
marketable securities in lieu of cash or may payments as determined in
take up to 7 days to pay a redemption request in the sole discretion of the
order to raise capital: adviser or subadviser
The Fund may close your account and send you the o When the Fund account
proceeds. You will have 60 days after being falls below a set minimum
notified of the Fund's intention to close your (currently $1,000 as set
account to increase the account to the set by the Fund's Board of
minimum. This does not apply to certain qualified Trustees)
retirement plans, automatic investment plans or
accounts that have fallen below the minimum
solely because of fluctuations in a Fund's net
asset value per share:
The Fund may withhold redemption proceeds until o When redemptions are made
the check or funds have cleared: within 10 calendar days of
purchase by check or ACH
of the shares being
redeemed
Telephone redemptions are not accepted for tax-qualified retirement accounts.
If you hold certificates representing your shares, they must be sent with your
request for it to be honored.
The Funds recommend that certificates be sent by registered mail.
<PAGE>
[graphic omitted] Fund Services
-------------
HOW FUND SHARES ARE PRICED
"Net asset value" is the price of one share of a Fund without a sales charge,
and is calculated each business day using this formula:
TOTAL MARKET VALUE OF SECURITIES + CASH AND
NET ASSET VALUE = OTHER ASSETS - LIABILITIES
-------------------------------------------
NUMBER OF OUTSTANDING SHARES
The net asset value of Fund shares is determined according to this schedule:
o A share's net asset value is determined at the close of regular trading on the
Exchange on the days the Exchange is open for trading. This is normally
4:00 p.m. Eastern time.
o The price you pay for purchasing, redeeming or exchanging a share will be
based upon the net asset value next calculated after your order is received
"in good order" by State Street Bank and Trust Company, the Fund's custodian
(plus or minus applicable sales charges as described earlier in this
Prospectus).
o Requests received by the Distributor after the Exchange closes will be
processed based upon the net asset value determined at the close of regular
trading on the next day that the Exchange is open, with the exception that
those orders received by your investment dealer before the close of the
Exchange and received by the Distributor before 5:00 p.m. Eastern time* on the
same day will be based on the net asset value determined on that day.
o A Fund heavily invested in foreign securities may have net asset value changes
on days when you cannot buy or sell its shares.
* Under limited circumstances, the Distributor may enter into a contractual
agreement where it may accept orders after 5:00 pm, but not later than 8:00 pm
Generally, during times of substantial economic or market change, it may be
difficult to place your order by phone. During these times, you may deliver your
order in person to the Distributor or send your order by mail as described in
"Buying Shares" and "Selling Shares."
Generally, Fund securities are valued as follows:
o EQUITY SECURITIES -- most recent sales or quoted bid price as provided by a
pricing service.
o DEBT SECURITIES (OTHER THAN SHORT-TERM OBLIGATIONS) -- based upon pricing
service valuations.
o SHORT-TERM OBLIGATIONS (REMAINING MATURITY OF LESS THAN 60 DAYS) -- amortized
cost (which approximates market value).
o SECURITIES TRADED ON FOREIGN EXCHANGES -- most recent sale/bid price on the
non-U.S. exchange, unless an occurrence after the close of the exchange will
materially affect its value. In that case, it is given fair value as
determined by or under the direction of the Fund's Board of Trustees at the
close of regular trading on the Exchange.
o OPTIONS -- last sale price, or if not available, last offering price.
o FUTURES -- unrealized gain or loss on the contract using current settlement
price. When a settlement price is not used, futures contracts will be valued
at their fair value as determined by or under the direction of the Fund's
Board of Trustees.
o ALL OTHER SECURITIES -- fair market value as determined by the adviser or
subadviser of the Fund under the direction of the Fund's Board of Trustees.
The effect of fair value pricing as described above under "Securities traded on
foreign exchanges" and "All other securities" is that securities may not be
priced on the basis of quotations from the primary market in which they are
traded but rather, may be priced by another method that the Fund's Board of
Trustees believes accurately reflects fair value.
<PAGE>
Fund Services [graphic omitted]
-------------
DIVIDENDS AND DISTRIBUTIONS
The Funds generally distribute most or all of their net investment income (other
than capital gains) in the form of dividends. The following table shows when
each Fund expects to distribute dividends. Each Fund distributes all net
realized long- and short-term capital gains annually, after applying any
available capital loss carryovers. Each Fund's Board of Trustees may adopt a
different schedule as long as payments are made at least annually.
- --------------------------------------------------------------------------------
DIVIDEND PAYMENT SCHEDULE
ANNUALLY SEMI-ANNUALLY QUARTERLY
Capital Growth Growth and Income Balanced
Growth Equity Income
International Equity
- --------------------------------------------------------------------------------
Depending on your investment goals and priorities, you may choose to:
o participate in the Dividend Diversification Program, which allows you to
have all dividends and distributions automatically invested at net asset
value in shares of the same class of another Nvest Fund registered in your
name. Certain investment minimums and restrictions may apply. For more
information about this program, see the section entitled "Additional
Investor Services."
o receive distributions from dividends and interest in cash while
reinvesting distributions from capital gains in additional shares of the
same class of the Fund or in the same class of another 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
Fund, you will receive a Form 1099 to help you report the prior calendar year's
distributions on your federal income tax return. Be sure to keep the 1099 as a
permanent record. A fee may be charged for any duplicate information requested.
TAX CONSEQUENCES
Each Fund intends to meet all requirements of the Internal Revenue Code
necessary to qualify as a "regulated investment company" and thus does not
expect to pay any federal income tax on income and capital gains distributed to
shareholders.
Fund distributions paid to you either in cash or reinvested in additional shares
are generally taxable to you either as ordinary income or as capital gains.
Distributions derived from short-term capital gains or investment income are
generally taxable at ordinary income rates. If you are a corporation investing
in a Fund, a portion of these dividends may qualify for the dividends-received
deduction provided that you meet certain holding period requirements.
Distributions of gains from investments that a Fund owned for more than one year
that are designated by a Fund as capital gain dividends will generally be
taxable to a shareholder receiving such distributions as long-term capital gain,
regardless of how long the shareholder has held Fund shares.
An exchange of shares for shares of another Nvest Fund or Money Market Fund is
treated as a sale, and any resulting gain or loss may be subject to federal
income tax. If you purchase shares of a Fund shortly before it declares a
capital gain distribution or a dividend, a portion of the purchase price may be
returned to you as a taxable distribution.
You should consult your tax adviser about any federal, state and local taxes
that may apply to the distributions you receive. Shareholders of Funds investing
in foreign securities should consult their tax advisers about consequences of
their investments under foreign laws.
<PAGE>
[graphic omitted] Fund Services
-------------
COMPENSATION TO SECURITIES DEALERS
As part of their business strategies, the Funds pay securities dealers that sell
their shares. This compensation originates from two sources: sales charges
(front-end or deferred) and 12b-1 fees (comprising the annual service and/or
distribution fees of a plan adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940). The sales charges are detailed in the section entitled
"How Sales Charges Are Calculated." Each class of Fund shares pays an annual
service fee of 0.25% of its average daily net assets. In addition to this
service fee, Class B shares pay an annual distribution fee of 0.75% of their
average daily net assets for 8 years (at which time they automatically convert
into Class A shares). Class C shares are subject to a distribution fee of 0.75%
of their average daily net assets. Generally, the 12b-1 fees are paid to
securities dealers on a quarterly basis. The Distributor retains the first year
of such fees for Class C shares. Because these distribution fees are paid out of
the Fund's assets on an ongoing basis, over time these fees for Class B and
Class C shares will increase the cost of your investment and may cost you more
than paying the front-end sales charge on Class A shares.
The Distributor may, at its expense, pay concessions in addition to the payments
described above to dealers which satisfy certain criteria established from time
to time by the Distributor relating to increasing net sales of shares of the
Nvest Funds over prior periods, and certain other factors. See the SAI for more
details.
<PAGE>
Fund Services [graphic omitted]
-------------
ADDITIONAL INVESTOR SERVICES
RETIREMENT PLANS
Nvest Funds offer 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
Money Market Fund, subject to the eligibility requirements of that other Fund
and to state securities law requirements. Shares will be purchased at the
selected Fund's net asset value without a front-end sales charge or CDSC on the
dividend record date. Before establishing a Dividend Diversification Program
into any other Nvest Fund or 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
other Nvest Funds or Money Market Funds. There is no fee for exchanges made
under this plan, but there may be a sales charge in certain circumstances.
Please refer to the SAI for more information on the Automatic Exchange Plan.
SYSTEMATIC WITHDRAWAL PLAN
This plan allows you to redeem shares and receive payments from your Fund on a
regular schedule. Redemption of shares that are part of the Systematic
Withdrawal Plan are not subject to a CDSC. However, the amount or percentage
that you specify in the plan may not exceed, on an annualized basis, 10% of the
value of your Fund account based upon the value of your Fund account on the day
you establish your plan. To establish a Systematic Withdrawal Plan, please refer
to the section entitled "Selling Shares."
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 your current account balance, 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 any of 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.
<PAGE>
[graphic omitted] Fund Performance
----------------
The financial highlights table is intended to help you understand each Fund's
financial performance for the past 5 years (or, if shorter, the 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 each 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, are incorporated by reference in the Statement
of Additional Information, which is available upon request.
<TABLE>
<CAPTION>
NVEST CAPITAL GROWTH FUND
CLASS A CLASS B
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Year $ 15.02 $ 18.41 $ 19.27 $ 19.95 $ 20.67 $ 14.89 $ 18.09 $ 18.74 $ 19.10 $ 19.37
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income (Loss) (0.11)(b) (0.14)(c) (0.18)(c) (0.13)(c) (0.13)(c) (0.16)(b) (0.28)(c) (0.32)(c) (0.27)(c) (0.27)(c)
Net Realized and
Unrealized Gain
(Loss) on
Investments 4.74 3.22 3.43 5.18 5.05 4.60 3.15 3.25 4.87 4.69
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations 4.63 3.08 3.25 5.05 4.92 4.44 2.87 2.93 4.60 4.42
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From
Net Realized
Capital Gains (1.24) (2.22) (2.57) (4.33) (2.73) (1.24) (2.22) (2.57) (4.33) (2.73)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions (1.24) (2.22) (2.57) (4.33) (2.73) (1.24) (2.22) (2.57) (4.33) (2.73)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value,
End of the Year $ 18.41 $ 19.27 $ 19.95 $ 20.67 $ 22.86 $ 18.09 $ 18.74 $ 19.10 $ 19.37 $ 21.06
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN (%) (a) 30.7 17.1 17.2 29.0 24.7 29.7 16.2 15.9 28.2 23.8
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to Average
Net Assets (%) 1.61 1.50 1.45 1.46 1.39 2.36 2.25 2.20 2.21 2.14
Ratio of Net
Investment Income
(Loss) to Average
Net Assets (%) (0.67) (0.71) (0.87) (0.62) (0.61) (1.42) (1.46) (1.62) (1.37) (1.36)
Portfolio Turnover
Rate (%) 69 74 48 136 124 69 74 48 136 124
Net Assets, End of
Year (000) $123,504 $141,326 $149,734 $175,511 $200,821 $ 26,234 $ 37,439 $ 45,546 $ 57,796 $ 74,774
<CAPTION>
CLASS C
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $ 14.89 $ 18.08 $ 18.74 $ 19.11 $ 19.37
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.09)(b) (0.28)(c) (0.34)(c) (0.27)(c) (0.27)(c)
Net Realized and Unrealized Gain (Loss) on Investments 4.52 3.16 3.28 4.86 4.69
-------- -------- -------- -------- --------
Total From Investment Operations 4.43 2.88 2.94 4.59 4.42
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From Net Realized Capital Gains (1.24) (2.22) (2.57) (4.33) (2.73)
-------- -------- -------- -------- --------
Total Distributions (1.24) (2.22) (2.57) (4.33) (2.73)
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 18.08 $ 18.74 $ 19.11 $ 19.37 $ 21.06
======== ======== ======== ======== ========
TOTAL RETURN (%) (a) 29.7 16.2 15.9 28.1 23.8
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) 2.36 2.25 2.20 2.21 2.14
Ratio of Net Investment Income (Loss) to Average
Net Assets (%) (1.42) (1.46) (1.62) (1.37) (1.36)
Portfolio Turnover Rate (%) 69 74 48 136 124
Net Assets, End of Year (000) $ 354 $ 504 $ 979 $ 1,609 $ 3,110
(a) A sales charge for Class A shares or a CDSC for Class B and C shares is not reflected in total return calculations.
(b) Per share net investment income (loss) does not reflect the period's reclassification of permanent differences between book
and tax basis net investment income (loss).
(c) Per share net investment income (loss) has been calculated using the average shares outstanding during the year.
The Fund's current subadviser assumed that function on February 16, 1998. The highlights prior to this date reflect results
achieved by the previous subadviser under different investment policies.
</TABLE>
<PAGE>
<TABLE>
[graphic omitted] Fund Performance
----------------
NVEST GROWTH FUND
<CAPTION>
CLASS A CLASS B CLASS C
FEBRUARY 28(A) SEPTEMBER 1(A)
THROUGH YEAR ENDED THROUGH YEAR ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997 1998 1999 1997 1998 1999 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period $ 8.87 $10.55 $11.63 $10.41 $11.36 $12.47 $10.32 $11.15 $11.18 $11.15
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (Loss) 0.05 0.04 0.01 0.08(c) 0.02 (0.07) 0.00(c) (0.05) 0.00(c) (0.05)
Net Realized and Unrealized
Gain (Loss) on Investments 3.30 2.07 2.79 3.00 1.57 1.94 2.95 1.52 2.09 1.52
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment
Operations 3.35 2.11 2.80 3.08 1.59 1.87 2.95 1.47 2.09 1.47
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net
Investment Income (0.05) (0.04) 0.00 (0.10) 0.00 0.00 (0.06) 0.00 (0.06) 0.00
Distributions From Net
Realized Gain on
Investments (1.62) (0.99) (4.02) (1.32) (1.95) (4.02) (1.32) (1.95) (1.32) (1.95)
Distributions in Excess
of Realized Gain on
Investments 0.00 0.00 0.00 (0.35) 0.00 0.00 (0.35) 0.00 (0.35) 0.00
Distributions from Return
of Capital 0.00 0.00 0.00 (0.36) 0.00 0.00 (0.39) 0.00 (0.39) 0.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (1.67) (1.03) (4.02) (2.13) (1.95) (4.02) (2.12) (1.95) (2.12) (1.95)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of the
Period $10.55 $11.63 $10.41 $11.36 $11.00 $10.32 $11.15 $10.67 $11.15 $10.67
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (b) 38.1 20.9 23.5 33.4 15.2 14.4 32.4 14.4 22.2 14.4
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 1.20 1.18 1.12 1.12 1.12 1.87(d) 1.87 (1.87) 1.87(d) 1.87
Ratio of Net Investment
Income to Average Net
Assets (%) 0.42 0.33 0.08 0.74 0.23 (0.67)(d) (0.01) (0.52) (0.01)(d) (0.52)
Portfolio Turnover Rate (%) 235 199 214 202 206 214(d) 202 206 202 206
Net Assets, End of Period
(000,000) $1,201 $1,297 $1,460 $1,825 $1,871 $ 18 $ 75 $ 136 $ 2 $ 9
(a) Commencement of Operations.
(b) A sales charge for Class A shares or a CDSC for Class B and C shares is not reflected in total return calculations. Periods of
less than one year are not annualized.
(c) Per share net investment income (loss) has been calculated using the average shares outstanding during the year.
(d) Computed on an annualized basis.
</TABLE>
<PAGE>
<TABLE>
[graphic omitted] Fund Performance
----------------
NVEST GROWTH AND INCOME FUND
<CAPTION>
CLASS A CLASS B
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period $ 12.41 $ 14.39 $ 13.87 $ 15.35 $ 16.57 $ 12.42 $ 14.40 $ 13.87 $ 15.28 $ 16.37
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income (Loss) 0.18 0.13 0.07(d) 0.04 0.08 0.10 0.03 (0.05)(d (0.05) (0.04)
Net Realized and
Unrealized Gain
(Loss) on
Investments 4.01 2.07 4.40 3.29 1.40 4.01 2.07 4.40 3.24 1.36
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total From
Investment
Operations 4.19 2.20 4.47 3.33 1.48 4.11 2.10 4.35 3.19 1.32
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From
Net Investment
Income (0.18) (0.13) (0.06) (0.01) (0.06) (0.10) (0.04) (0.01) 0.00 0.00
Distributions From
Net Realized
Capital Gains (2.03) (2.59) (2.93) (2.10) (2.66) (2.03) (2.59) (2.93) (2.10) (2.66)
Distributions in
Excess of
Net Investment
Income 0.00 0.00 0.00 0.00 0.00(c) 0.00 0.00 0.00 0.00 0.00(c)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions (2.21) (2.72) (2.99) (2.11) (2.72) (2.13) (2.63) (2.94) (2.10) (2.66)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value,
End of the Period $ 14.39 $ 13.87 $ 15.35 $ 16.57 $ 15.33 $ 14.40 $ 13.87 $ 15.28 $ 16.37 $ 15.03
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN (%)(b) 35.1 17.2 33.4 23.9 9.5 34.3 16.3 32.4 23.1 8.6
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to
Average Net
Assets (%) 1.38 1.30 1.25 1.23 1.21 2.11 2.05 2.00 1.98 1.96
Ratio of Net
Investment Income
to Average Net
Assets (%) 1.31 0.92 0.46 0.33 0.48 0.56 0.17 (0.29) (0.42) (0.27)
Portfolio Turnover
Rate (%) 69 127 103 114 133 69 127 103 114 133
Net Assets, End of
Period (000) $150,693 $166,963 $220,912 $304,139 $375,676 $ 29,026 $ 46,856 $ 81,066 $153,369 $216,457
<CAPTION>
CLASS C
MAY 1(A)
THROUGH
DEC. 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 13.84 $ 14.39 $ 13.85 $ 15.28 $ 16.35
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.06 0.04 (0.05)(d (0.04) (0.04)
Net Realized and Unrealized Gain (Loss) on Investments 2.58 2.05 4.42 3.21 1.36
-------- -------- -------- -------- --------
Total From Investment Operations 2.64 2.09 4.37 3.17 1.32
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.06) (0.04) (0.01) 0.00 0.00
Distributions From Net Realized Capital Gains (2.03) (2.59) (2.93) (2.10) (2.66)
Distributions in Excess of Net Investment Income 0.00 0.00 0.00 0.00 0.00(c)
-------- -------- -------- -------- --------
Total Distributions (2.09) (2.63) (2.94) (2.10) (2.66)
-------- -------- -------- -------- --------
Net Asset Value, End of the Period $ 14.39 $ 13.85 $ 15.28 $ 16.35 $ 15.01
======== ======== ======== ======== ========
TOTAL RETURN (%)(b) 20.2 16.3 32.6 22.9 8.6
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) 2.11(e) 2.05 2.00 1.98 1.96
Ratio of Net Investment Income to Average Net Assets (%) 0.56(e) 0.17 (0.29) (0.42) (0.27)
Portfolio Turnover Rate (%) 69 127 103 114 133
Net Assets, End of Period (000) $ 4,707 $ 3,912 $ 6,735 $ 18,288 $ 26,983
(a) Commencement of Operations.
(b) A sales charge for Class A shares or a CDSC for Class B and C shares is not reflected in total return calculations.
(c) Amount rounds to less than $0.01.
(d) Per share net investment income (loss) has been calculated using the average shares outstanding during the year.
(e) Computed on an annualized basis.
The Fund's current subadviser assumed that function on May 1, 1995. The highlights prior to this date reflect results
achieved by the previous subadviser under different investment policies.
</TABLE>
<PAGE>
<TABLE>
[graphic omitted] Fund Performance
----------------
NVEST BALANCED FUND
<CAPTION>
CLASS A CLASS B
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Year $ 11.27 $ 13.14 $ 13.94 $ 14.25 $ 13.52 $ 11.24 $ 13.08 $ 13.86 $ 14.15 $ 13.40
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- --------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.42 0.38 0.33 0.33 0.32 0.34 0.29 0.23 0.21 0.21
Net Realized and
Unrealized Gain
(Loss) on
Investments 2.49 1.76 2.05 0.74 (0.82) 2.46 1.74 2.03 0.74 (0.80)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- --------
Total From
Investment
Operations 2.91 2.14 2.38 1.07 (0.50) 2.80 2.03 2.26 0.95 (0.59)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- --------
LESS DISTRIBUTIONS
Distributions From
Net Investment
Income (0.40) (0.39) (0.33) (0.32) (0.32) (0.32) (0.30) (0.23) (0.22) (0.22)
Distributions From
Net Realized
Capital Gains (0.64) (0.95) (1.74) (1.48) (1.01) (0.64) (0.95) (1.74) (1.48) (1.01)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- --------
Total Distributions (1.04) (1.34) (2.07) (1.80) (1.33) (0.96) (1.25) (1.97) (1.70) (0.98)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- --------
Net Asset Value,
End of the Year $ 13.14 $ 13.94 $ 14.25 $ 13.52 $ 11.69 $ 13.08 $ 13.86 $ 14.15 $ 13.40 $ 11.58
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
======== ========
TOTAL RETURN (%)(a) 26.3 17.1 17.5 8.2 (3.8) 25.3 16.3 16.7 7.3 (4.4)
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to
Average Net
Assets (%) 1.36 1.33 1.29 1.30 1.33 2.11 2.08 2.04 2.05 2.08
Ratio of Net
Investment Income
to Average Net
Assets (%) 3.37 2.79 2.25 2.25 2.30 2.62 2.04 1.50 1.50 1.55
Portfolio Turnover
Rate (%) 54 70 69 81 61 54 70 69 81 61
Net Assets, End of
the Year (000) $196,514 $219,626 $233,421 $222,866 $167,943 $ 40,361 $ 58,367 $ 76,558 $ 84,255 $ 65,942
<CAPTION>
CLASS C
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $ 11.24 $ 13.05 $ 13.82 $ 14.10 $ 13.35
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.35 0.29 0.23 0.21 0.21
Net Realized and Unrealized Gain (Loss) on Investments 2.44 1.73 2.02 0.74 (0.80)
-------- -------- -------- -------- --------
Total From Investment Operations 2.79 2.02 2.25 0.95 (0.59)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.34) (0.30) (0.23) (0.22) (0.22)
Distributions From Net Realized Capital Gains (0.64) (0.95) (1.74) (1.48) (1.01)
-------- -------- -------- -------- --------
Total Distributions (0.98) (1.25) (1.97) (1.70) (1.23)
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 13.05 $ 13.82 $ 14.10 $ 13.35 $ 11.53
======== ======== ======== ======== ========
TOTAL RETURN (%)(a) 25.2 16.2 16.6 7.3 (4.5)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) 2.11 2.08 2.04 2.05 2.08
Ratio of Net Investment Income to Average Net Assets (%) 2.62 2.04 1.50 1.50 1.55
Portfolio Turnover Rate (%) 54 70 69 81 61
Net Assets, End of the Year (000) $ 718 $ 2,538 $ 4,596 $ 5,480 $ 4,454
(a) A sales charge for Class A shares or a CDSC for Class B and C shares is not reflected in total return
calculations.
</TABLE>
<PAGE>
<TABLE>
[graphic omitted] Fund Performance
----------------
NVEST EQUITY INCOME FUND
<CAPTION>
CLASS A
NOV. 28(a)
THROUGH
DEC. 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period $ 12.50 $ 12.86 $ 15.15 $ 17.59 $ 17.62
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.04 0.31 0.25 0.26(b) 0.17
Net Realized and Unrealized Gains on
Investments 0.36 3.11 3.15 0.20(c) (0.51)
-------- -------- -------- -------- --------
Total From Investment Operations 0.40 3.42 3.40 0.46 (0.34)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From Net Investment
Income (0.04) (0.30) (0.26) (0.26) (0.12)
Distributions From Net Realized
Capital Gains 0.00 (0.83) (0.70) (0.17) (0.00)(g)
-------- -------- -------- -------- --------
Total Distributions (0.04) (1.13) (0.96) (0.43) (0.12)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 12.86 $ 15.15 $ 17.59 $ 17.62 $ 17.16
======== ======== ======== ======== ========
TOTAL RETURN (%)(d) 3.2 26.6 22.6 2.7 (1.9)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets (%)(e) 1.50(f) 1.50 1.50 1.50 1.50
Ratio of Net Investment Income to
Average Net Assets (%) 3.58(f) 2.06 1.76 1.48 0.94
Portfolio Turnover Rate (%) 0 45 33 61 93
Net Assets, End of Period (000) $ 2,064 $ 2,613 $ 14,681 $ 17,839 $ 11,291
(a) Commencement of Operations.
(b) Per share net investment income has been calculated using the average shares outstanding during the year.
(c) The amount shown for a share outstanding does not correspond with the aggregate net gain/loss on investments for the period
ended December 31, 1998, due to the timing of purchases and redemptions of Fund shares in relation to fluctuating market
values of the investments of the Fund.
(d) A sales charge for Class A shares or a CDSC for Class B and C shares is not reflected in total return calculations. Periods of
less than one year are not annualized.
(e) The ratio of operating expenses to average net assets without giving effect to the expense limitation in effect would have
been (%):
5.97(f) 3.67 3.10 1.92 2.12
(f) Computed on an annualized basis.
(g) Amount is to less than $0.01.
<CAPTION>
CLASS B CLASS C
SEPTEMBER 15(a) SEPTEMBER 15(a)
THROUGH YEAR ENDED THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period $ 17.06 $ 17.59 $ 17.62 $ 17.06 $ 17.59 $ 17.63
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.03 0.13(b) 0.03 0.03 0.13(b) 0.03
Net Realized and Unrealized Gains on
Investments 0.60 0.20(c) (0.50) 0.60 0.21(c) (0.50)
-------- -------- -------- -------- -------- --------
Total From Investment Operations 0.63 0.33 (0.47) 0.63 0.34 (0.47)
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From Net Investment
Income (0.04) (0.13) (0.05) (0.04) (0.13) (0.05)
Distributions From Net Realized
Capital Gains (0.06) (0.17) (0.00)(g) (0.06) (0.17) (0.00)(g)
-------- -------- -------- -------- -------- --------
Total Distributions (0.10) (0.30) (0.05) (0.10) (0.30) (0.05)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 17.59 $ 17.62 $ 17.10 $ 17.59 $ 17.63 $ 17.11
======== ======== ======== ======== ======== ========
TOTAL RETURN (%)(d) 3.7 2.0 (2.7) 3.7 2.0 (2.7)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets (%)(e) 2.25(f) 2.25 2.25 2.25(f) 2.25 2.25
Ratio of Net Investment Income to
Average Net Assets (%) 1.01(f) 0.73 0.19 1.01(f) 0.73 0.19
Portfolio Turnover Rate (%) 33 61 93 33 61 93
Net Assets, End of Period (000) $ 9,375 $ 16,623 $ 9,643 $ 1,596 $ 2,101 $ 1,336
(a) Commencement of Operations.
(b) Per share net investment income has been calculated using the average shares outstanding during the year.
(c) The amount shown for a share outstanding does not correspond with the aggregate net gain/loss on investments for the period
ended December 31, 1998, due to the timing of purchases and redemptions of Fund shares in relation to fluctuating market
values of the investments of the Fund.
(d) A sales charge for Class A shares or a CDSC for Class B and C shares is not reflected in total return calculations. Periods of
less than one year are not annualized.
(e) The ratio of operating expenses to average net assets without giving effect to the expense limitation in effect would have
been (%):
3.85(f) 2.67 2.87 3.85(f) 2.67 2.87
(f) Computed on an annualized basis.
(g) Amount is to less than $0.01.
</TABLE>
<PAGE>
<TABLE>
[graphic omitted] Fund Performance
----------------
NVEST INTERNATIONAL EQUITY FUND
<CAPTION>
CLASS A CLASS B
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Year $ 15.50 $ 16.13 $ 16.31 $ 14.06 $ 14.26 $ 15.35 $ 15.93 $ 16.00 $ 13.71 $ 13.98
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment Income
(Loss) 0.27 0.02(c) 0.09(c) 0.15(c) (0.03)(c) 0.19 (0.10)(c) (0.03)(c) 0.04(c) (0.15)(c)
Net Realized and
Unrealized Gain
(Loss) on
Investments 0.63 0.51 (1.25) 0.77 12.31 0.58 0.50 (1.17) 0.75 12.01
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations 0.90 0.53 (1.16) 0.92 12.28 0.77 0.40 (1.20) 0.79 11.86
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From
Net Investment
Income (0.27) (0.02) 0.00 (0.23) (0.02) (0.19) 0.00 0.00 (0.12) 0.00
Distributions in
Excess of Net
Investment Income 0.00 0.00 0.00 (0.21) 0.00 0.00 0.00 0.00 (0.12) 0.00
Distributions From
Net Realized
Capital Gains 0.00 (0.33) (1.05) (0.19) (1.13) 0.00 (0.33) (1.05) (0.19) (1.13)
Distributions in
Excess of Net
Realized Gains 0.00 0.00 (0.04) (0.09) 0.00 0.00 0.00 (0.04) (0.09) 0.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions (0.27) (0.35) (1.09) (0.72) (1.15) (0.19) (0.33) (1.09) (0.52) (1.13)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End
of the Year $ 16.13 $ 16.31 $ 14.06 $ 14.26 $ 25.39 $ 15.93 $ 16.00 $ 13.71 $ 13.98 $ 24.71
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN (%)(a) 5.8 3.3 (7.6) 6.7 87.6 5.0 2.5 (8.0) 5.8 86.3
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to Average
Net Assets (%)(b) 1.75 1.75 1.75 1.91 2.00 2.50 2.50 2.50 2.66 2.75
Ratio of Net
Investment Income
(Loss) to Average
Net Assets (%) 1.24 0.14 0.62 1.04 (0.15) 0.49 (0.61) (0.13) 0.29 (0.90)
Portfolio Turnover
Rate (%) 119 59 154 105 229 119 59 154 105 229
Net Assets, End of
the Year (000) $136,848 $109,773 $ 57,845 $ 47,444 $ 67,197 $ 52,895 $ 45,974 $ 25,216 $ 19,797 $ 29,045
(a) A sales charge for Class A shares or a CDSC for Class B and C shares are not reflected in total return calculations.
(b) The ratio of operating expenses to average net assets without giving effect to expense limitations would have been (%):
CLASS A CLASS B
------------------------------------------------ ------------------------------------------------
1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
1.83 1.79 2.14 2.25 2.26 2.58 2.54 2.89 3.00 3.01
(c) Per share net investment income (loss) has been calculated using the average shares outstanding during the year.
The Fund's current subadviser assumed that function on February 14, 1997. The highlights prior to this date reflect results
achieved by the previous subadviser under different investment policies.
<CAPTION>
CLASS C
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $ 15.35 $ 15.96 $ 16.03 $ 13.74 $ 14.02
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.19 (0.10)(c) (0.03)(c) 0.05(c) (0.15)(c)
Net Realized and Unrealized Gain (Loss) on Investments 0.61 0.50 (1.17) 0.75 12.04
-------- -------- -------- -------- --------
Total From Investment Operations 0.80 0.40 (1.20) 0.80 11.89
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.19) 0.00 0.00 (0.12) 0.00
Distributions in Excess of Net Investment Income 0.00 0.00 0.00 (0.12) 0.00
Distributions From Net Realized Capital Gains 0.00 (0.33) (1.05) (0.19) (1.13)
Distributions in Excess of Net Realized Gains 0.00 0.00 (0.04) (0.09) 0.00
-------- -------- -------- -------- --------
Total Distributions (0.19) (0.33) (1.09) (0.52) (1.13)
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 15.96 $ 16.03 $ 13.74 $ 14.02 $ 24.78
======== ======== ======== ======== ========
TOTAL RETURN (%)(a) 5.2 2.5 (8.0) 5.9 86.2
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net
Assets (%)(b) 2.50 2.50 2.50 2.66 2.75
Ratio of Net Investment Income (Loss) to Average
Net Assets (%) 0.49 (0.61) (0.13) 0.29 (0.90)
Portfolio Turnover Rate (%) 119 59 154 105 229
Net Assets, End of the Year (000) $ 1,066 $ 850 $ 843 $ 860 $ 1,267
(a) A sales charge for Class A shares or a CDSC for Class B and C shares are not reflected in total return calculations.
(b) The ratio of operating expenses to average net assets without giving effect to expense limitations would have been (%):
CLASS C
------------------------------------------------
1995 1996 1997 1998 1999
2.58 2.54 2.89 3.00 3.01
(c) Per share net investment income (loss) has been calculated using the average shares outstanding during the year.
The Fund's current subadviser assumed that function on February 14, 1997. The highlights prior to this date reflect results
achieved by the previous subadviser under different investment policies.
</TABLE>
<PAGE>
GLOSSARY OF TERMS
BID PRICE -- The price a prospective buyer is ready to pay. This term is used by
traders who maintain firm bid and offer prices in a given security by standing
ready to buy or sell security units at publicly quoted prices.
BOTTOM-UP ANALYSIS -- The search for outstanding performance of individual
stocks before considering the impact of economic trends. Such companies may be
identified from research reports, stock screens or personal knowledge of the
products and services.
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
S&P, Moody's or Fitch Investor Services, Inc. ("Fitch"). Bonds with a credit
rating of BBB or higher by S&P, Baa or higher by Moody's or BBB by Fitch are
generally considered investment grade.
DERIVATIVE -- A financial instrument whose value and performance are based on
the value and performance of another security or financial instrument.
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 companies or
industries to reduce the risk if an individual company or one sector of the
market suffers losses.
DIVIDEND YIELD -- The current or estimated annual dividend divided by the market
price per share of a security.
DURATION -- A measure of how much a bond's price fluctuates with changes in
comparable interest rates.
EARNINGS GROWTH -- A pattern of increasing rate of growth in earnings per share
from one period to another, which usually causes a stock's price to rise.
FUNDAMENTAL ANALYSIS -- An analysis of the balance sheet and income statements
of a company in order to forecast its future stock price movements. Fundamental
analysis considers past records of assets, earnings, sales, products, management
and markets in predicting future trends in these indicators of a company's
success or failure. By appraising a company's prospects, analysts using such an
approach assess whether a particular stock or group of stocks is undervalued or
overvalued at its current market price.
GROWTH INVESTING -- An investment style that emphasizes companies with strong
earnings growth. Growth investing is generally considered more aggressive than
"value" investing.
INCOME DISTRIBUTIONS -- Payments to 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.
MARKET CAPITALIZATION -- Market price multiplied by number of shares
outstanding. Large capitalization companies generally have over $5 billion in
market capitalization; medium cap companies between $1.5 billion and $5 billion;
and small cap companies less than $1.5 billion. These capitalization figures may
vary depending upon the index being used and/or the guidelines used by the
portfolio manager.
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.
PRICE-TO-BOOK VALUE RATIO -- Current market price of a stock divided by its book
value, or net asset value.
PRICE-TO-EARNINGS RATIO -- Current market price of a stock divided by its
earnings per share. Also known as the "multiple," the price-to-earnings ratio
gives investors an idea of how much they are paying for a company's earning
power and is a useful tool for evaluating the costs of different securities.
Some firms use the inverse ratio for this calculation(i.e. earnings-to-price
ratio).
QUALITATIVE ANALYSIS -- An analysis of the qualities possessed by a company,
including its management, products and competitive positions, to help determine
if the company can execute its strategy.
RETURN ON EQUITY -- The amount, expressed as a percentage, earned on a company's
common stock investment for a given period. It is calculated by dividing common
stock equity (net worth) at the beginning of the accounting period into net
income for the period after preferred stock dividends but before common stock
dividends by the common stock equity (net worth) average for the accounting
period. This tells common shareholders how effectively their money is being
employed.
RULE 144A SECURITIES -- Rule 144A securities are privately offered securities
that can be resold only to certain qualified institutional buyers. Rule 144A
securities are treated as illiquid, unless a manager has determined, under
guidelines established by a Fund's trustees, that a particular issue of Rule
144A securities is liquid.
TARGET PRICE -- Price that an investor is hoping a stock he or she has just
bought will rise to within a specified period of time. An investor may buy XYZ
at $20, with a target price of $40 in one year's time, for instance.
TECHNICAL ANALYSIS -- The research into the demand and supply for securities,
options, mutual funds and commodities based on trading volume and price studies.
Technical analysis uses charts or computer programs to identify and project
price trends in a market, security, mutual fund or futures contract.
TOP-DOWN APPROACH -- The method in which an investor first looks at trends in
the general economy, and next selects attractive industries and then companies
that should benefit from those trends.
TOTAL RETURN -- The change in value of an investment in a Fund over a specific
time period expressed as a percentage. Total returns assume all earnings are
reinvested in additional shares of a Fund.
VALUE INVESTING -- A relatively conservative investment approach that focuses on
companies that may be temporarily out of favor or whose earnings or assets are
not fully reflected in their stock prices. Value stocks will tend to have a
lower price-to-earnings ratio than growth stocks.
VOLATILITY -- The general variability of a portfolio's value resulting from
price fluctuations of its investments. In most cases, the more diversified a
portfolio is, the less volatile it will be.
YIELD -- The rate at which a fund earns income, expressed as a percentage.
Mutual fund yield calculations are standardized, based upon a formula developed
by the SEC.
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.
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
IF YOU WOULD LIKE MORE INFORMATION ABOUT THE
FUNDS, THE FOLLOWING DOCUMENTS ARE AVAILABLE FREE
UPON REQUEST:
ANNUAL AND SEMIANNUAL REPORTS -- Provide
additional information about each Fund's
investments. Each report includes a discussion of
the market conditions and investment strategies
that significantly affected the Fund's performance
during its last fiscal year. 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 (SAI) --
Provides more detailed information about the
Funds, has been filed with the Securities and
Exchange Commission and is incorporated into this
Prospectus by reference.
TO ORDER A FREE COPY OF A FUND'S ANNUAL OR
SEMIANNUAL REPORT OR ITS SAI, CONTACT YOUR
FINANCIAL REPRESENTATIVE, OR THE FUNDS AT:
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 Funds' reports and SAIs at the
Public Reference Room of the Securities and
Exchange Commission 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.
NVEST FUNDS
STOCK FUNDS
Nvest Capital Growth Fund
Nvest Growth Fund
Nvest Growth and Income Fund
Nvest Balanced Fund
Nvest Equity Income Fund
Nvest International Equity Fund
(Investment Company Act File No. 811-4323)
(Investment Company Act File No. 811-242)
(Investment Company Act File No. 811-7345)
XS51-0500
<PAGE>
NVESTFUNDS(SM)
Where The Best Minds Meet (R)
- --------------------------------------------------------------------------------
Nvest
STOCK FUNDS -- CLASS Y SHARES
[graphic omitted]
- --------------------------------------------------------------------------------
LARGE-CAP EQUITY
Nvest Capital Growth Fund
Westpeak Investment Advisors, L.P.
Nvest Growth Fund
Capital Growth Management Limited Partnership
Nvest Growth and Income Fund
Westpeak Investment Advisors, L.P.
Nvest Balanced Fund
Loomis, Sayles & Company, L.P.
INTERNATIONAL EQUITY
Nvest International Equity Fund
Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved any Fund's shares or
determined whether this Prospectus is accurate or complete. Anyone who tells you
otherwise is committing a crime.
For general information on the Funds or any of their services and for assistance
in opening an account, contact your financial representative or call Nvest
Funds.
PROSPECTUS
May 1, 2000
WHAT'S INSIDE
Goals, Strategies & Risks
[graphic omitted] Page 1
- --------------------------------------------------------------------------------
Fund Fees & Expenses
[graphic omitted] Page 11
- --------------------------------------------------------------------------------
Management Team
[graphic omitted] Page 14
- --------------------------------------------------------------------------------
Fund Services
[graphic omitted] Page 18
- --------------------------------------------------------------------------------
Fund Performance
[graphic omitted] Page 26
- --------------------------------------------------------------------------------
Nvest Funds
399 Boylston Street, Boston, Massachusetts 02116
800-225-5478
www.nvestfunds.com
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GOALS, STRATEGIES & RISKS
- --------------------------------------------------------------------------------
Nvest Capital Growth Fund ................................................ 1
Nvest Growth Fund ........................................................ 3
Nvest Growth and Income Fund ............................................. 5
Nvest Balanced Fund ...................................................... 7
Nvest International Equity Fund .......................................... 9
- --------------------------------------------------------------------------------
FUND FEES & EXPENSES
- --------------------------------------------------------------------------------
Fund Fees & Expenses ..................................................... 11
- --------------------------------------------------------------------------------
MORE ABOUT RISK
- --------------------------------------------------------------------------------
More About Risk .......................................................... 13
- --------------------------------------------------------------------------------
MANAGEMENT TEAM
- --------------------------------------------------------------------------------
Meet the Funds' Investment Advisers and Subadvisers ...................... 14
Meet the Funds' Portfolio Managers ....................................... 16
- --------------------------------------------------------------------------------
FUND SERVICES
- --------------------------------------------------------------------------------
It's Easy to Open an Account ............................................. 18
Buying Shares ............................................................ 19
Selling Shares ........................................................... 20
Selling Shares in Writing ................................................ 21
Exchanging Shares ........................................................ 22
Restrictions on Buying, Selling and Exchanging Shares .................... 22
How Fund Shares Are Priced ............................................... 23
Dividends and Distributions .............................................. 24
Tax Consequences ......................................................... 24
Compensation to Securities Dealers ....................................... 25
- --------------------------------------------------------------------------------
FUND PERFORMANCE
- --------------------------------------------------------------------------------
Nvest Capital Growth Fund ................................................ 26
Nvest Growth Fund ........................................................ 27
Nvest Growth and Income Fund ............................................. 28
Nvest Balanced Fund ...................................................... 29
Nvest International Equity Fund .......................................... 30
Glossary of Terms ........................................................ 31
If you have any questions about any of the terms used in this Prospectus, please
refer to the "Glossary of Terms."
To learn more about the possible risks of investing in a Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Funds may engage. Please read this section carefully
before you invest.
Fund shares are not bank deposits and are not guaranteed, endorsed or insured by
the Federal Deposit Insurance Corporation or any other government agency, and
are subject to investment risks, including possible loss of the principal
invested.
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- ----------------------------
NVEST CAPITAL GROWTH FUND Stability Income Growth
High X
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Management") Mod. X
SUBADVISER: Westpeak Investment --------- ------ ------
Advisors, L.P. ("Westpeak") Low X
MANAGER: Gerald H. Scriver
CATEGORY: Large-Cap Equity TICKER SYMBOL: CLASS Y
-------
NYCGX
INVESTMENT GOAL
The Fund seeks long-term capital growth.
The Fund's investment goal may be changed without
shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all of its
assets in common stock of U.S. large and mid-capitalization companies in any
industry.
Westpeak constructs a portfolio of large and mid capitalization stocks that
exhibit reasonable growth potential. Westpeak believes risk and return can be
accurately measured and controlled through thoughtful portfolio construction.
Therefore its focus will be on the aggregate characteristics of the portfolio
and not just individual stocks. The portfolio emphasizes the characteristics
that Westpeak believes are most likely to be rewarded by the market in the
period ahead based upon current and historical probabilities. Westpeak will seek
to construct a portfolio of growth stocks with reasonable relative valuation.
The Fund's industry weightings will not vary significantly from the Russell 1000
Growth Index.
Using proprietary quantitative research based on macroeconomic, market and
company-specific information, Westpeak analyzes each stock and ranks it based on
characteristics such as:
o earnings growth
o potential earnings surprises
o earnings-to-price
o earnings momentum
In selecting investments for the Fund's portfolio, Westpeak employs the
following process:
o It starts with the Russell 3000 Growth Index of about 1,800 stocks and
generally eliminates stocks of companies below a $600 million market
capitalization threshold. This creates an overall universe of about 1,200
stocks, with approximately 90% of its capitalization from the Russell 1000
Growth Index (comprised of large and medium capitalization companies) and
10% from the Russell 2000 Growth Index (comprised of small capitalization
companies).
o Next, it screens these stocks using fundamental growth and value criteria
and calculates a "fundamental rank" for each stock. This rank reflects a
historical analysis of the company using approximately 70 growth, value and
industry characteristics.
o All of the stocks are then screened using various Wall Street analysts'
historical and projected earnings estimates for the company and each is
assigned an "expectations rank." This rank accounts for the company's recent
and historical earnings revisions and the potential for "positive earnings
surprises" (whether its business has the potential to improve in the near
future).
o The fundamental and expectations rank for each stock are placed in a
valuation matrix to evaluate whether to buy, sell or hold a stock.
o The final step is the use of proprietary methodology to arrange the selected
stocks into an optimal portfolio using their respective fundamental and
expectation ranks and risk characteristics.
The desired result is a diversified portfolio of 75 to 125 stocks that Westpeak
believes will produce the highest long-term returns and characteristics similar
to that of the Fund's benchmark, the Russell 1000 Growth Index.
The Fund may:
o Hold up to 10% of its assets in smaller capitalization companies.
o Engage in active and frequent trading of securities. Frequent trading may
produce higher transaction costs and a higher level of capital gains, which
may lower your return.
o Purchase money market or high quality debt securities for temporary
defensive purposes in response to adverse market, economic or political
conditions. These investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in a stock's value or periods
of below-average performance in a given stock or in the stock market as a
whole. Growth stocks are generally more sensitive to market movements than
other types of stocks, primarily because their stock prices are based
heavily on future expectations. Small capitalization companies may be
subject to more abrupt price movements, limited markets and less liquidity
than larger, more established companies, which could adversely affect the
value of the portfolio.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Capital Growth Fund by showing changes in the Fund's performance from
year to year and showing how the Fund's average annual returns for one-year,
five-year and since-inception periods compare with those of a broad measure of
market performance and those of indices of funds with similar objectives. The
returns shown are those of the Fund's Class A, B and C shares which are not
offered in this Prospectus. Class Y shares would have substantially similar
annual returns because they would be invested in the same portfolio of
securities as the Class A, B and C shares and would only differ to the extent
that the classes do not have the same expenses. The Fund's past performance does
not necessarily indicate how it will perform in the future. The Fund's current
subadviser assumed that function on February 16, 1998. This chart and table
reflect results achieved by the previous subadviser using different investment
principles for periods prior to February 16, 1998.
The bar chart shows the Fund's total returns for Class A shares for each
calendar year since its first full year of operations. The returns for the Class
B and C shares differ from the Class A returns shown in the bar chart, depending
upon the respective expenses of each class. The chart does not reflect any sales
charge that you may be required to pay when you buy or redeem the Fund's shares.
A sales charge will reduce your return.
(total return)
1993 7.89%
1994 -1.64%
1995 30.76%
1996 17.05%
1997 17.23%
1998 29.08%
1999 24.74%
/\ Highest Quarterly Return: Fourth Quarter 1998, up 24.26%
\/ Lowest Quarterly Return: Third Quarter 1998, down 11.67%
The table below shows the Fund's average annual total returns for the one-year,
five-year and since-inception periods compared to those of the Russell 1000
Growth Index, an unmanaged subset of stocks from the larger Russell 1000 Index,
selected for their greater growth orientation. They are also compared to the
Morningstar Large Growth and Lipper Multi-Cap Growth Averages, each an average
of the total returns of all mutual funds with an investment style similar to
that of the Fund as calculated by Morningstar, Inc. and Lipper, Inc. The Fund
previously compared its returns to the broad Lipper category in which the Fund
was categorized. In 1999, Lipper Inc. narrowed their existing categories and
created additional categories and the Fund falls within Lipper Multi-Cap Growth
Average, one of the newly created categories. You may not invest directly in an
index. The Fund's total returns reflect its expenses and the maximum sales
charge that you may pay when you buy or redeem the Fund's shares. The Russell
1000 Growth Index returns have not been adjusted for ongoing management,
distribution and operating expenses and sales charges applicable to mutual fund
investments. The Morningstar Large Growth Average and Lipper Multi-Cap Growth
Average returns have been adjusted for these expenses but do not reflect any
sales charges.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1999) PAST 1 YEAR PAST 5 YEARS SINCE CLASS INCEPTION
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nvest Capital Growth Fund: Class A (inception 8/3/92) 17.57% 22.17% 17.58%
Russell 1000 Growth Index 33.16% 32.41% 22.82%
Morningstar Large Growth Average (calculated from 7/31/92) 38.63% 28.74% 21.78%
Lipper Multi-Cap Growth Average (calculated from 7/31/92) 52.30% 28.55% 21.67%
Nvest Capital Growth Fund: Class B (inception 9/13/93) 18.81% 22.41% 17.77%
Russell 1000 Growth Index 33.16% 32.41% 26.48%
Morningstar Large Growth Average (calculated from 9/30/93) 38.63% 28.74% 23.07%
Lipper Multi-Cap Growth Average (calculated from 9/30/93) 52.30% 28.55% 21.73%
Nvest Capital Growth Fund: Class C (inception 12/30/94) 22.81% 22.59% 22.58%
Russell 1000 Growth Index 33.16% 32.41% 32.41%
Morningstar Large Growth Average 38.63% 28.74% 29.66%
Lipper Multi-Cap Growth Average 52.30% 28.55% 28.55%
- -------------------------------------------------------------------------------------------------------------------------
For the expenses of Class Y shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- ----------------------------
NVEST GROWTH FUND Stability Income Growth
High X
ADVISER: Capital Growth Management Limited --------- ------ ------
Partnership ("CGM") Mod.
MANAGER: G. Kenneth Heebner --------- ------ ------
Low X X
CATEGORY: Large-Cap Equity TICKER SYMBOL: CLASS Y
-------
NEGYX
INVESTMENT GOAL
The Fund seeks long-term growth of capital through investment in equity
securities of companies whose earnings are expected to grow at a faster rate
than the United States economy.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all of its
assets in a focused portfolio of equity securities. The Fund will generally
invest in common stock of large capitalization companies that CGM expects will
grow at a faster rate than the United States economy. When CGM believes that
market conditions warrant, however, CGM may select stocks based upon overall
economic factors such as the general economic outlook, the level and direction
of interest rates and potential impact of inflation. The Fund will not invest in
small capitalization companies.
In general, CGM seeks companies with the following characteristics, although not
all of the companies selected will have these attributes:
x well-established with records of above-average growth
x promise of maintaining their leadership positions in their industries
x likely to benefit from internal revitalization or innovations, changes in
consumer demand, or basic economic forces
Rather than following a particular style, CGM employs a flexible approach and
seeks to take advantage of opportunities as they arise. In making an investment
decision, CGM generally employs the following methods:
o It uses a top-down approach, meaning that it analyzes the overall economic
factors that may affect a potential investment.
o CGM then conducts a thorough analysis of certain industries and companies,
evaluating the fundamentals of each on a case-by-case basis and focusing on
companies that it determines are attractively valued.
o CGM's ultimate decision to purchase a security results from a thorough
assessment of all of the information that CGM deems to be relevant at the
time of investment.
o CGM will sell a stock if it determines that its investment expectations are
not being met, if better opportunities are identified or if its price
objective has been attained.
The Fund may:
o Invest in foreign securities.
o Invest in other investment companies.
o Engage in active and frequent trading of securities. Frequent trading may
produce higher transaction costs and a higher level of taxable capital gains,
which may lower your return.
o Purchase money market or high quality debt securities for temporary defensive
purposes in response to adverse market, economic or political conditions.
These investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in value or periods of
below-average performance in a given stock or in the stock market as a whole.
Although the Fund is diversified, its focused approach means that its
relatively small number of holdings may result in greater share price
fluctuations than a more diversified mutual fund. Growth stocks are generally
more sensitive to market movements than other types of stocks, primarily
because their stock prices are based heavily on future expectations.
INVESTMENTS IN OTHER INVESTMENT COMPANIES: May incur extra costs in addition to
its own expenses.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic
and information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Growth Fund by showing changes in the Fund's performance from year to
year and by showing how the Fund's average annual returns for one-, five- and
ten-year (since inception if shorter) periods compare with those of a broad
measure of market performance and those of indices of funds with similar
objectives. The returns shown are those of the Fund's Class A, B and C shares
which are not offered in this Prospectus. Class Y shares would have
substantially similar annual returns because they would be invested in the same
portfolio of securities as the Class A, B and C shares and would only differ to
the extent that the classes do not have the same expenses. The Fund's past
performance does not necessarily indicate how it 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. The returns for Class B and C shares differ from the
Class A returns shown in the bar chart, depending upon the respective expenses
of each class. The chart does not reflect any sales charge that you may be
required to pay when you buy or redeem the Fund's shares. A sales charge will
reduce your return.
(total return)
1990 5.26%
1991 56.72%
1992 -6.63%
1993 11.29%
1994 -7.05%
1995 38.06%
1996 20.88%
1997 23.54%
1998 33.40%
1999 15.18%
/\ Highest Quarterly Return: Fourth Quarter 1998, 28.51
\/ Lowest Quarterly Return: Third Quarter 1998, down 18.07%
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' inception if shorter)
compared to those of the Standard & Poor's Composite Index of 500 Stocks ("S&P
500"), a market value-weighted, unmanaged index of common stock prices for 500
selected stocks. They are also compared to the Morningstar Large Blend and
Lipper Large-Cap Core Averages, each an average of the total returns of all
mutual funds with an investment style similar to that of the Fund as calculated
by Morningstar, Inc. and Lipper, Inc. The Fund previously compared its returns
to the broad Lipper category in which the Fund was categorized. In 1999, Lipper
Inc. narrowed their existing categories and created additional categories and
the Fund falls within Lipper Large-Cap Core Average, one of the newly created
categories. You may not invest directly in an index. The Fund's total returns
reflect its expenses and the maximum sales charges that you may pay when you buy
or redeem the Fund's shares. The S&P 500 returns have not been adjusted for
ongoing management, distribution and operating expenses and sales charges
applicable to mutual fund investments. The Morningstar Large Blend Average and
Lipper Large-Cap Core Average returns have been adjusted for these expenses but
do not reflect any sales charges.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------- * Since
AVERAGE ANNUAL TOTAL RETURNS class
(for the periods ended December 31, 1999) inception
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
<S> <C> <C> <C>
Nvest Growth Fund: Class A (inception 11/27/68) 8.59% 24.46% 16.88%
S&P 500 21.04% 28.56% 18.21%
Morningstar Large Blend Average 19.47% 23.89% 15.71%
Lipper Large-Cap Core Average 22.29% 25.53% 16.66%
Nvest Growth Fund: Class B (inception 2/28/97) 9.59% 20.72%*
S&P 500 21.04% 26.24%*
Morningstar Large Blend Average 19.47% 21.92%*
Lipper Large-Cap Core Average 22.29% 24.19%*
Nvest Growth Fund: Class C (inception 9/1/98) 13.42% 28.59%*
S&P 500 21.04% 39.83%*
Morningstar Large Blend Average (calculated from 8/31/98) 19.47% 35.62%*
Lipper Large-Cap Core Average (calculated from 8/31/98) 22.29% 40.97%*
- --------------------------------------------------------------------------------------------------------------------
For the expenses of Class Y shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- ----------------------------
NVEST GROWTH Stability Income Growth
AND INCOME FUND
High X
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Management") Mod. X
SUBADVISER: Westpeak Investment --------- ------ ------
Advisors, L.P. ("Westpeak") Low X
MANAGERS: Gerald H. Scriver
CATEGORY: Large-Cap Equity TICKER SYMBOL: CLASS Y
-------
NEOYX
INVESTMENT GOAL
The Fund seeks opportunities for long-term capital growth and income.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all its
assets in common stock of large and mid-capitalization companies in any
industry.
Westpeak constructs a portfolio of recognizable, large and mid-capitalization
stocks that exhibit good relative value and reasonable growth potential.
Westpeak believes risk and return can be accurately measured and controlled
through thoughtful portfolio construction. Therefore its focus will be on the
aggregate characteristics of the portfolio and not just individual stocks. The
portfolio emphasizes the characteristics that Westpeak believes are most likely
to be rewarded by the market in the period ahead based upon current and
historical probabilities. At times the portfolio may be biased toward value; at
other times toward growth as determined by the characteristics Westpeak favors.
The Fund's industry weightings will not vary significantly from the S&P 500.
Using proprietary quantitative research based on macroeconomic, market and
company-specific information, Westpeak analyzes each stock and ranks it based on
characteristics such as:
x earnings-to-price
x earnings growth
x potential earnings surprises
x book-to-price
In selecting investments for the Fund, Westpeak employs the following process:
o It starts with an initial universe of approximately 2,100 stocks of mainly
large capitalization companies and eliminates stocks of companies below a
$1.6 billion market capitalization threshold. This creates an overall
universe of about 1,000 stocks.
o Next, it screens these stocks using fundamental growth and value criteria and
calculates a "fundamental rank" for each stock. This rank reflects a
historical analysis of the company using approximately 70 growth, value and
industry-specific characteristics.
o All of the stocks are then screened using various Wall Street analysts'
historical and projected earnings estimates for the company and each is
assigned an "expectations rank." This rank accounts for the company's recent
and historical earnings revisions and the potential for "positive earnings
surprises" (whether its business has the potential to improve in the near
future).
o The fundamental and expectations ranks for each stock are placed in a
valuation matrix to evaluate whether to buy, sell or hold a stock.
o The final step is the use of proprietary methodology to arrange the selected
stocks into an optimal portfolio using their respective fundamental and
expectation ranks and risk characteristics.
The desired result is a diversified portfolio of 75 to 150 stocks, with risk
characteristics that approximate that of the benchmark, the S&P 500 Index, which
Westpeak believes will produce the highest long-term returns consistent with the
portfolio's risk parameters.
The Fund may:
o Invest in foreign securities traded in U.S. markets (through American
Depositary Receipts ("ADRs") or stocks sold in U.S. dollars).
o Engage in active and frequent trading of securities. Frequent trading may
produce higher transaction costs and a higher level of taxable capital gains,
which may lower your return.
o Purchase money market or high quality debt securities for temporary defensive
purposes in response to adverse market, economic or political conditions.
These investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in value or periods of
below-average performance in a given stock or in the stock market as a whole.
Growth stocks are generally more sensitive to market movements than other
types of stocks, primarily because their stock prices are based heavily on
future expectations. Value stocks present the risk that they may fall out of
favor with investors and underperform growth stock during given periods.
FOREIGN SECURITIES: ADRs may be more volatile than U.S. securities and carry
political, economic and information risks that are associated with foreign
securities.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Growth and Income Fund by showing changes in the Fund's performance
from year to year and by showing how the Fund's average annual returns for
one-year and since inception periods compare with those of a broad measure of
market performance and those of indices of funds with similar objectives. The
Fund's past performance does not necessarily indicate how it will perform in the
future.
The bar chart shows the Fund's total returns for Class Y shares for each
calendar year since it first offered Class Y shares. The returns for the Class
A, B and C shares are generally lower than the Class Y returns shown in the bar
chart because of the sales charges and higher expenses of those classes.
(total return)
1999 9.77%
/\ Highest Quarterly Return: Second Quarter 1999, up 8.75%
\/ Lowest Quarterly Return: Third Quarter 1999, down 8.04%
The table below shows the Fund's average annual total returns for the one-year
and since-inception periods compared to those of the S&P 500, a market
value-weighted, unmanaged index of common stock prices of 500 selected stocks.
They are also compared to the Morningstar Large-Cap Value and Lipper Multi-Cap
Core Averages, each an average of the total returns of all mutual funds with an
investment style similar to that of the Fund as calculated by Morningstar, Inc.
and Lipper, Inc. The Fund previously compared its returns to the broad Lipper
category in which the Fund was categorized. In 1999, Lipper Inc. narrowed their
existing categories and created additional categories and the Fund falls within
Lipper Multi-Cap Core Average, one of the newly created categories. You may not
invest directly in an index. The Fund's total returns reflect its expenses and
the maximum sales charge that you may pay when you buy or redeem the Fund's
shares. The S&P 500 returns have not been adjusted for ongoing management,
distribution and operating expenses and sales charges applicable to mutual fund
investments. The Morningstar Large-Cap Value Average and Lipper Multi-Cap Core
Average returns have been adjusted for these expenses but do not reflect any
sales charges.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
PAST 1 YEAR SINCE CLASS INCEPTION
<S> <C> <C>
Nvest Growth and Income Fund: Class Y (inception 11/18/98) 9.77% 16.51%
S&P 500 21.04% 25.69%
Morningstar Large-Cap Value Average (calculated from 11/30/98) 6.59% 9.05%
Lipper Multi-Cap Core Average (calculated from 11/30/98) 22.50% 27.71%
- ----------------------------------------------------------------------------------------------------------
For the expenses of Class Y shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- ----------------------------
NVEST BALANCED FUND Stability Income Growth
High
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Management") Mod. X X X
SUBADVISER: Loomis, Sayles & Company, L.P. --------- ------ ------
("Loomis Sayles") Low
MANAGERS: Equity (Value Component):
Jeff Wardlow and Gregg Watkins
Equity (Growth Component):
Mark Baribeau, Pamela Czekanski,
Richard Skaggs
Fixed Income: John Hyll
TICKER SYMBOL: CLASS Y
CATEGORY: Large-Cap Equity -------
NEBYX
INVESTMENT GOAL
The Fund seeks a reasonable long-term investment return from a combination of
long-term capital appreciation and moderate current income.
PRINCIPAL INVESTMENT STRATEGIES
The Fund principally invests in common stocks of quality, large to mid-market
capitalization companies of any industry and investment grade bonds. Generally,
the Fund will invest approximately 65% of its assets in equity securities and
approximately 35% of its assets in fixed-income securities. Nvest Management
allocates capital invested in the Fund's equity securities equally between a
growth and a value component. Loomis Sayles uses a flexible approach to seek
investments with some of the following characteristics, although not all of the
companies selected will have all of these attributes:
EQUITY SECURITIES (growth or value component):
x discounted price compared to its current value or future growth prospects
(growth/value)
x leading position within industry (growth)
x superior earnings growth potential (growth)
x below-average price-to-earnings ratios (value)
x competitive current and estimated dividend yield (value)
FIXED-INCOME SECURITIES:
x greater yield-to-maturity than appropriate benchmarks
x maturities typically between 1 and 30 years
x controlled duration variance compared to index
In order to maintain a balanced, flexible portfolio of investments, Loomis
Sayles employs the following strategy:
o Depending on Loomis Sayles' view of the economic outlook, the Fund may invest
more heavily in either equity or fixed-income securities. However, the Fund
will always invest a minimum of 50% of its assets in equity securities and a
minimum of 25% of its assets in fixed-income securities.
o For the value component, it selects stocks from a universe of approximately
1,400 companies. It then uses a proprietary valuation model to rank stocks
based on valuation, earnings estimate revisions and quality. Fundamental
research is then used to identify what Loomis Sayles believes are the most
attractive 60 to 75 stocks for purchase by the Fund.
o For the growth component, Loomis Sayles selects stocks from a universe of
approximately 500 companies. It then uses fundamental analysis to identify
companies with leading market positions. Valuation analysis follows to find
undervalued companies with positive growth catalysts. Portfolio construction
then balances opportunities with risks to produce a portfolio of about 50
stocks.
o It selects bonds by placing a greater emphasis on security and sector
selection than interest rate anticipation. It conducts extensive research and
credit analysis of over 600 corporate issuers and assigns each a proprietary
rating. It combines these ratings with internal policy limitations to select
bonds for the Fund.
o Loomis Sayles will sell a stock when its price objective has been attained,
its fundamentals deteriorate or when more attractive opportunities are
identified. It sells bonds depending on expected credit deterioration or when
it identifies other securities with better total returns going forward.
The Fund may also invest in:
o Foreign securities and related currency hedging transactions; Rule 144A
securities; mortgage- and asset-backed securities; zero-coupon bonds and
when-issued securities.
o Money market or high quality debt securities for temporary defensive purposes
in response to adverse market, economic or political conditions. These
investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in value or periods of
below-average performance in a given stock or in the stock market as a whole.
Growth stocks are generally more sensitive to market movements than other
types of stocks, primarily because their stock prices are based heavily on
future expectations. Value stocks present the risk that they may fall out of
favor with investors and underperform growth stocks during given periods.
Rule 144A securities may be more illiquid than other equity securities.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic
and information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency.
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise.
Zero-coupon bonds may be subject to these risks to a greater extent than
other fixed-income securities.
MORTGAGE- AND ASSET-BACKED SECURITIES: Subject to prepayment risk. With
prepayment, the Fund may reinvest the prepaid amounts in securities with
lower yields than the prepaid obligations. The Fund may also incur a realized
loss when there is a prepayment of securities that were purchased at a
premium.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Balanced Fund by showing changes in the Fund's performance from year to
year and by showing how the Fund's average annual returns for one-year,
five-year and since-inception periods compare with those of a broad measure of
market performance and those of indices of funds with similar objectives. The
Fund's past performance does not necessarily indicate how it will perform in the
future.
The bar chart shows the Fund's total returns for Class Y shares for each
calendar year since it first offered Class Y shares. The returns for the Class
A, B and C shares are generally lower than the Class Y returns shown in the bar
chart because of the sales charges and higher expenses of those classes.
(total return)
1995 26.84%
1996 17.63%
1997 18.12%
1998 8.59%
1999 -3.32%
/\ Highest Quarterly Return: Second Quarter 1997, up 10.33%
\/ Lowest Quarterly Return: Third Quarter 1999, down 8.48%
The table below shows the Fund's average annual total returns for the one-year,
five-year and since-inception periods compared to those of a blend of the
Standard & Poor's Composite Index of 500 Stocks ("S&P 500") and the Lehman
Government/Corporate Bond Index ("S&P/Lehman G/C Blend"). This index is
represented by a 65% weighting in the S&P 500 and a 35% weighting in the Lehman
G/C Index. Indices are rebalanced to 65%/35% at the end of each year. The
returns are also compared to the Morningstar Domestic Hybrid and Lipper Balanced
Averages, each an average of the total returns of all mutual funds with an
investment style similar to that of the Fund as calculated by Morningstar, Inc.
and Lipper, Inc. You may not invest directly in an index. The Fund's total
returns reflect the expenses of the Fund's Class Y shares. The S&P/Lehman G/C
Blend returns have not been adjusted for ongoing management, distribution and
operating expenses applicable to mutual fund investments. The Morningstar
Domestic Hybrid Average and the Lipper Balanced Average returns have been
adjusted for these expenses.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
PAST 1 YEAR PAST 5 YEARS SINCE CLASS INCEPTION
<S> <C> <C> <C>
Nvest Balanced Fund: Class Y (inception 3/8/94) -3.32% 13.09% 10.61%
S&P/Lehman G/C Blend (Lehman calculated from 3/31/94) 12.92% 21.23% 18.88%
Morningstar Domestic Hybrid Average (calculated from 3/31/94) 8.77% 15.60% 11.73%
Lipper Balanced Average (calculated from 3/31/94) 8.72% 16.24% 14.21%
- ------------------------------------------------------------------------------------------------------------------------
*For actual past expenses of Class Y shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- ----------------------------
NVEST INTERNATIONAL EQUITY Stability Income Growth
High X
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Management") Mod.
SUBADVISER: Loomis, Sayles & Company, L.P. --------- ------ ------
("Loomis Sayles") Low X X
MANAGERS: Alexander Muromcew. John Tribolet
and Eswar Menon
CATEGORY: International Equity TICKER SYMBOL: CLASS Y
-------
NEIYX
INVESTMENT GOAL
The Fund seeks total return from long-term capital growth and dividend income.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest primarily in equity
securities of companies organized or headquartered outside of the United States.
The Fund will hold securities from at least 3 different countries including
those within emerging markets. The Fund will focus on securities with large
market capitalization but may invest in securities with any size capitalization.
Loomis Sayles uses a bottom-up, fundamental research process to build the Fund's
portfolio. Combining careful research with visits with management, Loomis Sayles
looks for growth oriented stocks of well-managed companies that are industry
leaders globally and possess strong competitive positions with pricing power and
strong distribution. Improving business or financial fundamentals are catalysts
for buy decisions, while deteriorating fundamentals or better opportunities in
other companies will trigger sell decisions. In addition to its bottom-up
approach to security selection, an overlay of country and industry macro data is
used to provide guidelines for portfolio weighting with a view towards
minimizing portfolio risk. The strong Loomis Sayles research team is combined
with a global network of research contacts to provide a steady stream of
information and ideas. Together with discipline and a thorough decision-making
process, the Loomis Sayles research operation seeks to provide investors with a
successful investment strategy.
Loomis Sayles uses a "No-Walls Decision Making(SM)" investment process, in which
the managers all meet in person to exchange ideas and make portfolio decisions;
each buy and sell decision is subject to intense scrutiny by the entire team;
and the skill and unique perspective of each manager on the team is leveraged.
The Fund may:
o Engage in active and frequent trading of its securities. Frequent trading may
produce higher transaction costs and a higher level of taxable capital gains,
which may lower your return.
o Purchase money market or high quality debt securities for temporary defensive
purposes in response to adverse market, economic or political conditions.
These investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in value or periods of
below-average performance in a given stock or in the stock market as a whole.
Growth stocks are generally more sensitive to market movements than other
types of stocks, primarily because their stock prices are based heavily on
future expectations. Small capitalization companies may be subject to more
abrupt price movements, limited markets and less liquidity than larger, more
established companies, which could adversely affect the value of the
portfolio.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic
and information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency. Investments in emerging markets
may be subject to these risks to a greater extent than those in more
developed markets.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest International Equity Fund by showing changes in the Fund's performance
from year to year and by showing how the Fund's average annual returns for
one-year, five-year and since-inception periods compare with those a of a broad
measure of market performance and those of indices of funds with similar
objectives. The Fund's past performance does not necessarily indicate how it
will perform in the future. The Fund's current subadviser assumed that function
on February 14, 1997. This chart and table reflect results achieved by the
previous subadviser under different investment policies for periods prior to
February 14, 1997.
The bar chart shows the Fund's total returns for Class Y shares for each
calendar year since it first offered Class Y shares. The returns for Class A, B
and C shares are generally lower than the Class Y returns shown in the bar chart
because of the sales charges and higher expenses of those classes.
(total return)
1994 8.93%
1995 6.56%
1996 3.95%
1997 -6.74%
1998 7.29%
1999 88.61%
/\ Highest Quarterly Return: Fourth Quarter 1999, up 66.97%
\/ Lowest Quarterly Return: Third Quarter 1998, down 14.44%
The table below shows the Fund's average annual total returns for the one-year,
five-year and since-inception periods compared to those of the Morgan Stanley
Capital International ("MSCI") Europe, Australasia and Far East Index ("EAFE"),
an arithmetical average of the performance of over 1,000 companies representing
stock markets in Europe, Australia, New Zealand and the Far East. The returns
are also compared to the Morningstar Foreign Stock and Lipper International
Averages, each an average of the total returns of all mutual funds with an
investment style similar to that of the Fund as calculated by Morningstar, Inc.
and Lipper, Inc. You may not invest directly in an index. The Fund's total
returns reflect the expenses of the Fund's Class Y shares. The MSCI EAFE returns
have not been adjusted for ongoing management, distribution and operating
expenses applicable to mutual fund investments. The Morningstar Foreign Stock
Average and the Lipper International Average returns have been adjusted for
these expenses.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
PAST 1 YEAR PAST 5 YEARS SINCE CLASS INCEPTION
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nvest International Equity Fund: Class Y (inception 9/9/93) 88.61% 15.89% 14.06%
MSCI EAFE 26.96% 12.83% 11.62%
Morningstar Foreign Stock Average (calculated from 9/30/93) 44.31% 15.11% 14.08%
Lipper International Average (calculated from 9/30/93) 40.88% 15.05% 13.46%
- ------------------------------------------------------------------------------------------------------------------------
For actual past expenses of Class Y shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
[graphic omitted] Fund Fee & 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)
ALL FUNDS
CLASS Y
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases None
Maximum deferred sales charge (load) None
Redemption fees None*
* Generally, a transaction fee will be charged for expedited payment of
redemption proceeds such as by wire or overnight delivery.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, as a percentage of average daily
net assets)
Expense information in the table has been restated to reflect current fees and
expenses.
<TABLE>
<CAPTION>
GROWTH AND INCOME
CAPITAL GROWTH FUND* GROWTH FUND* FUND
CLASS Y CLASS Y CLASS Y
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees 0.74% 0.67% 0.66%
Distribution and/or service (12b-1) fees 0.00% 0.00% 0.00%
Other expenses 0.24% 0.16% 0.19%
Total annual fund operating expenses 0.98% 0.83% 0.85%
<CAPTION>
INTERNATIONAL
BALANCED FUND EQUITY FUND
CLASS Y CLASS Y
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Management fees 0.73% 0.90%
Distribution and/or service (12b-1) fees 0.00% 0.00%
Other expenses 0.23% 0.47%
Total annual fund operating expenses 0.96% 1.37%
</TABLE>
* Expenses have been annualized.
<PAGE>
Fund Fees & Expenses [graphic omitted]
--------------------
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:
CAPITAL GROWTH FUND GROWTH FUND GROWTH AND INCOME FUND
CLASS Y CLASS Y CLASS Y
- --------------------------------------------------------------------------------
1 year $ 100 $ 85 $ 87
3 years $ 314 $ 266 $ 272
5 years $ 544 $ 462 $ 473
10 years $1,206 $1,029 $1,052
BALANCED FUND INTERNATIONAL EQUITY FUND
CLASS Y CLASS Y
- ----------------------------------------------------------------
1 year $ 98 $ 140
3 years $ 307 $ 437
5 years $ 533 $ 754
10 years $1,182 $1,655
<PAGE>
MORE ABOUT RISK
The Funds have principal investment strategies that come with inherent risks.
The following is a list of risks to which each Fund may be subject by investing
in various types of securities or engaging in various practices.
MARKET RISk (All Funds) The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably based upon change in a company's
financial condition as well as overall market and economic conditions.
RISK OF SMALL CAPITALIZATION COMPANIES (Capital Growth and International Equity
Funds) These companies carry special risks, including narrower markets, limited
financial and management resources, less liquidity and greater volatility than
large company stocks.
MANAGEMENT RISK (All Funds) The risk that a strategy used by a Fund's portfolio
management may fail to produce the intended result.
CREDIT RISK (All Funds) The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to honor a
financial obligation.
CURRENCY RISK (All Funds except Capital Growth and Growth and Income Funds) The
risk that fluctuations in the exchange rates between the U.S. dollar and foreign
currencies may negatively affect an investment.
EMERGING MARKET RISK (International Equity Fund) The risk associated with
developing securities markets of smaller sizes or with short operating
histories. Emerging markets involve risks in addition to and greater than those
generally associated with investing in developed foreign markets. The extent of
economic development, political stability, market depth, infrastructure and
capitalization, and regulatory oversight in emerging market economies is
generally less than in more developed markets.
RISKS OF OPTIONS, FUTURES AND SWAP CONTRACTS (All Funds) These transactions are
subject to changes in the underlying security on which such transactions are
based. It is important to note that even a small investment in these types of
derivative securities can have a significant impact on a Fund's exposure to
stock market values, interest rates or the currency exchange rate. These types
of transactions will be used primarily for hedging purposes.
LEVERAGE RISK (All Funds) The risk associated with securities or practices (e.g.
borrowing) that multiply small index or market movements into large changes in
value. When a derivative security (a security whose value is based on another
security or index) is used as a hedge against an offsetting position that a Fund
also holds, any loss generated by the derivative security should be
substantially offset by gains on the hedged instrument, and vice versa. To the
extent that a Fund uses a derivative security for purposes other than as a
hedge, that Fund is directly exposed to the risks of that derivative security
and any loss generated by the derivative security will not be offset by a gain.
INTEREST RATE RISK (All Funds) The risk of market losses attributable to changes
in interest rates. In general, the prices of fixed-income securities rise when
interest rates fall, and fall when interest rates rise.
INFORMATION RISK (All Funds) The risk that key information about a security is
inaccurate or unavailable.
OPPORTUNITY RISK (All Funds) The risk of missing out on an investment
opportunity because the assets necessary to take advantage of it are tied up in
less profitable investments.
LIQUIDITY RISK (All Funds) The risk that certain securities may be difficult or
impossible to sell at the time and at the price that the seller would like. This
may result in a loss or may be costly to a Fund. These types of risks may apply
to restricted securities, Section 4(2) Commercial Paper or Rule 144A securities.
CORRELATION RISK (All Funds) The risk that changes in the value of a hedging
instrument will not match those of the asset being hedged.
EXTENSION RISK (Balanced Fund) The risk that an unexpected rise in interest
rates will extend the life of a mortgage- or asset-backed security beyond the
expected prepayment time, typically reducing the security's value.
VALUATION RISK (All Funds) The risk that a Fund has valued certain securities at
a higher price than it can sell them for.
PREPAYMENT RISK (Balanced Fund) The risk that unanticipated prepayments may
occur, reducing the value of mortgage- or asset-backed securities, or real
estate investment trusts.
POLITICAL RISK (All Funds) The risk of losses directly attributable to
government or political actions.
EURO CONVERSION (All Funds except Capital Growth and Growth and Income Funds)
Many European countries have adopted a single European currency, the "euro." The
consequences of this conversion for foreign exchange rates, interest rates and
the value of European securities are unclear presently. Such consequences may
decrease the value and/or increase the volatility of securities held by a Fund.
<PAGE>
Management Team [graphic omitted]
---------------
MEET THE FUNDS' INVESTMENT ADVISERS
AND SUBADVISERS
The Nvest Funds family includes 25 mutual funds with a total of over $8 billion
in assets under management as of December 31, 1999. Nvest Funds are distributed
through Nvest Funds Distributor, L.P. (the "Distributor"). This Prospectus
covers Class Y shares of Nvest Stock Funds (the "Funds" or each a "Fund"), which
along with Nvest Star Funds, Nvest Bond Funds, Kobrick Funds and Nvest State
Tax-Free Funds, constitute the "Nvest Funds." Nvest Cash Management Trust Money
Market Series and Nvest Tax Exempt Money Market Trust constitute the "Money
Market Funds."
NVEST FUNDS MANAGEMENT, L.P.
Nvest Management, located at 399 Boylston Street, Boston, Massachusetts 02116,
serves as the adviser to each Fund except Growth Fund (for which CGM serves as
adviser). Nvest Management is a subsidiary of Nvest Companies, L.P. ("Nvest
Companies"), which is part of an affiliated group including Nvest, L.P., a
publicly-traded company listed on the New York Stock Exchange (the "Exchange").
Nvest Companies' 18 principal subsidiary or affiliated asset management firms,
collectively, had more than $133 billion in assets under management as of
December 31, 1999. Nvest Management oversees, evaluates and monitors the
subadvisory services provided to each Fund except Growth Fund. It also provides
general business management and administration to the Funds. Nvest Management,
however, does not determine what investments will be purchased by the Funds. The
subadvisers listed below and CGM make the investment decisions for their
respective Fund.
The combined advisory and subadvisory fees paid by each Fund (except Growth
Fund) in 1999 as a percentage of each Fund's average daily net assets were 0.74%
for Capital Growth Fund, 0.66% for Growth and Income Fund, 0.64% for
International Equity Fund (after reimbursement), and 0.73% for Balanced Fund.
SUBADVISERS
LOOMIS SAYLES, located at One Financial Center, Boston, Massachusetts 02111,
serves as subadviser to BALANCED and INTERNATIONAL EQUITY Funds. Loomis Sayles
is a subsidiary of Nvest Companies. Founded in 1926, Loomis Sayles is one of
America's oldest investment advisory firms with over $67 billion in assets under
management as of December 31, 1999. Loomis Sayles is well known for its
professional research staff, which is one of the largest in the industry.
WESTPEAK, located at 1011 Walnut Street, Boulder, Colorado 80302, serves as
subadviser to GROWTH AND INCOME Fund and CAPITAL GROWTH Fund. Westpeak is a
subsidiary of Nvest Companies. Founded in 1991, Westpeak has approximately $10
billion in assets under management as of December 31, 1999.
CAPITAL GROWTH MANAGEMENT LIMITED PARTNERSHIP (ADVISER)
CGM, located at One International Place, Boston, Massachusetts 02110, has served
as adviser to Growth Fund since CGM's inception in 1989. It also serves as
investment adviser to eight additional mutual funds and various institutional
investors. CGM is an affiliate of Nvest Companies and has grown to manage over
$8.2 billion in assets as of December 31, 1999. In 1999, Growth Fund paid 0.67%
of its average daily net assets to CGM in advisory fees.
<PAGE>
[graphic omitted] Management Team
---------------
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 the Fund's Board of Trustees. Shareholders
will be notified of any subadviser changes.
PORTFOLIO TRADES
In placing portfolio trades, a Fund's subadviser may use brokerage firms that
market the Fund's shares or are affiliated with Nvest Companies, Nvest
Management or any of the subadvisers. In placing such trades the subadvisers
will seek to obtain the best combination of price and execution, which involves
a number of judgmental factors. Such Fund trades are subject to applicable
regulatory restrictions and related procedures adopted by the Fund's Board of
Trustees.
<PAGE>
Management Team [graphic omitted]
---------------
MEET THE FUNDS' PORTFOLIO MANAGERS
GERALD H. SCRIVER
Gerald Scriver has managed GROWTH AND INCOME FUND since May 1995 and CAPITAL
GROWTH FUND since February 1998. Mr. Scriver is President and Chief Executive
Officer of Westpeak Investment Advisors which he founded in 1991. He also
manages the Westpeak segment of Star Value Fund. Mr. Scriver is a graduate of
the State University of N.Y. at Buffalo and has over 34 years of investment
experience.
G. KENNETH HEEBNER
G. Kenneth Heebner has managed GROWTH FUND since 1976. In 1989, Mr. Heebner
co-founded and is currently senior portfolio manager of CGM. He is also a
Chartered Financial Analyst. Mr. Heebner received a B.S. from Amherst College
and an M.B.A. from Harvard Business School, and is a highly regarded 35 year
veteran of the investment industry.
JEFFREY W. WARDLOW
Jeffrey Wardlow has co-managed the value component of the equity portion of
BALANCED FUND since August 1998. Mr. Wardlow, Vice President of Loomis Sayles,
joined the company over 10 years ago. He also co-manages the Loomis Sayles
segment of Star Value Fund. Mr. Wardlow, a Chartered Financial Analyst, received
both his B.B.A. and his M.B.A. from Michigan State University and has over 17
years of investment experience.
GREGG WATKINS
Gregg Watkins has co-managed the value component of the equity portion of
BALANCED FUND since August 1988. Mr. Watkins, Vice President of Loomis Sayles,
joined the company in 1991. He is also a Chartered Financial Analyst. Mr.
Watkins received his B.A. from Yale University and his M.B.A. from Wayne State
University and has over 15 years of investment experience.
MARK B. BARIBEAU
Mark B. Baribeau has co-managed the growth component of the equity portion of
BALANCED FUND since March 2000. Mr. Baribeau, Vice President of Loomis Sayles,
joined the company in 1989. He also serves as a portfolio manager of Loomis
Sayles Growth Fund. Mr. Baribeau, a Chartered Financial Analyst, received an
M.A. from University of Maryland, a B.A. from University of Vermont and has 14
years of investment experience.
PAMELA N. CZEKANSKI
Pamela N. Czekanski has co-managed the growth component of the equity portion of
BALANCED FUND since March 2000. Ms. Czekanski, Vice President of Loomis Sayles,
joined the company in 1995. She also serves as a portfolio manager of Loomis
Sayles Growth Fund. Ms. Czekanski, a Chartered Financial Analyst, received a
B.A. from Middlebury College and has 16 years of investment experience.
RICHARD D. SKAGGS
Richard D. Skaggs has co-managed the growth component of the equity portion of
BALANCED FUND since March 2000. Mr. Skaggs, Vice President of Loomis Sayles,
joined the company in 1994. He also serves as a portfolio manager of Loomis
Sayles Growth Fund. Mr. Skaggs, a Chartered Financial Analyst, received a M.S.M.
and a B.S. from Oakland University and has 13 years of investment experience.
JOHN HYLL
John Hyll has served the fixed-income portion of BALANCED FUND as co-manager
from 1994 until August 1999 and as manager thereafter. Mr. Hyll, Vice President
of Loomis Sayles, joined the company in 1989. He received his B.A. and his
M.B.A. from Baldwin-Wallace College and has over 16 years of investment
experience.
ALEXANDER MUROMCEW
Alexander Muromcew serves as co-portfolio manager for INTERNATIONAL EQUITY FUND,
concentrating on Asian markets. Mr. Muromcew, Vice President of Loomis Sayles,
joined the company in 1999. He also co-manages the Loomis Sayles segment of Star
Worldwide Fund, the International Equities sector of Loomis Sayles Worldwide
Fund, Loomis Sayles International Equity Fund and Loomis Sayles Emerging Markets
Fund. Prior to joining Loomis Sayles, Mr. Muromcew was a portfolio manager at
Nicholas Applegate Capital Management since 1996. Prior to 1996, Mr. Muromcew
held positions with Jardine Fleming Securities in Japan, Emerging Markets
Investors Corporation and Teton Partners L.P. He received an M.B.A. from
Stanford University, a B.A. from Dartmouth College and has over 10 years of
investment experience.
<PAGE>
[graphic omitted] Management Team
---------------
JOHN TRIBOLET
John Tribolet serves as co-portfolio manager for INTERNATIONAL EQUITY FUND,
concentrating on European markets. Mr. Tribolet, Vice President of Loomis
Sayles, joined the company in 1999. He also co-manages the Loomis Sayles segment
of Star Worldwide Fund, International Equities sector of Loomis Sayles Worldwide
Fund, Loomis Sayles International Equity Fund and Loomis Sayles Emerging Markets
Fund. Prior to joining Loomis Sayles, Mr. Tribolet was a portfolio manager for
European Equities at Nicholas Applegate Capital Management since 1997. From 1995
to 1997 he was a full time MBA student at the University of Chicago. Prior to
1995, he spent three years in the investment banking industry, most recently at
Paine Webber Inc. He received his B.S. from Columbia University and has over 8
years of investment experience.
ESWAR MENON
Eswar Menon serves as co-portfolio manager for INTERNATIONAL EQUITY FUND,
concentrating on emerging markets. Mr. Menon, Vice President of Loomis Sayles,
joined the company in 1999. He also co-manages the Loomis Sayles segment of the
Star Worldwide Fund, International Equities sector of Loomis Sayles Worldwide
Fund, Loomis Sayles International Equity Fund and Loomis Sayles Emerging Markets
Fund. Prior to joining Loomis Sayles, Mr. Menon was the Portfolio Manager for
Emerging Countries at Nicholas Applegate Capital Management since 1995. Prior to
his position at Nicholas Applegate Capital Management, he spent five years with
Koeneman Capital Management and Integrated Device Technology. Mr. Menon received
an M.B.A. from the University of Chicago, an M.S. from the University of
California, a B.S. from Indian Institute of Technology, Madras, India and has
over 10 years of investment experience.
<PAGE>
Fund Services [graphic omitted]
-------------
IT'S EASY TO OPEN AN ACCOUNT
TO OPEN AN ACCOUNT WITH NVEST FUNDS:
1. Read this Prospectus carefully.
2. Read the following eligibility and minimum investment requirements to
determine if you may purchase Class Y shares.
Class Y shares of the Funds may be purchased by the following entities at
the following investment minimums.
A minimum initial investment is $1 million and $10,000 is the minimum
subsequent investment for:
o Other mutual funds, endowments, foundations, bank trust departments or
trust companies.
There is no initial or subsequent investment minimum for:
o RETIREMENT PLANS (401(a), 401(k), 457 or 403(b) plans) that have total
investment assets of at least $10 million. Plan sponsor accounts can be
aggregated to meet this minimum.
o INSURANCE COMPANY ACCOUNTS of New England Financial, Metropolitan Life
Insurance Company ("MetLife") or their affiliates.
o SEPARATE ACCOUNTS of New England Financial, MetLife, or their affiliates.
o WRAP FEE PROGRAMS of certain broker-dealers not being paid by the Funds,
Nvest Management or the Distributor. Such wrap fee programs may be
subject to additional or different conditions, including a wrap account
fee. Each broker-dealer is responsible for transmitting to its customer a
schedule of fees and other information regarding any such conditions. If
the participant who purchased Class Y shares through a wrap fee program
should terminate the wrap fee arrangement with the broker-dealer, then
the Class Y shares will, at the discretion of the broker-dealer,
automatically be converted to a number of Class A shares of the same Fund
having the same dollar value of the shares converted, and the
broker-dealer may thereafter be entitled to receive from that Fund an
annual service fee of 0.25% of the value of Class A shares owned by that
shareholder.
o CERTAIN INDIVIDUAL RETIREMENT ACCOUNTS if the amounts invested represent
rollover distributions from investments by any of the Retirement Plans
set forth above.
o DEFERRED COMPENSATION PLAN ACCOUNTS of New England Life Insurance Company
("NELICO"), Metlife or their affiliates ("Deferred Compensation
Accounts").
o SERVICE ACCOUNTS through an omnibus account by investment advisers,
financial planners, broker-dealers or other intermediaries who have
entered into a service agreement with a Fund. A fee may be charged to
shareholders purchasing through a service account if they effect
transactions through such parties and should contact such parties
regarding information regarding such fees.
3. You should contact Nvest Funds at 800-225-5478 for an application or if you
have any questions about purchasing Fund shares.
4. Use the sections of this Prospectus that follow as your guide for purchasing
shares.
CERTIFICATES
You will not receive certificates representing Class Y shares.
NVEST FUNDS WEB SITE
You may have access to your account 24 hours a day by visiting us online at
www.nvestfunds.com.
<PAGE>
[graphic omitted] Fund Services
-------------
BUYING SHARES
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
THROUGH YOUR INVESTMENT DEALER
o Call your investment dealer for o Call your investment dealer for
information. information.
BY MAIL
[graphic omitted]
o Make out a check in U.S. dollars o Make out a check in U.S. dollars
for the investment amount, payable for the investment amount, payable
to "Nvest Funds." Third party and to "Nvest Funds." Third party and
"starter" checks will generally not "starter" checks will generally not
be accepted. be accepted.
o Mail the check with your completed o Fill out the detachable investment
application to Nvest Funds, P.O. slip from an account statement. If
Box 8551, Boston, MA 02266-8551. no slip is available, include with
the check a letter specifying the
Fund name, your class of shares,
your account number and the
registered account name(s). To make
investing even easier, you can
order more investment slips by
calling 800-225-5478.
BY EXCHANGE
[graphic omitted]
o Obtain a current prospectus for the o Call your investment dealer or
Fund into which you are exchanging Nvest Funds at 800-225-5478 or
by calling your investment dealer visit nvestfunds.com to request an
or Nvest Funds at 800-225-5478. exchange.
o See the section entitled
o Call your investment dealer or "Exchanging Shares."
Nvest Funds to request an exchange.
o See the section entitled
"Exchanging Shares."
BY WIRE
[graphic omitted]
o Call Nvest Funds at 800-225-5478 to o Visit nvestfunds.com to add shares
obtain an account number and wire to your account by wire.
transfer instructions. Your bank
may charge you for such a transfer. o Instruct your bank to transfer
funds to State Street Bank & Trust
Company, ABA# 011000028, DDA#
99011538.
o Specify the Fund name, your account
number and the registered account
name(s). Your bank may charge you
for such a transfer.
THROUGH AUTOMATED CLEARING HOUSE ("ACH")
[graphic omitted]
o Ask your bank or credit union o Call Nvest Funds at 800-225-5478 or
whether it is a member of the ACH visit nvestfunds.com to add shares
system. to your account through ACH.
o Complete the "Telephone Withdrawal o If you have not signed up for the
and Exchange" and "Bank ACH system, please call Nvest Funds
Information" sections on your for a Service Options Form. A
account application. signature guarantee may be required
to add this privilege.
o Mail your completed application to
Nvest Funds, P.O. Box 8551, Boston,
MA 02266-8551.
<PAGE>
Fund Services [graphic omitted]
-------------
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
[graphic omitted]
o Write a letter to request a redemption specifying the name of the Fund, your
class of shares, your account number, the exact registered account name(s),
the number of shares or the dollar amount to be redeemed and the method by
which you wish to receive your proceeds. Additional materials may be
required. See the section entitled "Selling Shares in Writing."
o The request must be signed by all of the owners of the shares including the
capacity in which they are signing, if appropriate.
o Mail your request to Nvest Funds, P.O. Box 8551, Boston, MA 02266-8551.
o Your proceeds will be delivered by the method chosen in your letter. If you
choose to have your proceeds delivered by mail, they will generally be mailed
to you on the business day after the request is received. You may also choose
to redeem by wire or through ACH (see below).
BY EXCHANGE
[graphic omitted]
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
[graphic omitted]
o Fill out the "Telephone Withdrawal and Exchange" and "Bank Information"
sections on your account application.
o Call Nvest Funds at 800-225-5478; visit nvestfunds.com or indicate in your
redemption request letter (see above) that you wish to have your proceeds
wired to your bank.
o Proceeds will generally be wired on the next business day. A wire fee
(currently $5.00) will be deducted from the proceeds.
THROUGH AUTOMATED CLEARING HOUSE ("ACH")
[graphic omitted]
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 or visit nvestfunds.com to request a redemption through this
system.
o Proceeds will generally arrive at your bank within three business days.
BY TELEPHONE
[graphic omitted]
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.
<PAGE>
[graphic omitted] Fund Services
-------------
SELLING SHARES IN WRITING
If you wish to redeem your shares in writing, all owners of the shares must sign
the redemption request in the exact names in which the shares are registered and
indicate any special capacity in which they are signing. In certain situations,
you will be required to make your request to sell shares in writing. In these
instances, a letter of instruction signed by the authorized owner is necessary.
In certain situations we also may require a signature guarantee or additional
documentation.
A signature guarantee protects you against fraudulent orders and is necessary
if:
o your address of record has been changed within the past 30 days;
o you are selling more than $100,000 worth of shares and you are requesting the
proceeds by check; or
o a proceeds check for any amount is mailed to an address other than the
address of record or not payable to the registered owner(s).
A notary public CANNOT provide a signature guarantee. A signature guarantee can
be obtained from one of the following sources:
o a financial representative or securities dealer;
o a federal savings bank, cooperative or other type of bank;
o a savings and loan or other thrift institution;
o a credit union; or
o a securities exchange or clearing agency.
<PAGE>
Fund Services [graphic omitted]
-------------
EXCHANGING SHARES
You may exchange Class Y shares of your Fund for Class Y shares of any other
Nvest Fund which offers Class Y shares or for Class A shares of the Money Market
Funds. Agents, general agents, directors and senior officers of NELICO and its
insurance company subsidiaries may, at the discretion of NELICO, elect to
exchange Class Y shares of any Nvest Fund in a NELICO Deferred Compensation
Account for Class A shares of any other Nvest Fund which does not offer Class Y
shares. Class A shares of any Nvest Fund in a NELICO Deferred Compensation
Account may also be exchanged for Class Y shares of any Nvest Fund. All
exchanges are subject to the eligibility requirements of the Nvest Fund or Money
Market 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.
For federal income tax purposes, an exchange of Fund shares for shares of
another Nvest Fund or Money Market Fund is treated as a sale on which gain or
loss may be recognized. Please refer to the Statement of Additional Information
(the "SAI") for more detailed information on exchanging Fund shares.
RESTRICTIONS ON BUYING, SELLING AND EXCHANGING SHARES
PURCHASE AND EXCHANGE RESTRICTIONS
Although the Funds do not anticipate doing so, they reserve the right to suspend
or change the terms of purchasing or exchanging shares. The Funds and the
Distributor reserve the right to refuse or limit any purchase or exchange order
by a particular purchaser (or group of related purchasers) if the transaction is
deemed harmful to the best interest of the Fund's other shareholders or would
disrupt the management of the Fund. The Funds and the Distributor reserve the
right to restrict purchases and exchanges for the accounts of "market timers" by
limiting the transaction to a maximum dollar amount. An account will be deemed
to be one of a market timer if: (i) more than two exchange purchases of a given
Fund are made for the account in a calendar quarter or (ii) the account makes
one or more exchange purchases of a given Fund in a calendar quarter in an
aggregate amount in excess of 1% of the Fund's total net assets.
SELLING RESTRICTIONS
The table below describes restrictions placed on selling shares of any Fund
described in this Prospectus:
RESTRICTION SITUATION
The Fund may suspend the right of redemption or o When the Exchange is closed
postpone payment for more than 7 days: (other than a
weekend/holiday)
o During an emergency
o Any other period permitted
by the SEC
The Fund reserves the right to suspend account o With a notice of a dispute
services or refuse transaction requests: between registered owners
o With suspicion/evidence of
a fraudulent act
The Fund may pay the redemption price in whole or o When it is detrimental for
part by a distribution in kind of readily a Fund to make cash
marketable securities in lieu of cash or may take payments as determined in
up to 7 days to pay a redemption request in order the sole discretion of the
to raise capital: adviser or subadviser
The Fund may withhold redemption proceeds until o When redemptions are made
the check or funds have cleared: within 10 calendar days of
purchase by check or ACH of
the shares being redeemed
Telephone redemptions are not accepted for tax-qualified retirement accounts.
<PAGE>
[graphic omitted] Fund Services
--------------
HOW FUND SHARES ARE PRICED
"Net asset value" is the price of one share of a Fund without a sales charge,
and is calculated each business day using this formula:
TOTAL MARKET VALUE OF SECURITIES + CASH AND
NET ASSET VALUE = OTHER ASSETS - LIABILITIES
-------------------------------------------
NUMBER OF OUTSTANDING SHARES
The net asset value of Fund shares is determined according to this schedule:
o A share's net asset value is determined at the close of regular trading on
the Exchange on the days the Exchange is open for trading. This is normally
4:00 p.m. Eastern time.
o The price you pay for purchasing, redeeming or exchanging a share will be
based upon the net asset value next calculated after your order is received
"in good order" by State Street Bank and Trust Company, the Fund's custodian
(plus or minus applicable sales charges as described earlier in this
Prospectus).
o Requests received by the Distributor after the Exchange closes will be
processed based upon the net asset value determined at the close of regular
trading on the next day that the Exchange is open, with the exception that
those orders received by your investment dealer before the close of the
Exchange and received by the Distributor before 5:00 p.m. Eastern time* on
the same day will be based on the net asset value determined on that day.
o A Fund heavily invested in foreign securities may have net asset value
changes on days when you cannot buy or sell its shares.
* Under limited circumstances, the Distributor may enter into a contractual
agreement where it may accept orders after 5:00pm, but not later than 8:00pm
Generally, during times of substantial economic or market change, it may be
difficult to place your order by phone. During these times, you may deliver your
order in person to the Distributor or send your order by mail as described in
"Buying Shares" and "Selling Shares."
Generally, Fund securities are valued as follows:
o EQUITY SECURITIES -- most recent sales or quoted bid price as provided by a
pricing service.
o DEBT SECURITIES (OTHER THAN SHORT-TERM OBLIGATIONS) -- based upon pricing
service valuations.
o SHORT-TERM OBLIGATIONS (REMAINING MATURITY OF LESS THAN 60 DAYS) -- amortized
cost (which approximates market value).
o SECURITIES TRADED ON FOREIGN EXCHANGES -- most recent sale/bid price on the
non-U.S. exchange, unless an occurrence after the close of the exchange will
materially affect its value. In that case, it is given fair value as
determined by or under the direction of the Funds' Board of Trustees at the
close of regular trading on the Exchange.
o OPTIONS -- last sale price, or if not available, last offering price.
o FUTURES -- unrealized gain or loss on the contract using current settlement
price. When a settlement price is not used, futures contracts will be valued
at their fair value as determined by or under the direction of the Funds'
Board of Trustees.
o ALL OTHER SECURITIES -- fair market value as determined by the adviser or
subadviser of the Fund under the direction of the Funds' Board of Trustees.
The effect of fair value pricing as described above for "Securities traded on
foreign exchanges" and "All other securities" is that securities may not be
priced on the basis of quotations from the primary market in which they are
traded but rather, may be priced by another method that the Funds' Board of
Trustees believes accurately reflects fair value.
<PAGE>
Fund Services [graphic omitted]
-------------
DIVIDENDS AND DISTRIBUTIONS
The Funds generally distribute most or all of their net investment income (other
than capital gains) in the form of dividends. The following table shows when
each Fund expects to distribute dividends. Each Fund distributes all net
realized long- and short-term capital gains annually, after applying any
available capital loss carryovers. Each Fund's Board of Trustees may adopt a
different schedule as long as payments are made at least annually.
- --------------------------------------------------------------------------------
DIVIDEND PAYMENT SCHEDULE
ANNUALLY SEMI-ANNUALLY QUARTERLY
Capital Growth Growth and Income Balanced
Growth
International Equity
- --------------------------------------------------------------------------------
Depending on your investment goals and priorities, you may choose to:
o Receive distributions from dividends and interest in cash while reinvesting
distributions from capital gains in additional Class Y shares of the Fund or
in Class Y shares of another Nvest Fund.
o Receive all distributions in cash.
Unless you select one of the above options, distributions will automatically be
reinvested in Class Y shares of the Fund.
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
Fund, you will receive a Form 1099 to help you report the prior calendar year's
distributions on your federal income tax return. Be sure to keep the 1099 as a
permanent record. A fee may be charged for any duplicate information requested.
TAX CONSEQUENCES
Each Fund intends to meet all requirements of the Internal Revenue Code
necessary to qualify as a "regulated investment company" and thus does not
expect to pay any federal income tax on income and capital gains distributed to
shareholders.
Fund distributions paid to you either in cash or reinvested in additional shares
are generally taxable to you either as ordinary income or as capital gains.
Distributions derived from short-term capital gains or investment income are
generally taxable at ordinary income rates. If you are a corporation investing
in a Fund, a portion of these dividends may qualify for the dividends-received
deduction provided that you meet certain holding period requirements.
Distributions of gains from investments that a Fund owned for more than one year
that are designated by a Fund as capital gain dividends will generally be
taxable to a shareholder receiving such distributions as long-term capital gain,
regardless of how long the shareholder has held Fund shares.
An exchange of shares for shares of another Nvest Fund or Money Market Fund is
treated as a sale, and any resulting gain or loss may be subject to federal
income tax. If you purchase shares of a Fund shortly before it declares a
capital gain distribution or a dividend, a portion of the purchase price may be
returned to you as a taxable distribution.
You should consult your tax adviser about any federal, state and local taxes
that may apply to the distributions you receive. Shareholders of Funds investing
in foreign securities should also consult their tax advisers about consequences
of their investments under foreign laws.
<PAGE>
[graphic omitted] Fund Services
-------------
COMPENSATION TO SECURITIES DEALERS
The Distributor may, at its expense, pay concessions to dealers which satisfy
certain criteria established from time to time by the Distributor relating to
increasing net sales of shares of the Nvest Funds over prior periods, and
certain other factors. See the SAI for more details.
<PAGE>
[graphic omitted] Fund Performance
----------------
The financial highlights table is intended to help you understand each Fund's
financial performance for the past 5 years (or, if shorter, the 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, are incorporated by reference in the SAI,
which is available upon request.
NVEST CAPITAL GROWTH FUND
CLASS Y
MARCH 16, 1999 (a) THROUGH DECEMBER 31, 1999
Net Asset Value, Beginning of the
Period $21.49
------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.05)(c)
Net Realized and Unrealized Gain
(Loss) on Investments 4.17
------
Total From Investment Operations 4.12
------
LESS DISTRIBUTIONS
Distributions From Net Realized
Capital Gains (2.73)
------
Total Distributions (2.73)
------
Net Asset Value, End of the Period $22.88
======
TOTAL RETURN (%) (b) 20.1
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets (%) 1.14(d)
Ratio of Net Investment Income (Loss)
to Average Net Assets (%) (0.36)(d)
Portfolio Turnover Rate (%) 124
Net Assets, End of Period (000) $ 154
(a) Commencement of operations.
(b) Periods less than one year are not annualized.
(c) Per share net investment income (loss) has been calculated using the average
shares outstanding during the period.
(d) Computed on an annualized basis.
<PAGE>
[graphic omitted] Fund Performance
----------------
NVEST GROWTH FUND
CLASS Y
JUNE 30, 1999(a) THROUGH DECEMBER 31, 1999
Net Asset Value, Beginning of the
Period $11.94
------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.03
Net Realized and Unrealized Gain
(Loss) on Investments 0.99
------
Total From Investment Operations 1.02
------
LESS DISTRIBUTIONS
Distributions From Net Realized
Capital Gains on Investments (1.95)
------
Total Distributions (1.95)
------
Net Asset Value, End of the Period $11.01
======
TOTAL RETURN (%) (b) 9.7
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets (%) 0.87(c)
Ratio of Net Investment Income (Loss)
to Average Net Assets (%) 0.48(c)
Portfolio Turnover Rate (%) 206
Net Assets, End of Period (000) $ 15
(a) Commencement of operations.
(b) Periods of less than one year are not annualized.
(c) Computed on an annualized basis.
<PAGE>
[graphic omitted] Fund Performance
----------------
NVEST GROWTH AND INCOME FUND
CLASS Y
NOVEMBER 18(a) YEAR ENDED
THROUGH DECEMBER 31, DECEMBER 31,
1998 1999
Net Asset Value, Beginning of Period $15.42 $16.57
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.02 0.02
Net Realized and Unrealized Gain on
Investments 1.22 1.51
------ ------
Total From Investment Operations 1.24 1.53
------ ------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.02) (0.08)
Distributions From Net Realized Capital
Gains (0.07) (2.66)
Distributions in Excess of Net
Investment Income (0.00) (0.00)(d)
------ ------
Total Distributions (0.09) (2.74)
====== ======
Net Asset Value, End of Period $16.57 $15.36
TOTAL RETURN (%)(c) 8.1 9.8
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average
Net Assets (%) 0.98(b) 0.96
Ratio of Net Investment Income to
Average Net Assets (%) 0.58(b) (0.73)
Portfolio Turnover Rate (%) 114 133
Net Assets, End of Period (000) $1 $14,377
(a) Commencement of Operations
(b) Computed on an annualized basis.
(c) Periods of less than one year are not annualized.
(d) Amount rounds to less than $0.01 per share.
<PAGE>
<TABLE>
[graphic omitted] Fund Performance
----------------
NVEST BALANCED FUND
<CAPTION>
CLASS Y
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 11.27 $ 13.15 $ 13.95 $ 14.27 $ 13.54
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.46 0.44 0.40 0.39 0.36
Net Realized and Unrealized Gain (Loss) on Investments 2.51 1.76 2.06 0.74 (0.81)
------- ------- ------- ------- -------
Total From Investment Operations 2.97 2.20 2.46 1.13 (0.45)
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.45) (0.45) (0.40) (0.38) (0.37)
Distributions From Net Realized Capital Gains (0.64) (0.95) (1.74) (1.48) (1.01)
------- ------- ------- ------- -------
Total Distributions (1.09) (1.40) (2.14) (1.86) (1.38)
------- ------- ------- ------- -------
Net Asset Value, End of Year $ 13.15 $ 13.95 $ 14.27 $ 13.54 $ 11.71
======= ======= ======= ======= =======
TOTAL RETURN (%) 26.8 17.6 18.1 8.6 (3.3)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%)(b) 1.11 0.88 0.88 0.90 0.93
Ratio of Net Investment Income to Average Net Assets (%) 3.62 3.24 2.66 2.65 2.68
Portfolio Turnover Rate (%) 54 70 69 81 61
Net Assets, End of Year (000) $59,411 $77,665 $85,620 $73,212 $47,130
</TABLE>
<PAGE>
<TABLE>
[graphic omitted] Fund Performance
----------------
NVEST INTERNATIONAL EQUITY FUND
<CAPTION>
CLASS Y
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $ 15.64 $ 16.25 $ 16.48 $ 14.35 $ 14.45
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.42 0.11(a) 0.19(a) 0.25(a) 0.02(a)
Net Realized and Unrealized Gain (Loss) on Investments 0.60 0.54 (1.23) 0.77 12.54
------- ------- ------- ------- -------
Total From Investment Operations 1.02 0.65 (1.04) 1.02 12.56
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends From Net Investment Income (0.41) (0.09) 0.00 (0.33) (0.07)
Dividends in Excess of Net Investment Income 0.00 0.00 0.00 (0.31) 0.00
Distributions From Net Realized Capital Gains 0.00 (0.33) (1.05) (0.19) (1.13)
Distributions in Excess of Net Realized Gains 0.00 0.00 (0.04) (0.09) 0.00
------- ------- ------- ------- -------
Total Distributions (0.41) (0.42) (1.09) (0.92) (1.20)
------- ------- ------- ------- -------
Net Asset Value, End of the Year $ 16.25 $ 16.48 $ 14.35 $ 14.45 $ 25.81
======= ======= ======= ======= =======
TOTAL RETURN (%) 6.6 4.0 (6.7) 7.3 88.6
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%)(b) 1.00 1.00 1.15 1.31 1.55
Ratio of Net Investment Income to Average Net Assets (%) 1.99 0.89 1.22 1.64 0.10
Portfolio Turnover Rate (%) 119 59 154 105 229
Net Assets, End of the Year (000) $83,119 $52,161 $ 4,752 $ 5,552 $14,441
Effective February 14, 1997 Loomis, Sayles & Company, L.P. became the subadviser to the Fund.
(a) Per share net investment income has been calculated using the average shares outstanding during the year.
(b) The ratio of operating expenses to average net assets
without giving effect to an expense limitation would
have been (%): 1.21 1.19 1.41 1.65 1.81
</TABLE>
<PAGE>
GLOSSARY OF TERMS
BID PRICE -- The price a prospective buyer is ready to pay. This term is used by
traders who maintain firm bid and offer prices in a given security by standing
ready to buy or sell security units at publicly quoted prices.
BOTTOM-UP ANALYSIS -- The search for outstanding performance of individual
stocks before considering the impact of economic trends. Such companies may be
identified from research reports, stock screens or personal knowledge of the
products and services.
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
S&P, Moody's or Fitch Investor Services, Inc. ("Fitch"). Bonds with a credit
rating of BBB or higher by S&P, Baa or higher by Moody's or BBB by Fitch are
generally considered investment grade.
DERIVATIVE -- A financial instrument whose value and performance are based on
the value and performance of another security or financial instrument.
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 companies or
industries to reduce the risk if an individual company or one sector of the
market suffers losses.
DIVIDEND YIELD -- The current or estimated annual dividend divided by the market
price per share of a security.
DURATION -- A measure of how much a bond's price fluctuates with changes in
comparable interest rates.
EARNINGS GROWTH -- A pattern of increasing rate of growth in earnings per share
from one period to another, which usually causes a stock's price to rise.
FUNDAMENTAL ANALYSIS -- An analysis of the balance sheet and income statements
of a company in order to forecast its future stock price movements. Fundamental
analysis considers past records of assets, earnings, sales, products, management
and markets in predicting future trends in these indicators of a company's
success or failure. By appraising a company's prospects, analysts using such an
approach assess whether a particular stock or group of stocks is undervalued or
overvalued at its current market price.
GROWTH INVESTING -- An investment style that emphasizes companies with strong
earnings growth. Growth investing is generally considered more aggressive than
"value" investing.
INCOME DISTRIBUTIONS -- Payments to 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.
MARKET CAPITALIZATION -- Market price multiplied by number of shares
outstanding. Large capitalization companies generally have over $5 billion in
market capitalization; medium cap companies between $1.5 billion and $5 billion;
and small cap companies less than $1.5 billion. These capitalization figures may
vary depending upon the index being used and/or the guidelines used by the
portfolio manager.
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.
PRICE-TO-BOOK VALUE RATIO -- Current market price of a stock divided by its book
value, or net asset value.
PRICE-TO-EARNINGS RATIO -- Current market price of a stock divided by its
earnings per share. Also known as the "multiple," the price-to-earnings ratio
gives investors an idea of how much they are paying for a company's earning
power and is a useful tool for evaluating the costs of different securities.
Some firms use the inverse ratio for this calculation (i.e. earnings-to-price
ratio).
QUALITATIVE ANALYSIS -- An analysis of the qualities possessed by a company,
including its management, products and competitive positions, to help determine
if the company can execute its strategy.
RETURN ON EQUITY -- The amount, expressed as a percentage, earned on a company's
common stock investment for a given period. It is calculated by dividing common
stock equity (net worth) at the beginning of the accounting period into net
income for the period after preferred stock dividends but before common stock
dividends. This tells common shareholders how effectively their money is being
employed.
RULE 144A SECURITIES -- Rule 144A securities are privately offered securities
that can be resold only to certain qualified institutional buyers. Rule 144A
securities are treated as illiquid, unless a manager has determined, under
guidelines established by a Fund's trustees, that a particular issue of Rule
144A securities is liquid.
TARGET PRICE -- Price that an investor is hoping a stock he or she has just
bought will rise to within a specified period of time. An investor may buy XYZ
at $20, with a target price of $40 in one year's time, for instance.
TECHNICAL ANALYSIS -- The research into the demand and supply for securities,
options, mutual funds and commodities based on trading volume and price studies.
Technical analysis uses charts or computer programs to identify and project
price trends in a market, security, mutual fund or futures contract.
TOP-DOWN APPROACH -- The method in which an investor first looks at trends in
the general economy, and next selects attractive industries and then companies
that should benefit from those trends.
TOTAL RETURN -- The change in value of an investment in a Fund over a specific
time period expressed as a percentage. Total returns assume all earnings are
reinvested in additional shares of a Fund.
VALUE INVESTING -- A relatively conservative investment approach that focuses on
companies that may be temporarily out of favor or whose earnings or assets are
not fully reflected in their stock prices. Value stocks will tend to have a
lower price-to-earnings ratio than growth stocks.
VOLATILITY -- The general variability of a portfolio's value resulting from
price fluctuations of its investments. In most cases, the more diversified a
portfolio is, the less volatile it will be.
YIELD -- The rate at which a fund earns income, expressed as a percentage.
Mutual fund yield calculations are standardized, based upon a formula developed
by the SEC.
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.
<PAGE>
IF YOU WOULD LIKE MORE INFORMATION ABOUT THE
FUNDS, THE FOLLOWING DOCUMENTS ARE AVAILABLE FREE
UPON REQUEST:
ANNUAL AND SEMIANNUAL REPORTS -- Provide
additional information about each Fund's
investments. Each report includes a discussion of
the market conditions and investment strategies
that significantly affected the Fund's performance
during its last fiscal year. 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 (SAI) --
Provides more detailed information about the
Funds, has been filed with the Securities and
Exchange Commission (the "SEC") and is
incorporated into this Prospectus by reference.
TO ORDER A FREE COPY OF A FUND'S ANNUAL OR
SEMIANNUAL REPORT OR ITS SAI, CONTACT YOUR FINANCIAL
REPRESENTATIVE, OR THE FUNDS AT:
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 Funds' reports and SAIs 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.
NVEST STOCK FUNDS
Class Y Shares of:
Nvest Capital Growth Fund
Nvest Growth Fund
Nvest Growth and Income Fund
Nvest Balanced Fund
Nvest International Equity Fund
(Investment Company Act File No. 811-4323)
(Investment Company Act File No. 811-242)
YS51-0500
<PAGE>
NVESTFUNDS(SM)
Where The Best Minds Meet(R)
- --------------------------------------------------------------------------------
Nvest
BOND FUNDS
[Graphic Omitted]
- --------------------------------------------------------------------------------
CORPORATE INCOME
Nvest Short Term Corporate Income Fund
Back Bay Advisors, L.P.
Nvest Bond Income Fund
Back Bay Advisors, L.P.
Nvest High Income Fund
Loomis, Sayles & Company, L.P.
Nvest Strategic Income Fund
Loomis, Sayles & Company, L.P.
GOVERNMENT INCOME
Nvest Limited Term U.S. Government Fund
Back Bay Advisors, L.P.
Nvest Government Securities Fund
Back Bay Advisors, L.P.
TAX FREE INCOME
Nvest Municipal Income Fund
Back Bay Advisors, L.P.
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved any Fund's shares or
determined whether this Prospectus is accurate or complete. Anyone who tells you
otherwise is committing a crime.
For general information on the Funds or any of their services and for assistance
in opening an account, contact your financial representative or call Nvest
Funds.
PROSPECTUS
May 1, 2000
WHAT'S INSIDE
Goals, Strategies & Risks
[GRAPHIC OMITTED] Page 1
- --------------------------------------------------------------------------------
Fund Fees & Expenses
[GRAPHIC OMITTED] Page 15
- --------------------------------------------------------------------------------
Management Team
[GRAPHIC OMITTED] Page 18
- --------------------------------------------------------------------------------
Fund Services
[GRAPHIC OMITTED] Page 20
- --------------------------------------------------------------------------------
Fund Performance
[GRAPHIC OMITTED] Page 32
- --------------------------------------------------------------------------------
Nvest Funds
399 Boylston Street, Boston, Massachusetts 02116
800-225-5478
www.nvestfunds.com
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GOALS, STRATEGIES & RISKS
- --------------------------------------------------------------------------------
Nvest Short Term Corporate Income Fund .................................. 1
Nvest Bond Income Fund .................................................. 3
Nvest High Income Fund .................................................. 5
Nvest Strategic Income Fund ............................................. 7
Nvest Limited Term U.S. Government Fund ................................. 9
Nvest Government Securities Fund ........................................ 11
Nvest Municipal Income Fund ............................................. 13
- --------------------------------------------------------------------------------
FUND FEES & EXPENSES
- --------------------------------------------------------------------------------
Fund Fees & Expenses .................................................... 15
- --------------------------------------------------------------------------------
MORE ABOUT RISK
- --------------------------------------------------------------------------------
More About Risk ......................................................... 17
- --------------------------------------------------------------------------------
MANAGEMENT TEAM
- --------------------------------------------------------------------------------
Meet the Funds' Investment Advisers and Subadvisers ..................... 18
Meet the Funds' Portfolio Managers ...................................... 19
- --------------------------------------------------------------------------------
FUND SERVICES
- --------------------------------------------------------------------------------
Investing in the Funds .................................................. 20
How Sales Charges Are Calculated ........................................ 21
Ways to Reduce or Eliminate Sales Charges ............................... 22
It's Easy to Open an Account ............................................ 23
Buying Shares ........................................................... 24
Selling Shares .......................................................... 25
Selling Shares in Writing ............................................... 26
Exchanging Shares ....................................................... 27
Restrictions on Buying, Selling and Exchanging Shares ................... 27
How Fund Shares Are Priced .............................................. 28
Dividends and Distributions ............................................. 29
Tax Consequences ........................................................ 29
Compensation to Securities Dealers ...................................... 30
Additional Investor Services ............................................ 31
- --------------------------------------------------------------------------------
FUND PERFORMANCE
- --------------------------------------------------------------------------------
Nvest Short Term Corporate Income Fund .................................. 32
Nvest Bond Income Fund .................................................. 33
Nvest High Income Fund .................................................. 34
Nvest Strategic Income Fund ............................................. 35
Nvest Limited Term U.S. Government Fund ................................. 36
Nvest Government Securities Fund ........................................ 37
Nvest Municipal Income Fund ............................................. 38
Glossary of Terms ....................................................... 39
If you have any questions about any of the terms used in this Prospectus, please
refer to the "Glossary of Terms."
To learn more about the possible risks of investing in a Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Funds may engage. Please read this section carefully
before you invest.
Fund shares are not bank deposits and are not guaranteed, endorsed or insured by
the Federal Deposit Insurance Corporation or any other government agency, and
are subject to investment risks, including possible loss of the principal
invested.
<PAGE>
<TABLE>
<S> <C> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS DURATION
--------------------------- ----------------------- -----------------------
Quality
NVEST SHORT TERM Stability Income Growth Short Int. Long
CORPORATE INCOME FUND High X High X
--------- ------ ------ --------- ------ ------
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") Mod. X Mod.
SUBADVISER: Back Bay Advisors, L.P. ("Back Bay Advisors") --------- ------ ------ --------- ------ ------
MANAGERS: J. Scott Nicholson and Richard G. Raczkowski Low X Low
CATEGORY: Corporate Income
TICKER SYMBOL: CLASS A CLASS B CLASS C
---------------------------
NEFAX NEABX NECSX
</TABLE>
INVESTMENT GOAL
The Fund seeks a high level of current income consistent with preservation of
capital.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund intends to invest in corporate bonds
and will invest at least 10% of its assets in U.S. Treasury and Agency
securities. The Fund may invest up to 25% of its assets in U.S.
dollar-denominated foreign securities and up to 10% of its assets in securities
denominated in foreign currencies (and related currency hedging transactions).
It may also invest up to 10% of its assets in lower-rated bonds, which may
include emerging market bonds (rated BB or lower by Standard & Poor's Ratings
Group ("S&P") and Ba or lower by Moody's Investors Service, Inc. ("Moody's")).
Back Bay Advisors follows a total return oriented investment approach in
selecting securities for the Fund. It seeks corporate, mortgage-related or U.S.
government securities that give the Fund's portfolio the following
characteristics, although Back Bay Advisors may look for other characteristics
if market conditions change:
x average credit rating of "A" by S&P or Moody's
x average maturity of 3 years or less
In selecting investments for the Fund, Back Bay Advisors employs the following
strategies:
o Its research analysts work closely with the Fund's portfolio manager to
develop an outlook on the economy from research produced by various Wall
Street firms and specific forecasting services or from economic data released
by U.S. and foreign governments as well as the Federal Reserve Bank.
o Next, the analysts conduct a thorough review of individual securities to
identify what they consider attractive values in the corporate and mortgage
marketplace. This value analysis uses quantitative tools such as internal and
external computer systems and software.
o Back Bay Advisors continuously monitors an issuer's creditworthiness to assess
whether the obligation remains an appropriate investment for the Fund.
o Back Bay Advisors seeks to balance opportunities for yield and price
performance by combining macroeconomic analysis with individual security
selection. The short-term maturity of the Fund's investments creates the
opportunity for greater price stability in addition to the conservative
income-producing capabilities of higher quality fixed-income securities.
The Fund may:
o Invest in 144A securities, collateralized mortgage obligations, asset-backed
securities and zero-coupon bonds.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
FIXED INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise.
Lower-quality fixed-income securities and zero-coupon bonds may be subject to
these risks to a greater extent than other fixed-income securities.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency. Investments in emerging markets may
be subject to these risks to a greater extent than those in more developed
markets.
MORTGAGE-RELATED AND ASSET-BACKED SECURITIES: Subject to prepayment risk. With
prepayment, the Fund may reinvest the prepaid amounts in securities with lower
yields than the prepaid obligations. The Fund may also incur a realized loss
when there is a prepayment of securities that were purchased at a premium.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Short Term Corporate Income Fund by showing changes in the Fund's
performance from year to year and by showing how the Fund's average annual
returns for one-year, five-year and since-inception periods compare with those
of a broad measure of market performance and those of indices of funds with
similar objectives. The Fund, formerly known as Adjustable Rate U.S. Government
Fund, changed its name and investment policies on December 1, 1998. The Fund is
still managed by the same subadviser and portfolio manager. The bar chart and
table reflect results achieved under different investment policies prior to
December 1, 1998. The Fund's past performance does not necessarily indicate how
it will perform in the future.
The bar chart shows the Fund's total returns for Class A shares for each
calendar year since the Fund's first full year of operations. The returns for
the other classes of shares offered by this Prospectus differ from the Class A
returns shown in the bar chart, depending upon the respective expenses of each
class. The chart does not reflect any sales charge that you may be required to
pay when you buy or redeem the Fund's shares. A sales charge will reduce your
return.
(total return)
1992 4.93%
1993 4.10%
1994 0.82%
1995 8.60%
1996 5.83%
1997 6.21%
1998 4.07%
1999 1.87%
/\ Highest Quarterly Return: First Quarter 1995, up 3.35%
\/ Lowest Quarterly Return: Second Quarter 1999, down 0.07%
The table below shows the Fund's average annual total returns for the one-year,
five-year and since-inception periods compared to those of the Lehman Mutual
Fund Short (1-5) Investment Grade Debt Index (the "Lehman Short Index"), an
unmanaged index of corporate bonds with maturities between one and five years.
They are also compared to the Morningstar Short Term Bond Average and the Lipper
Short Term Investment Grade Average, each an average of the total return of
mutual funds with similar investment objectives as the Fund as calculated by
Morningstar, Inc. and Lipper, Inc. The Fund changed investment policies and
comparative indices on December 1, 1998. You may not invest directly in an
index. The Fund's total returns reflect its expenses and the maximum sales
charge you pay when you buy or redeem the Fund's shares. The Lehman Short
Index's percentages have not been adjusted for ongoing management, distribution
and operating expenses and sales charges applicable to mutual fund investments.
The Morningstar Short Term Bond Average and Lipper Short Term Investment Grade
Average percentages have been adjusted for these expenses but do not reflect any
sales charges.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
SINCE CLASS A SINCE CLASS B SINCE CLASS C
PAST 1 YEAR PAST 5 YEARS INCEPTION INCEPTION INCEPTION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NVEST SHORT TERM CORPORATE INCOME FUND
(formerly Adjustable Rate U.S. Government Fund)
Class A (inception 10/18/91) -1.24% 4.65% 4.17%
Class B (inception 9/13/93) -3.69% 4.18% 3.56%
Class C (inception 12/7/98) 0.24% 1.38%
Lehman Mutual Fund Short (1-5) Investment
Grade Index 2.49% 7.30% 6.72% 5.88% 2.49%
Morningstar Short Term Bond Average 2.14% 6.09% 5.55% 4.75% 2.13%
Lipper Short Term Investment Grade Average 2.81% 5.95% 5.59% 4.88% 2.81%
- -----------------------------------------------------------------------------------------------------------------------------------
Each Index is calculated from 10/31/91 for Class A shares, 9/30/93 for Class B shares and 12/31/98 for Class C shares.
For actual past expenses of Class A, B and C shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS DURATION
--------------------------- ----------------------- -----------------------
Quality
NVEST BOND INCOME FUND Stability Income Growth Short Int. Long
High X High X
--------- ------ ------ --------- ------ ------
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") Mod. X Mod.
SUBADVISER: Back Bay Advisors, L.P. ("Back Bay Advisors") --------- ------ ------ --------- ------ ------
MANAGERS: Peter W. Palfrey and Richard G. Raczkowski Low X Low
CATEGORY: Corporate Income
TICKER SYMBOL: CLASS A CLASS B CLASS C
---------------------------
NEFRX NERBX NECRX
</TABLE>
INVESTMENT GOAL
The Fund seeks a high level of current income consistent with what the Fund
considers reasonable risk. It invests primarily in corporate and U.S. government
bonds.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest primarily in U.S. corporate
and U.S. government bonds. It will adjust to changes in the relative strengths
of the U.S. corporate or U.S. government bond markets by shifting the relative
balance between the two. The Fund will invest at least 80% of its assets in
investment-grade bonds (rated BBB or higher by Standard & Poor's Ratings Group
("S&P") or Baa or higher by Moody's Investors Service, Inc. ("Moody's")) and
will generally maintain an average effective maturity of ten years or less. The
Fund may also purchase lower-quality bonds (those rated below BBB by S&P and
below Baa by Moody's).
Back Bay Advisors follows a total return oriented investment approach in
selecting securities for the Fund. It takes into account economic and market
conditions as well as issuer-specific data, such as:
x fixed charge coverage
x the relationship between cash flows and dividend obligations
x the experience and perceived strength of management
x price responsiveness of the security to interest rate changes
x earnings prospects
x debt as a percentage of assets
x borrowing requirements, debt maturity schedules and liquidation value
In selecting investments for the Fund, Back Bay Advisors employs the following
strategies:
o Its research analysts work closely with the Fund's portfolio manager to
develop an outlook for the economy from research produced by various Wall
Street firms and specific forecasting services or from economic data released
by U.S. and foreign governments as well as the Federal Reserve Bank.
o Next, the analysts conduct a thorough review of individual securities to
identify what they consider attractive values in the high quality bond market.
This value analysis uses quantitative tools such as internal and external
computer systems and software.
o Back Bay Advisors continuously monitors an issuer's creditworthiness to assess
whether the obligation remains an appropriate investment to the Fund. It may
relax its emphasis on quality with respect to a given security if it believes
that the issuer's financial outlook is solid. This may create an opportunity
for higher return.
o Back Bay Advisors seeks to balance opportunities for yield and price
performance by combining macroeconomic analysis with individual security
selection. Fund holdings are diversified across industry groups such as
utilities or telecommunications, which tend to move independently of the ebbs
and flows in economic growth.
The Fund may:
o Invest in foreign securities, including those of emerging markets, and related
currency hedging transactions.
o Invest in Rule 144A and mortgage-backed securities.
o Invest substantially all of its assets in U.S. government securities for
temporary defensive purposes in response to adverse market, economic or
political conditions. These investments may prevent the Fund from achieving
its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise. Lower
quality fixed-income securities may be subject to these risks to a greater
extent than other fixed-income securities.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency. Investments in emerging markets may
be subject to these risks to a greater extent than those in more developed
markets.
MORTGAGE-RELATED SECURITIES: Subject to prepayment risk. With prepayment, the
Fund may reinvest the prepaid amounts in securities with lower yields than the
prepaid obligations. The Fund may also incur a realized loss when there is a
prepayment of securities that were purchased at a premium.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Bond Income Fund by showing changes in the Fund's performance from year
to year and by showing how the Fund's average annual returns for one-, five-and
ten-year periods compare with those of a broad measure of market performance and
those of indices of funds with similar objectives. The Fund's past performance
does not necessarily indicate how it 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. The returns for the other classes of shares offered by
this Prospectus differ from the Class A returns shown in the bar chart,
depending upon the respective expenses of each class. The chart does not reflect
any sales charge that you may be required to pay when you buy or redeem the
Fund's shares. A sales charge will reduce your return.
(total return)
1990 7.42%
1991 18.13%
1992 7.66%
1993 11.83%
1994 -4.17%
1995 20.75%
1996 4.61%
1997 11.05%
1998 8.04%
1999 -0.34%
/\ Highest Quarterly Return: Second Quarter 1995, up 7.41%
\/ Lowest Quarterly Return: First Quarter 1994, down 3.30%
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' inception if shorter)
compared to those of the Lehman Aggregate Bond Index, an unmanaged index of
investment-grade bonds with one- to ten-year maturities issued by the U.S.
government and U.S. corporations. They are also compared to the Morningstar
Intermediate Term Bond Average ("Morningstar Int. Bond Average") and Lipper
Intermediate Investment Grade Debt Average ("Lipper Int. Invest. Grade Debt
Average"), each an average of the total return of mutual funds with similar
investment objectives as the Fund as calculated by Morningstar, Inc. and Lipper,
Inc. You may not invest directly in an index. The Fund's total returns reflect
its expenses and the maximum sales charge that you may pay when you buy or
redeem the Fund's shares. The Lehman Aggregate Bond Index returns have not been
adjusted for ongoing management, distribution and operating expenses and sales
charges applicable to mutual fund investments. The Morningstar Int. Bond Average
and Lipper Int. Invest. Grade Debt Average returns have been adjusted for these
expenses but do not reflect any sales charges.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS *Since class inception
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NVEST BOND INCOME FUND: Class A (inception 11/7/73) -4.81% 7.59% 7.76%
Lehman Aggregate Bond Index -0.82% 7.73% 7.70%
Morningstar Int. Bond Avg. -1.38% 6.82% 7.21%
Lipper Int. Invest. Grade Debt Avg. -1.31% 6.79% 7.09%
NVEST BOND INCOME FUND: Class B (inception 9/13/93) -5.74% 7.49% 5.15%*
Lehman Aggregate Bond Index (calculated from 9/30/93) -0.82% 7.73% 5.65%*
Morningstar Int. Bond Avg. (calculated from 9/30/93) -1.38% 6.82% 4.79%*
Lipper Int. Invest. Grade Debt Avg. (calculated from 9/30/93) -1.31% 6.79% 4.81%*
NVEST BOND INCOME FUND: Class C (inception 12/30/94) -2.02% 7.49% 7.49%*
Lehman Aggregate Bond Index -0.82% 7.73% 7.73%*
Morningstar Int. Bond Avg. -1.38% 6.82% 6.84%*
Lipper Int. Invest. Grade Debt Avg. -1.31% 6.79% 6.79%*
For actual past expenses of Class A, B and C shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS DURATION
--------------------------- ----------------------- -----------------------
Quality
NVEST HIGH INCOME FUND Stability Income Growth Short Int. Long
High X High
--------- ------ ------ --------- ------ ------
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") Mod. X Mod.
SUBADVISER: Loomis, Sayles & Company, L.P. ("Loomis Sayles") --------- ------ ------ --------- ------ ------
MANAGER: Gary l. Goodenough Low X Low X
CATEGORY: Corporate Income
TICKER SYMBOL: CLASS A CLASS B CLASS C
---------------------------
NEFHX NEFBX NEHCX
</TABLE>
INVESTMENT GOAL
The Fund seeks high current income plus the opportunity for capital appreciation
to produce a high total return.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest at least 65% of its assets
in lower-quality fixed-income securities, commonly known as "junk bonds." Junk
bonds are generally rated below BBB by Standard & Poor's Ratings Group ("S&P")
and below Baa by Moody's Investors Service, Inc. ("Moody's"). The Fund will
normally invest at least 80% of its assets in U.S. corporate or U.S.
dollar-denominated foreign fixed-income securities. The Fund may also invest up
to 20% of its assets in foreign currency-denominated fixed-income securities,
including those in emerging markets.
Loomis Sayles performs its own extensive credit analyses to determine the
creditworthiness and potential for capital appreciation of a security. The
Fund's management minimizes market timing or interest rate forecasting. Instead,
it uses a strategy based on gaining a thorough understanding of industry and
company dynamics as well as individual security characteristics such as:
x issuer debt and debt maturity schedules
x earnings prospects
x responsiveness to changes in interest rates
x experience and perceived strength of management
x borrowing requirements and liquidation value
x market price in relation to cash flow, interest and dividends
In selecting investments for the Fund, Loomis Sayles employs the following
strategies:
o It utilizes the skills of its in-house team of more than 40 research analysts
to cover a broad universe of industries, companies and markets. The Fund's
portfolio manager takes advantage of these extensive resources to identify
securities that meet the Fund's investment criteria.
o Loomis Sayles employs a selection strategy that focuses on a value-driven,
bottom-up approach to identify securities that provide an opportunity for both
generous yields and capital appreciation. Loomis Sayles analyzes an individual
company's potential for positive financial news to determine if it has growth
potential. Examples of positive financial news include an upward turn in the
business cycle, improvement in cash flows, rising profits or the awarding of
new contracts.
o Loomis Sayles emphasizes in-depth credit analysis, appreciation potential and
diversification in its bond selection. Each bond is evaluated to assess the
ability of its issuer to pay interest and, ultimately, principal (which helps
the Fund generate an ongoing flow of income). Loomis Sayles also assesses a
bond's relation to market conditions within its industry and favors bonds
whose prices may benefit from positive business developments.
o Loomis Sayles seeks to diversify the Fund's holdings to reduce the inherent
risk in lower-quality fixed-income securities. The Fund's portfolio will
generally include 45 to 50 holdings across many industries.
The Fund may:
o Invest in zero-coupon, pay-in-kind and Rule 144A securities.
o Purchase higher quality debt securities (such as U.S. government securities
and obligations of U.S. banks with at least $2 billion of deposits) for
temporary defensive purposes in response to adverse market, economic or
political conditions, such as a rising trend in interest rates. These
investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise.
Lower-quality fixed-income securities and zero-coupon bonds may be subject to
these risks to a greater extent than other fixed-income securities.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency. Investments in emerging markets may
be subject to these risks to a greater extent than those in more developed
markets.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest High Income Fund by showing changes in the Fund's performance from year
to year and by showing how the Fund's average annual returns for one-, five and
ten-year periods compare with those of a broad measure of market performance and
those of indices of funds with similar objectives. The Fund's past performance
does not necessarily indicate how it will perform in the future. The Fund's
current subadviser assumed that function on July 1, 1996. This chart and table
reflect results achieved by the previous subadviser using different investment
principles for periods prior to July 1, 1996.
The bar chart shows the Fund's total returns for Class A shares for each of the
last ten calendar years. The returns for the other classes of shares offered by
this Prospectus differ from the Class A returns shown in the bar chart,
depending upon the respective expenses of each class. The chart does not reflect
any sales charge that you may be required to pay when you buy or redeem the
Fund's shares. A sales charge will reduce your return.
(total return)
1990 -13.28%
1991 36.42%
1992 15.73%
1993 16.57%
1994 -3.22%
1995 11.75%
1996 14.88%
1997 15.37%
1998 -1.66%
1999 4.00%
/\ Highest Quarterly Return: First Quarter 1991, up 11.92%
\/ Lowest Quarterly Return: Fourth Quarter 1990, down 9.10%
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' inception if shorter)
compared to those of the Lehman High Yield Composite Index, a market-weighted
unmanaged index of fixed-rate, noninvestment grade debt. They are also compared
to the Morningstar High Yield Bond and Lipper High Current Yield Averages each
an average of the total return of mutual funds with similar investment
objectives as the Fund as calculated by Morningstar, Inc. and Lipper, Inc. You
may not invest directly in an index. The Fund's total returns reflect its
expenses and the maximum sales charge that you may pay when you buy or redeem
the Fund's shares. The Lehman High Yield Composite Index returns have not been
adjusted for ongoing management, distribution and operating expenses and sales
charges applicable to mutual fund investments. The Morningstar High Yield Bond
Average and Lipper High Current Yield Average returns have been adjusted for
these expenses but do not reflect any sales charges.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999) *Since
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS class
- ------------------------------------------------------------------------------------------------------------- inception
<S> <C> <C> <C>
NVEST HIGH INCOME FUND: Class A (inception 2/22/84) -0.71% 7.66% 8.38%
Lehman High Yield Composite Index 2.39% 9.31% 10.72%
Morningstar High Yield Bond Average 4.19% 8.79% 9.98%
Lipper High Current Yield Average 4.53% 8.84% 10.03%
NVEST HIGH INCOME FUND: Class B (inception 9/20/93) -1.35% 7.63% 6.27%*
Lehman High Yield Composite Index
(calculated from 9/30/93) 2.39% 9.31% 7.85%*
Morningstar High Yield Bond Average
(calculated from 9/30/93) 4.19% 8.79% 7.51%*
Lipper High Current Yield Average
(calculated from 9/30/93) 4.53% 8.84% 7.39%*
NVEST HIGH INCOME FUND: Class C (inception 3/2/98) 2.40% -0.40%*
Lehman High Yield Composite Index
(calculated from 2/28/98) 2.39% 1.01%*
Morningstar High Yield Bond Average
(calculated from 2/28/98) 4.19% 0.48%*
Lipper High Current Yield Average
(calculated from 2/28/98) 4.53% 0.14%*
For actual past expenses of Class A, B and C shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS DURATION
--------------------------- ----------------------- -----------------------
Quality
NVEST STRATEGIC Stability Income Growth Short Int. Long
INCOME FUND High X High
--------- ------ ------ --------- ------ ------
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") Mod. X Mod. X
SUBADVISER: Loomis, Sayles & Company, L.P. ("Loomis Sayles") --------- ------ ------ --------- ------ ------
MANAGERS: Daniel J. Fuss and Kathleen C. Gaffney Low X Low
CATEGORY: Corporate Income
TICKER SYMBOL: CLASS A CLASS B CLASS C
---------------------------
NEFZX NEZBX NECZX
</TABLE>
INVESTMENT GOAL
The Fund seeks high current income with a secondary objective of capital growth.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all of its
assets in debt instruments (including lower-quality securities) with a focus on
U.S. corporate bonds, foreign debt instruments, including those in emerging
markets and U.S. government securities. The Fund may invest up to 35% of its
assets in preferred stocks and dividend-paying common stocks. The portfolio
managers shift the Fund's assets among various bond segments based upon changing
market conditions.
Loomis Sayles performs its own extensive credit analyses to determine the
creditworthiness and potential for capital appreciation of a security. The
Fund's management refrains from market timing or interest rate forecasting.
Instead, it uses a flexible approach to identify securities in the global
marketplace with the following characteristics, although not all of the
securities selected will have these attributes:
x discounted share price compared to economic value
x undervalued credit ratings with strong or improving credit profiles
x yield premium relative to its benchmark
In selecting investments for the Fund, Loomis Sayles generally employs the
following strategies:
o It utilizes the skills of its in-house team of more than 40 research analysts
to cover a broad universe of industries, companies and markets. The Fund's
portfolio managers take advantage of these extensive resources to identify
securities that meet the Fund's investment criteria.
o Loomis Sayles seeks to buy bonds at a discount -- bonds that offer a positive
yield advantage over the market and, in its view, have room to go up in price.
It may also invest to take advantage of what the portfolio managers believe
are temporary disparities in the yield of different segments of the market for
U.S. government securities.
o Loomis Sayles provides the portfolio managers with maximum flexibility to find
investment opportunities in a wide range of markets, both domestic and
foreign. This flexible approach offers investors one-stop access to a wide
array of investment opportunities. The three key sectors that the portfolio
managers focus upon are U.S. corporate issues, foreign bonds and U.S.
government securities.
o The Fund's portfolio managers maintain a core of the Fund's investments in
corporate bond issues and shift its assets among other bond segments as
opportunities develop. The Fund maintains a high level of diversification as a
form of risk management.
The Fund may:
o Invest in mortgage-backed securities, zero- coupon or pay-in-kind bonds, and
stripped securities.
o Invest substantially in U.S. government securities for temporary defensive
purposes in response to adverse market, economic or political conditions.
These investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise.
Lower-quality fixed-income securities and zero-coupon bonds may be subject to
these risks to a greater extent than other fixed-income securities.
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in value or periods of below-
average performance in a given stock or in the stock market as a whole.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency. Investments in emerging markets may
be subject to these risks to a greater extent than those in more developed
markets.
MORTGAGE-RELATED SECURITIES: Subject to prepayment risk. With prepayment, the
Fund may reinvest the prepaid amounts in securities with lower yields than the
prepaid obligations. The Fund may also incur a realized loss when there is a
prepayment of securities that were purchased at a premium. Stripped securities
are more sensitive to changes in the prevailing interest rates and the rate of
principal payments on the underlying assets than regular mortgage-backed
securities.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Strategic Income Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual returns for one-year
and since inception compare with a broad measure of market performance and those
of indices of funds with similar objectives. The Fund's past performance does
not necessarily indicate how it will perform in the future.
The bar chart shows the Fund's total returns for Class A shares for each
calendar year since its first full year of operations. The returns for the other
classes of shares offered by this Prospectus differ from the Class A returns
shown in the bar chart, depending upon the respective expenses of each class.
The chart does not reflect any sales charge that you may be required to pay when
you buy or redeem the Fund's shares. A sales charge will reduce your return.
(total return)
1996 14.49%
1997 9.33%
1998 -1.69%
1999 12.17%
/\ Highest Quarterly Return: Fourth Quarter 1998, up 7.42%
\/ Lowest Quarterly Return: Third Quarter 1998, down 10.57%
The table below shows the Fund's average annual total returns for the one-year
and since-inception periods compared to those of the Lehman Aggregate Bond
Index, a market-weighted aggregate index that includes nearly all debt issued by
the U.S. Treasury, U.S. government agencies and U.S. corporations rated
investment grade, and U.S. agency debt backed by mortgage pools. They are also
compared to the Lehman Universal Bond Index, an unmanaged index representing 85%
of the return of the Lehman Brothers Aggregate Bond Index, 5% of the Lehman
Brothers High Yield Corporate Bond Index, 4% of the Lehman Brothers Emerging
Market Index, 5% of Eurodollar instruments and 1% of 144A Commercial Paper. They
are also compared to the Morningstar Multi-Sector Bond Average and Lipper
Multi-Sector Income Average, each an average of the total return of mutual funds
with similar investment objectives as the Fund, as calculated by Morningstar,
Inc. and Lipper, Inc. You may not invest directly in an index. The Fund's total
returns reflect its expenses and the maximum sales charges that you may pay when
you buy or redeem the Fund's shares. The Lehman Aggregate Bond Index and the
Lehman Universal Bond Index returns have not been adjusted for ongoing
management, distribution and operating expenses and sales charges applicable to
mutual fund investments. The Morningstar Multi-Sector Bond Average and Lipper
Multi-Sector Income Average returns have been adjusted for these expenses but do
not reflect any sales charges.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999)
SINCE CLASS
PAST 1 YEAR INCEPTION
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
NVEST STRATEGIC INCOME FUND: Class A (inception 5/1/95) 7.08% 8.35%
Lehman Aggregate Bond Index (calculated from 4/30/95) -0.82% 6.85%
Lehman Universal Bond Index (calculated from 4/30/95) 0.17% 6.22%
Morningstar Multi-Sector Bond Average (calculated from 4/30/95) -2.55% 7.26%
Lipper Multi-Sector Income Average (calculated from 4/30/95) 2.58% 7.27%
NVEST STRATEGIC INCOME FUND: Class B (inception 5/1/95) 6.33% 8.29%
Lehman Aggregate Bond Index (calculated from 4/30/95) -0.82% 6.85%
Lehman Universal Bond Index (calculated from 4/30/95) 0.17% 6.22%
Morningstar Multi-Sector Bond Average (calculated from 4/30/95) -2.55% 7.26%
Lipper Multi-Sector Income Average (calculated from 4/30/95) 2.58% 7.27%
NVEST STRATEGIC INCOME FUND: Class C (inception 5/1/95) 10.34% 8.53%
Lehman Aggregate Bond Index (calculated from 4/30/95) -0.82% 6.85%
Lehman Universal Bond Index (calculated from 4/30/95) 0.17% 6.22%
Morningstar Multi-Sector Bond Average (calculated from 4/30/95) -2.55% 7.26%
Lipper Multi-Sector Income Average (calculated from 4/30/95) 2.58% 7.27%
For actual past expenses of Class A, B and C shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS DURATION
--------------------------- ----------------------- -----------------------
Quality
NVEST LIMITED TERM Stability Income Growth Short Int. Long
U.S. GOVERNMENT FUND High X X High X
--------- ------ ------ --------- ------ ------
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") Mod. Mod.
SUBADVISER: Back Bay Advisors, L.P. ("Back Bay Advisors") --------- ------ ------ --------- ------ ------
MANAGERS: James S. Welch and J. Scott Nicholson Low X Low
CATEGORY: Government Income
TICKER SYMBOL: CLASS A CLASS B CLASS C
---------------------------
NEFLX NELBX NECLX
</TABLE>
INVESTMENT GOAL
The Fund seeks a high current return consistent with preservation of capital.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest primarily in U.S.
government securities, including U.S. Treasury and Agency bills, notes and
bonds, pass through mortgage securities issued or guaranteed by U.S. government
agencies and zero-coupon bonds.
Back Bay Advisors follows a total return oriented investment approach in
selecting securities for the Fund. It seeks securities that give the Fund's
portfolio the following characteristics, although Back Bay Advisors may look for
other characteristics if market conditions change:
x average credit rating of "AAA" by Standard & Poor's Ratings Group ("S&P") or
"Aaa" by Moody's Investors Service, Inc., ("Moody's")
x effective duration range of 2 to 4 years
In selecting investments for the Fund, Back Bay Advisors employs the following
strategies:
o Its research analysts work closely with the Fund's portfolio managers to
develop an outlook on the economy from research produced by various Wall
Street firms and specific forecasting services or from economic data released
by the U.S. and foreign governments as well as the Federal Reserve Bank.
o Next, the analysts conduct a thorough review of individual securities to
identify what they consider attractive values in the U.S. government security
marketplace. This value analysis uses quantitative tools such as internal and
external computer systems and software.
o Back Bay Advisors continuously monitors an issuer's creditworthiness to assess
whether the obligation remains an appropriate investment to the Fund.
o It seeks to balance opportunities for yield and price performance by combining
macroeconomic analysis with individual security selection. It emphasizes
securities that tend to perform particularly well in response to interest rate
changes, such as U.S. Treasury securities in a declining interest rate
environment and mortgage-backed or U.S. government agency securities in a
steady or rising interest rate environment.
o Back Bay Advisors seeks to increase the opportunity for higher yields while
maintaining the greater price stability that intermediate-term bonds have
compared to bonds with longer maturities.
The Fund may:
o Invest in investment-grade corporate notes and bonds (rated BBB or higher by
S&P and Baa or higher by Moody's).
o Invest in asset-backed securities rated AAA by S&P or Aaa by Moody's.
o Invest in foreign bonds denominated in U.S. dollars.
o Engage in active and frequent trading of its securities. Frequent trading may
produce higher transaction costs and a higher level of taxable capital gains,
which may lower your return.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise. Zero-coupon
bonds may be subject to these risks to a greater extent than other
fixed-income securities.
MORTGAGE- AND ASSET-BACKED SECURITIES: Subject to prepayment risk. With
prepayment, the Fund may reinvest the prepaid amounts in securities with lower
yields than the prepaid obligations. The Fund may also incur a realized loss
when there is a prepayment of securities that were purchased at a premium.
FOREIGN SECURITIES: Foreign bonds denominated in U.S. dollars may be more
volatile than U.S. securities and carry political, economic and information
risks that are associated with foreign securities.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Limited Term U.S. Government Fund by showing changes in the Fund's
performance from year to year and by showing how the Fund's average annual
returns for one-, five- and ten-year (since inception if shorter) periods
compare with those of a broad measure of market performance and those of indices
of funds with similar objectives. The Fund's past performance does not
necessarily indicate how it 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. The returns for the other classes of shares offered by
this Prospectus differ from the Class A returns shown in the bar chart,
depending upon the respective expenses of each class. The chart does not reflect
any sales charge that you may be required to pay when you buy or redeem the
Fund's shares. A sales charge will reduce your return.
(total return)
1990 10.49%
1991 13.82%
1992 5.62%
1993 7.47%
1994 -2.22%
1995 13.00%
1996 2.37%
1997 7.27%
1998 6.49%
1999 -0.67%
/\ Highest Quarterly Return: Third Quarter 1991, up 5.01%
\/ Lowest Quarterly Return: First Quarter 1994, down 1.60%
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 inception if shorter)
compared to those of the Lehman Intermediate Government Bond Index ("Lehman Int.
Gov't Bond Index"), an unmanaged index of bonds issued by the U.S. Government
and its agencies having maturities between one and ten years. They are also
compared to the Morningstar Short Government Average and the Lipper Short
Intermediate U.S. Government Average ("Lipper Short Int. U.S. Gov't Average"),
each an average of the total return of mutual funds with similar investment
objectives as the Fund as calculated by Morningstar, Inc. and Lipper, Inc. You
may not invest directly in an index. The Fund's total returns reflect its
expenses and the maximum sales charges that you may pay when you buy or redeem
the Fund's shares. The Lehman Int. Gov't Bond Index returns have not been
adjusted for ongoing management, distribution and operating expenses and sales
charges applicable to mutual fund investments. The Morningstar Short Government
Average and Lipper Short Int. U.S. Gov't Average returns have been adjusted for
these expenses but do not reflect any sales charges.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------ *Since class
AVERAGE ANNUAL TOTAL RETURNS inception
(for the periods ended December 31, 1999)
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
<S> <C> <C> <C>
NVEST LIMITED TERM U.S. GOVERNMENT FUND: Class A
(inception 1/3/89) -3.64% 4.94% 5.92%
Lehman Int. Gov't. Bond Index (calculated from 1/31/89) 0.49% 6.93% 7.10%
Morningstar Short Government Average
(calculated from 1/31/89) 1.59% 5.78% 6.29%
Lipper Short Int. U.S. Gov't. Average
(calculated from 1/31/89) 0.64% 6.00% 6.47%
NVEST LIMITED TERM U.S. GOVERNMENT FUND: Class B
(inception 9/27/93) -6.09% 4.58% 3.28%*
Lehman Int. Gov't. Bond Index (calculated from 9/30/93) 0.49% 6.93% 5.24%*
Morningstar Short Government Average
(calculated from 9/30/93) 1.59% 5.78% 4.44%*
Lipper Short Int. U.S. Gov't. Average
(calculated from 9/30/93) 0.64% 6.00% 4.36%*
NVEST LIMITED TERM U.S. GOVERNMENT FUND: Class C
(inception 12/30/94) -2.34% 4.72% 4.72%*
Lehman Int. Gov't. Bond Index 0.49% 6.93% 6.93%*
Morningstar Short Government Average 1.59% 5.78% 5.83%*
Lipper Short Int. U.S. Gov't. Average 0.64% 6.00% 6.00%*
- ------------------------------------------------------------------------------------------------------------
For actual past expenses of Class A, B and C shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS DURATION
--------------------------- ----------------------- -----------------------
Quality
NVEST GOVERNMENT Stability Income Growth Short Int. Long
SECURITIES FUND High X High X
--------- ------ ------ --------- ------ ------
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") Mod. X Mod.
SUBADVISER: Back Bay Advisors, L.P. ("Back Bay Advisors") --------- ------ ------ --------- ------ ------
MANAGERS: James S. Welch and J. Scott Nicholson Low X Low
CATEGORY: Government Income
TICKER SYMBOL: CLASS A CLASS B
---------------------------
NEFUX NEUBX
</TABLE>
INVESTMENT GOAL
The Fund seeks a high level of current income consistent with safety of
principal by investing in U.S. government securities.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest its assets in U.S.
government securities, including U.S. Treasury bills, notes and bonds, and
mortgage-backed securities issued or guaranteed by U.S. government agencies.
Back Bay Advisors follows a total return oriented investment approach in
selecting securities for the Fund. It seeks securities that give the Fund's
portfolio the following characteristics, although these characteristics may
change depending on market conditions:
x average credit quality of "AAA" by Standard & Poor's Ratings Group or "Aaa" by
Moody's Investors Service, Inc.
x average maturity of 10 years or more
In selecting investments for the Fund's portfolio, Back Bay Advisors employs the
following strategies:
o Its research analysts work closely with the Fund's portfolio managers to
develop an outlook on the economy from research produced by various Wall
Street firms and specific forecasting services or from economic data released
by U.S. and foreign governments as well as the Federal Reserve Bank.
o Next, the analysts conduct a thorough review of individual securities to
identify what they consider attractive values in the U.S. government security
marketplace. This value analysis uses quantitative tools such as internal and
external computer systems and software.
o Back Bay Advisors seeks to balance opportunities for yield and price
performance by combining macroeconomic analysis with individual security
selection. They will emphasize securities that tend to perform particularly
well in response to interest rate changes, such as U.S. Treasury securities in
a declining interest rate environment and mortgage-backed or U.S. government
agency securities in a steady or rising interest rate environment.
o Back Bay Advisors seeks to maximize the opportunity for high yields while
taking into account the price volatility inherent in bonds with longer
maturities.
The Fund may:
o Invest in zero-coupon bonds.
o Invest in mortgage-related securities, including collateralized mortgage
obligations and stripped securities.
o Engage in active and frequent trading of securities. Frequent trading may
produce higher transaction costs and a higher level of taxable capital gains,
which may lower your return.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise. Zero-coupon
bonds may be subject to these risks to a greater extent than other
fixed-income securities.
MORTGAGE-RELATED SECURITIES: Subject to prepayment risk. With prepayment, the
Fund may reinvest the prepaid amounts in securities with lower yields than the
prepaid obligations. The Fund may also incur a realized loss when there is a
prepayment of securities that were purchased at a premium.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Government Securities Fund by showing changes in the Fund's performance
from year to year and by showing how the Fund's average annual returns for one-,
five- and ten-year (since inception if shorter) periods compare with those of a
broad measure of market performance and those of indices of funds with similar
objectives. The Fund's past performance does not necessarily indicate how it
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. The returns for the other classes of shares offered by
this Prospectus differ from the Class A returns shown in the bar chart,
depending upon the respective expenses of each class. The chart does not reflect
any sales charge that you may be required to pay when you buy or redeem the
Fund's shares. A sales charge will reduce your return.
(total return)
1990 5.59%
1991 14.86%
1992 6.77%
1993 9.04%
1994 -5.44%
1995 20.01%
1996 0.77%
1997 10.32%
1998 9.05%
1999 -6.42%
/\ Highest Quarterly Return: Third Quarter 1991, up 8.04%
\/ Lowest Quarterly Return: First Quarter 1996, down 3.19%
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' inception if shorter)
compared to those of the Lehman Government Bond Index ("Lehman Gov't Bond
Index"), an unmanaged index of public debt of the U.S. Treasury, government
agencies and their obligations. The Fund's returns are also compared to the
Morningstar Long Government Average and Lipper General Government Average
("Lipper General Gov't. Average"), each an average of the total return of mutual
funds with similar investment objectives as the Fund as calculated by
Morningstar, Inc. and Lipper, Inc. You may not invest directly in an index. The
Fund's total returns reflect its expenses and the maximum sales charges that you
may pay when you buy or redeem the Fund's shares. The Lehman Gov't Bond Index
returns have not been adjusted for ongoing management, distribution and
operating expenses and sales charges applicable to mutual fund investments. The
Morningstar Long Government Average and Lipper General Gov't. Average returns
have been adjusted for these expenses but do not reflect any sales charges.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------- *Since
AVERAGE ANNUAL TOTAL RETURNS class
(for the periods ended December 31, 1999) inception
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
<S> <C> <C> <C>
NVEST GOVERNMENT SECURITIES FUND: Class A
(inception 9/16/85) -10.63% 5.40% 5.67%
Lehman Gov't. Bond Index -2.23% 7.44% 7.48%
Morningstar Long Government Average -7.10% 7.46% 7.37%
Lipper General. Gov't. Average -3.01% 6.51% 6.63%
NVEST GOVERNMENT SECURITIES FUND: Class B
(inception 9/23/93) -11.53% 5.25% 3.19%*
Lehman Gov't. Bond Index (calculated from 9/30/93) -2.23% 7.44% 5.27%*
Morningstar Long Government Average
(calculated from 9/30/93) -7.10% 7.46% 4.49%*
Lipper General. Gov't. Average
(calculated from 9/30/93) -3.01% 6.51% 4.32%*
- -------------------------------------------------------------------------------------------------------------
For actual past expenses of Class A and B shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS DURATION
--------------------------- ----------------------- -----------------------
Quality
NVEST MUNICIPAL Stability Income Growth Short Int. Long
INCOME FUND High X High X
--------- ------ ------ --------- ------ ------
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") Mod. X Mod.
SUBADVISER: Back Bay Advisors, L.P. ("Back Bay Advisors") --------- ------ ------ --------- ------ ------
MANAGERS: James S. Welch Low X Low
CATEGORY: Tax-Free Income
TICKER SYMBOL: CLASS A CLASS B
---------------------------
NEFTX NETBX
</TABLE>
INVESTMENT GOAL
The 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. The Fund invests primarily in debt securities of municipal issuers
("municipal securities"), which pay interest that is exempt from regular federal
income tax but may be subject to the federal alternative minimum tax.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest at least 80% of its assets
in municipal securities, including those of states, other political subdivisions
of the United States and local governments. It will invest at least 85% of its
assets in investment-grade bonds (rated BBB or higher by Standard & Poor's
Ratings Group ("S&P") or Baa or higher by Moody's Investors Service, Inc.
("Moody's")), and the other 15% may be invested in non- investment grade bonds
(those rated below BBB by S&P and below Baa by Moody's). The Fund's portfolio
manager will generally shift assets among investment-grade bonds depending on
economic conditions and outlook in order to increase appreciation potential.
Back Bay Advisors follows a total return oriented investment approach in
selecting securities for the Fund. It takes into account economic conditions and
market conditions as well as issuer-specific data, such as:
x the relationship between cash flows and dividend obligations
x the experience and perceived strength of management
x price responsiveness of the security to interest rate changes
x earnings prospects
x debt as a percentage of assets
x borrowing requirements, debt maturity schedules and liquidation value
In selecting investments for the Fund, Back Bay Advisors employs the following
strategies:
o Its research analysts work closely with the Fund's portfolio manager to
develop an outlook for the economy from research produced by various Wall
Street firms and specific forecasting services or from economic data released
by U.S. and foreign governments as well as the Federal Reserve Bank.
o Next, the analysts conduct a thorough review of individual securities to
identify what they consider attractive values in the municipal marketplace.
This value analysis uses quantitative tools such as internal and external
computer systems and software.
o The Fund's portfolio manager and analysts then perform a careful and
continuous credit analysis to emphasize the range of the credit quality most
likely to provide the Fund with the highest level of tax-free income.
o Back Bay Advisors seeks to balance opportunities for yield and price
performance by combining macroeconomic analysis with individual security
selection. It invests in general obligation bonds and revenue bonds nationwide
and across a variety of municipal sectors. This use of multi-state and
multi-sector diversification helps provide increased protection against local
economic downturns or bond rating downgrades.
The Fund may:
o Invest in "private activity" bonds, which may subject a shareholder to an
alternative minimum tax.
o Invest in zero-coupon bonds.
o Engage in active and frequent trading of securities. Frequent trading may
produce higher transaction costs and a higher level of taxable capital gains,
which may lower your return.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise.
Lower-quality fixed-income securities and zero-coupon bonds may be subject to
these risks to a greater extent than other fixed-income securities.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Municipal Income Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual returns for one-,
five- and ten-year (since inception if shorter) periods compare with those of a
broad measure of market performance and those of indices of funds with similar
objectives. The Fund's past performance does not necessarily indicate how it
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. The returns for the other classes of shares offered by
this Prospectus differ from the Class A returns shown in the bar chart,
depending upon the respective expenses of each class. The chart does not reflect
any sales charge that you may be required to pay when you buy or redeem the
Fund's shares. A sales charge will reduce your return.
(total return)
1990 5.47%
1991 11.64%
1992 8.70%
1993 12.16%
1994 -8.02%
1995 17.21%
1996 4.63%
1997 8.57%
1998 5.35%
1999 -2.75%
/\ Highest Quarterly Return: First Quarter 1995, up 8.47%
\/ Lowest Quarterly Return: First Quarter 1994, down 6.53%
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' inception if shorter)
compared to those of the Lehman Municipal Index, an unmanaged index of bonds
issued by states, municipalities and other governmental entities having
maturities of more than one year. They are also compared to the Morningstar
Municipal National Long Average ("Morningstar Muni Nat'l. Long Average") and
Lipper General Municipal Average, each an average of the total return of mutual
funds with similar investment objectives as the Fund as calculated by
Morningstar, Inc. and Lipper, Inc. You may not invest directly in an index. The
Fund's total returns reflect its expenses and the maximum sales charge that you
may pay when you buy or redeem the Fund's shares. The Lehman Municipal Index
returns have not been adjusted for ongoing management, distribution and
operating expenses and sales charges applicable to mutual fund investments. The
Morningstar Muni Nat'l. Long Average and Lipper General Municipal returns have
been adjusted for these expenses but do not reflect any sales charges.
<TABLE>
- ------------------------------------------------------------------------------------------------------------- *Since class
AVERAGE ANNUAL TOTAL RETURNS inception
(for the periods ended December 31, 1999)
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
<S> <C> <C> <C>
Nvest Municipal Income Fund: Class A (inception 5/9/77) -7.17% 5.44% 5.58%
Lehman Municipal Index -2.06% 6.91% 6.89%
Morningstar Muni Nat'l. Long Average -4.81% 5.81% 6.16%
Lipper General Municipal Average -4.46% 5.76% 6.18%
Nvest Municipal Income Fund: Class B (inception 9/13/93) -8.10% 5.28% 3.09%*
Lehman Municipal Index (calculated from 9/30/93) -2.06% 6.91% 4.83%*
Morningstar Muni Nat'l. Long Average
(calculated from 9/30/93) -4.81% 5.81% 3.66%*
Lipper General Municipal Average
(calculated from 9/30/93) -4.46% 5.76% 3.73%*
- -------------------------------------------------------------------------------------------------------------
For actual past expenses of Class A and B shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
[graphic omitted] Fund Fees & Expenses
--------------------
The following tables describe the fees and expenses that you may pay if you buy
and hold shares of each Fund.
<TABLE>
SHAREHOLDER FEES
(fees paid directly from your investment)
<CAPTION>
ALL FUNDS EXCEPT
SHORT TERM CORPORATE INCOME FUND AND SHORT TERM CORPORATE INCOME FUND AND
LIMITED TERM U.S. GOVERNMENT FUND LIMITED TERM U.S. GOVERNMENT FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases (as a percentage of
offering price)(1)(2) 4.50% None None 3.00% None None
Maximum deferred sales charge (load)
(as a percentage of original purchase
price or redemption proceeds, as
applicable)(2) (3) 5.00% 1.00% (3) 5.00% 1.00%
Redemption fees None* None* None* None* None* None*
(1) A reduced sales charge on Class A shares applies in some cases. See "Ways to Reduce or Eliminate Sales Charges"
within the section entitled "Fund Services."
(2) Does not apply to reinvested distributions.
(3) A 1.00% contingent deferred sales charge applies with respect to certain purchases of Class A shares greater than
$1,000,000 redeemed within 1 year after purchase, but not to any other purchases or redemptions of Class A shares.
See "How Sales Charges are Calculated" within the section entitled "Fund Services."
* Generally, a transaction fee will be charged for expedited payment of redemption proceeds such as by wire or
overnight delivery.
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, as a percentage of average daily net assets)
SHORT TERM CORPORATE INCOME FUND BOND INCOME FUND HIGH INCOME FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 0.55% 0.55% 0.55% 0.41% 0.41% 0.41% 0.70% 0.70% 0.70%
Distribution and/or
service (12b-1) fees 0.25% 1.00%* 1.00%* 0.25% 1.00%* 1.00%* 0.25% 1.00%* 1.00%*
Other expenses 0.42% 0.42% 0.42% 0.31% 0.31% 0.31% 0.33% 0.33% 0.33%
Total annual fund
operating expenses 1.22% 1.97% 1.97% 0.97% 1.72% 1.72% 1.28% 2.03% 2.03%
Fee waiver/expense
reimbursement 0.32%** 0.32%** 0.32%** 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Net expenses 0.90% 1.65% 1.65% 0.97% 1.72% 1.72% 1.28% 2.03% 2.03%
<PAGE>
<CAPTION>
STRATEGIC INCOME FUND LIMITED TERM U.S. GOVERNMENT FUND GOVERNMENT SECURITIES FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 0.63% 0.63% 0.63% 0.65% 0.65% 0.65% 0.65% 0.65%
Distribution and/or
service (12b-1) fees 0.25% 1.00%* 1.00%* 0.35% 1.00%* 1.00%* 0.25% 1.00%*
Other expenses 0.33% 0.33% 0.33% 0.33% 0.33% 0.33% 0.46% 0.46%
Total annual fund
operating expenses 1.21% 1.96% 1.96% 1.33% 1.98% 1.98% 1.36% 2.11%
<CAPTION>
MUNICIPAL INCOME FUND
CLASS A CLASS B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Management fees 0.44% 0.44%
Distribution and/or
service (12b-1) fees 0.25% 1.00%*
Other expenses 0.24% 0.24%
Total annual fund
operating expenses 0.93% 1.68%
* Because of the higher 12b-1 fees, long-term shareholders may pay more than the economic equivalent of the maximum front-end
sales charge permitted by rules of the National Association of Securities Dealers, Inc.
** Nvest Management has given a binding undertaking to Short Term Corporate Income Fund to limit the amount of the Fund's total
fund operating expenses to 0.90%, 1.65% and 1.65% of its average daily net assets for Class A, Class B and Class C shares,
respectively. This undertaking is in effect until April 30, 2001 and will be reevaluated on an annual basis. Expense
information has been restated to reflect these current fees.
</TABLE>
<PAGE>
Fund Fees & Expenses [graphic omitted]
EXAMPLE
This example is intended to help you compare the cost of investing in each Fund
with the cost of investing in other mutual funds.
The example assumes that:
o You invest $10,000 in the Fund for the time periods indicated;
o Your investment has a 5% return each year; and
o The Fund's operating expenses remain the same.
Although your actual costs and returns may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
SHORT TERM CORPORATE INCOME FUND BOND INCOME FUND HIGH INCOME FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 389 $ 669 $ 169 $ 269 $ 169 $ 545 $ 676 $ 176 $ 276 $ 176 $ 575 $ 708 $ 208 $ 308 $ 208
3 years $ 647 $ 893 $ 593 $ 593 $ 593 $ 746 $ 846 $ 546 $ 546 $ 546 $ 840 $ 943 $ 643 $ 643 $ 643
5 years $ 924 $1,242 $1,042 $1,042 $1,042 $ 964 $1,140 $ 940 $ 940 $ 940 $1,124 $1,303 $1,103 $1,103 $1,103
10 years* $1,712 $2,090 $2,090 $2,287 $2,287 $1,590 $1,843 $1,843 $2,043 $2,043 $1,933 $2,181 $2,181 $2,376 $2,376
<CAPTION>
STRATEGIC INCOME FUND LIMITED TERM U.S. GOVERNMENT FUND GOVERNMENT SECURITIES FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 568 $ 701 $ 201 $ 301 $ 201 $ 432 $ 703 $ 203 $ 303 $ 203 $ 583 $ 716 $ 216
3 years $ 819 $ 921 $ 621 $ 621 $ 621 $ 711 $ 927 $ 627 $ 627 $ 627 $ 864 $ 967 $ 667
5 years $1,088 $1,266 $1,066 $1,066 $1,066 $1,011 $1,277 $1,077 $1,077 $1,077 $1,165 $1,345 $1,145
10 years* $1,856 $2,106 $2,106 $2,302 $2,302 $1,861 $2,154 $2,154 $2,323 $2,323 $2,019 $2,267 $2,267
<CAPTION>
MUNICIPAL INCOME FUND
- ---------------------------------------
CLASS A CLASS B
(1) (2)
<S> <C> <C> <C>
1 year $ 541 $ 672 $ 172
3 years $ 734 $ 834 $ 534
5 years $ 944 $1,119 $ 919
10 years* $1,545 $1,798 $1,798
(1) Assumes redemption at end of period
(2) Assumes no redemption at end of period
* Class B shares automatically convert to Class A shares after 8 years; therefore, Class B amounts are calculated using Class A
expenses in years 9 and 10.
</TABLE>
<PAGE>
MORE ABOUT RISK
The Funds have principal investment strategies that come with
inherent risks. The following is a list of risks to which each Fund may be
subject by investing in various types of securities or engaging in various
practices.
MARKET RISK (All Funds) The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably, based upon change in an issuer's
financial condition as well as overall market and economic conditions.
RISK OF SMALL CAPITALIZATION COMPANIES (Strategic Income Fund) These companies
carry special risks, including narrower markets, limited financial and
management resources, less liquidity and greater volatility than large company
stocks.
MANAGEMENT RISK (All Funds) The risk that a strategy used by a Fund's portfolio
management may fail to produce the intended result.
CREDIT RISK (All Funds) The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to honor a
financial obligation.
CURRENCY RISK (High Income, Strategic Income, Bond Income, Short Term Corporate
Income Funds) The risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment.
EMERGING MARKET RISK (Short Term Corporate Income, Bond Income, High Income,
Strategic Income Funds) The risk associated with securities markets of smaller
sizes or with short operating histories. Emerging markets involve risks in
addition to and greater than those generally associated with investing in
developed foreign markets. The extent of economic development, political
stability, market depth, infrastructure and capitalization and regulatory
oversight in emerging market economies is generally less than in more developed
markets.
RISKS OF OPTIONS, FUTURES AND SWAP CONTRACTS (Strategic Income, Municipal
Income, Short Term Corporate Income, Limited Term U.S. Government, Government
Securities Funds) These transactions are subject to changes in the underlying
security on which such transactions are based. It is important to note that even
a small investment in these types of derivative securities can have a
significant impact on a Fund's exposure to stock market values, interest rates
or the currency exchange rate. These types of transactions will be used
primarily for hedging purposes.
LEVERAGE RISK (All Funds) The risk associated with securities or practices (e.g.
borrowing) that multiply small index or market movements into large changes in
value. When a derivative security (a security whose value is based on another
security or index) is used as a hedge against an offsetting position that the
Fund also holds, any loss generated by the derivative security should be
substantially offset by gains on the hedged instrument, and vice versa. To the
extent that a Fund uses a derivative security for purposes other than as a
hedge, that Fund is directly exposed to the risks of that derivative security
and any loss generated by the derivative security will not be offset by a gain.
INTEREST RATE RISK (All 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 value.
INFORMATION RISK (All Funds) The risk that key information about a security is
inaccurate or unavailable.
OPPORTUNITY RISK (All Funds) The risk of missing out on an investment
opportunity because the assets necessary to take advantage of it are tied up in
less advantageous investments.
LIQUIDITY RISK (All Funds) The risk that certain securities may be difficult or
impossible to sell at the time and at the price that the seller would like. This
may result in a loss or may be costly to a Fund.
CORRELATION RISK (All Funds) The risk that changes in the value of a hedging
instrument will not match those of the asset being hedged.
EXTENSION RISK (Strategic Income, Short Term Corporate Income, Limited Term U.S.
Government, Government Securities Funds) The risk that an unexpected rise in
interest rates will extend the life of a mortgage-backed security beyond the
expected prepayment time, typically reducing the security's value.
VALUATION RISK (All Funds) The risk that the Fund has valued certain securities
at a higher price than it can sell them for.
PREPAYMENT RISK (Strategic Income, Short Term Corporate Income, Limited Term
U.S. Government, Government Securities Funds) The risk that unanticipated
prepayments may occur, reducing the value of mortgage- or asset- backed
securities or Real Estate Investment Trusts (REITs).
POLITICAL RISK (All Funds) The risk of losses directly attributable to
government or political actions.
EURO CONVERSION (High Income, Strategic Income, Bond Income, Short Term
Corporate Income Funds) Many European countries have adopted a single European
currency, the "euro." The consequences of this conversion for foreign exchange
rates, interest rates and the value of European securities are presently
unclear. Such consequences may adversely affect the value and/or increase the
volatility of securities held by a Fund.
<PAGE>
Management Team [graphic omitted]
---------------
MEET THE FUNDS' INVESTMENT ADVISERS
AND SUBADVISERS
The Nvest Funds family includes 25 mutual funds with a total of over $8 billion
in assets under management as of December 31, 1999. Nvest Funds are distributed
through Nvest Funds Distributor, L.P. (the "Distributor"). This Prospectus
covers Nvest Bond Funds (the "Funds" or each a "Fund"), which along with Nvest
Stock Funds, Nvest Star Funds, Kobrick Funds and Nvest State Tax-Free Funds,
constitute the "Nvest Funds." Nvest Cash Management Trust Money Market Series
and Nvest Tax-Exempt Money Market Trust constitute the "Money Market 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
Nvest Companies, L.P. ("Nvest Companies"), which is part of an affiliated group
including Nvest, L.P., a publicly-traded company listed on the New York Stock
Exchange (the "Exchange"). Nvest Companies' 18 principal subsidiary or
affiliated asset management firms, collectively, had more than $133 billion in
assets under management as of December 31, 1999. Nvest Management oversees,
evaluates and monitors the subadvisory services provided to each Fund. It also
provides general business management and administration to the Funds. The
subadvisers listed below make the Funds' investment decisions for their
respective Funds.
The combined advisory and subadvisory fees paid by the Funds in 1999 as a
percentage of each Fund's average daily net assets were 0.23% for Short Term
Corporate Income Fund (after waiver or reimbursement), 0.41% for Bond Income
Fund, 0.70% for High Income Fund, 0.63% for Strategic Income Fund, 0.65% for
Limited Term U.S. Government Fund, 0.65% for Government Securities Fund and
0.44% for Municipal Income Fund.
SUBADVISERS
BACK BAY ADVISORS, located at 399 Boylston Street, Boston, Massachusetts 02116,
serves as the subadviser to Short Term Corporate Income Fund, Bond Income Fund,
Limited Term U.S. Government Fund, Government Securities Fund and Municipal
Income Fund. Back Bay Advisors is a subsidiary of Nvest Companies. Back Bay
Advisors, founded in 1986, provides discretionary investment management services
for approximately $5 billion of assets as of December 31, 1999 for mutual funds
and various institutional investors.
LOOMIS SAYLES, located at One Financial Center, Boston, Massachusetts 02111,
serves as subadviser to High Income Fund and Strategic Income Fund. Loomis
Sayles is a subsidiary of Nvest Companies. Founded in 1926, Loomis Sayles is one
of America's oldest investment advisory firms with over $67 billion in assets
under management as of December 31, 1999. Loomis Sayles is well known for its
professional research staff, which is one of the largest in the industry.
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 the 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 Nvest Companies,
Nvest Management, Back Bay Advisors or Loomis Sayles. In placing trades, Back
Bay Advisors or Loomis Sayles will seek to obtain the best combination of price
and execution, which involves a number of judgmental factors. Such portfolio
trades are subject to applicable regulatory restrictions and related procedures
adopted by the Fund's Board of Trustees.
<PAGE>
[graphic omitted] Management Team
---------------
MEET THE FUNDS' PORTFOLIO MANAGERS
J. SCOTT NICHOLSON
Scott Nicholson has been the lead portfolio manager of SHORT TERM CORPORATE
INCOME FUND since October 1991, including when it was known as Adjustable Rate
U.S. Government Fund. He has also served as co-manager of LIMITED TERM U.S.
GOVERNMENT FUND and GOVERNMENT SECURITIES FUND since May 2000. Mr. Nicholson,
Senior Vice President of Back Bay Advisors, joined the company in 1986. He
received his B.S. from Davidson College and his M.B.A. from Babson College and
has over 22 years of investment experience.
RICHARD G. RACZKOWSKI
Richard Raczkowski has served as a portfolio manager of BOND INCOME FUND and
SHORT TERM CORPORATE INCOME FUND since May 1999. Mr. Raczkowski, Vice President
of Back Bay Advisors, joined the company in 1998. Previously, he was senior
consultant at Hagler Bailly Consulting. He received a B.A. from the University
of Massachusetts and an M.B.A. from Northeastern University and has 15 years of
investment experience.
PETER W. PALFREY
Peter Palfrey has served the BOND INCOME FUND as co-manager from May 1999 until
September 1999 and then as lead manager thereafter. Mr. Palfrey, Senior Vice
President of Back Bay Advisors, joined the company in 1993. He is also a
Chartered Financial Analyst. Mr Palfrey received his B.A. from Colgate
University and has over 17 years of investment experience.
GARY L. GOODENOUGH
Gary Goodenough has managed HIGH INCOME FUND since July 1996. Mr. Goodenough is
Vice President of Loomis Sayles and joined the company in 1993. He is a graduate
of Dartmouth College, received his M.B.A. from the Wharton School, University of
Pennsylvania and has 24 years of investment experience.
DANIEL J. FUSS
Daniel Fuss has managed STRATEGIC INCOME FUND since May 1995. Mr. Fuss is Vice
Chairman, Director and Managing Partner of Loomis Sayles. He began his
investment career in 1968 and has been at Loomis Sayles since 1976. Mr. Fuss is
also a Chartered Financial Analyst. He received a B.S. and an M.B.A. from
Marquette University and has 32 years of investment experience.
KATHLEEN C. GAFFNEY
Kathleen Gaffney has been assisting Daniel Fuss as a portfolio manager of
STRATEGIC INCOME FUND since April 1996. Ms. Gaffney, a Chartered Financial
Analyst, joined Loomis Sayles in 1984 and is now a Vice President of the
company. She holds a B.A. from the University of Massachusetts at Amherst and
has 15 years of investment experience.
JAMES S. WELCH
James Welch has managed the MUNICIPAL INCOME FUND since January 1998. He has
also served as lead manager of LIMITED TERM U.S. GOVERNMENT FUND and GOVERNMENT
SECURITIES FUND since May 2000. Mr. Welch, Senior Vice President of Back Bay
Advisors, has been with the company since 1993. Mr. Welch is a graduate of The
Pennsylvania State University and has 10 years of investment experience.
<PAGE>
Fund Services [graphic omitted]
-------------
INVESTING IN THE FUNDS
CHOOSING A SHARE CLASS
Each Fund offers Class A, Class B and Class C shares to the public, except
Municipal Income Fund and Government Securities Fund which offer only Class A
and Class B shares. Each class has different costs associated with buying,
selling and holding Fund shares, which allow you to choose the class that best
meets your needs. Which class you choose will depend upon the size of your
investment and how long you intend to hold your shares. Class B shares, Class C
shares and certain shareholder features may not be available to you if you hold
your shares in a street name account. Your financial representative can help you
decide which class of shares is most appropriate for you.
CLASS A SHARES
o You pay a sales charge when you buy Fund shares. There are several ways to
reduce this charge. See the section entitled "Ways to Reduce or Eliminate
Sales Charges."
o You pay lower annual expenses than Class B and Class C shares, giving you the
potential for higher returns per share.
o You do not pay a sales charge on orders of $1 million or more, but you may pay
a charge on redemption if you redeem these shares within 1 year of purchase.
CLASS B SHARES
o You do not pay a sales charge when you buy Fund shares. All of your money goes
to work for you right away.
o You pay higher annual expenses than Class A shares.
o You will pay a charge on redemptions if you sell your shares within 6 years of
purchase, as described in the section entitled "How Sales Charges are
Calculated."
o Your Class B shares will automatic ally convert into Class A shares after 8
years, which reduces your annual expenses.
o We will not accept an order for $1 million or more of Class B shares. You may,
however, purchase $1 million or more of Class A shares, which have no sales
charge as well as lower annual expenses. You may pay a charge on redemption if
you redeem these shares within 1 year of purchase.
CLASS C SHARES
o You do not pay a sales charge when you buy Fund shares. All of your money goes
to work for you right away.
o You pay higher annual expenses than Class A shares.
o You will pay a charge on redemptions if you sell your shares within 1 year of
purchase.
o Your Class C shares will not automatically convert into Class A shares. If you
hold your shares for longer than 8 years, you'll pay higher expenses than
other classes.
o We will not accept an order for $1 million or more of Class C shares. You may,
however, purchase $1 million or more of Class A shares, which have no sales
charge as well as lower annual expenses. You may pay a charge on redemption if
you redeem these shares within 1 year of purchase.
For actual past expenses of Class A, B and C shares, see the section entitled
"Fund Fees & Expenses" in this Prospectus.
CERTIFICATES
Certificates will not be automatically issued for any class of shares. Upon
written request, you may receive certificates for Class A shares only.
<PAGE>
[graphic omitted] FUND SERVICES
-------------
HOW SALES CHARGES ARE CALCULATED
CLASS A SHARES
The price that you pay when you buy Class A shares (the "offering price") is
their net asset value plus a sales charge (sometimes called a "front-end sales
charge") which varies depending upon the size of your purchase.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
CLASS A SALES CHARGES
BOND INCOME HIGH INCOME STRATEGIC INCOME SHORT TERM CORPORATE INCOME
GOVERNMENT SECURITIES MUNICIPAL INCOME LIMITED TERM U.S. GOVERNMENT
AS A % OF AS A % OF AS A % OF AS A % OF
YOUR INVESTMENT OFFERING PRICE YOUR INVESTMENT OF OFFERING PRICE YOUR INVESTMENT
<S> <C> <C> <C> <C>
Less than $100,000 4.50% 4.71% 3.00% 3.09%
$100,000 - $249,999 3.50% 3.63% 2.50% 2.56%
$250,000 - $499,999 2.50% 2.56% 2.00% 2.04%
$500,000 - $999,999 2.00% 2.04% 1.25% 1.27%
$1,000,000 or more* 0% 0% 0% 0%
- --------------------------------------------------------------------------------------------------------
* For purchases of Class A shares of the Funds of $1 million or more or purchases by Retirement Plans
(Plans under Sections 401(a) or 401(k) of the Internal Revenue Code with investments of $1 million or
more or that have 100 or more eligible employees), there is no front-end sales charge, but a contingent
deferred sales charge of 1.00% may apply to redemptions of your shares within one year of the purchase
date. See the section entitled "Ways to Reduce or Eliminate Sales Charges."
</TABLE>
CLASS B SHARES
The offering price of Class B shares is their net asset value, without a
front-end sales charge. However, there is a contingent deferred sales charge
("CDSC") on shares that you sell within 6 years of buying them. The amount of
the CDSC, if any, declines each year that you own your shares. The holding
period for purposes of timing the conversion to Class A shares and determining
the CDSC will continue to run after an exchange to Class B shares of another
Nvest Fund. The CDSC equals the following percentages of the dollar amounts
subject to the charge:
- --------------------------------------------------------------------------------
ALL FUNDS
CLASS B CONTINGENT DEFERRED SALES CHARGES
YEAR SINCE PURCHASE CDSC ON SHARES BEING SOLD
1st 5.00%
2nd 4.00%
3rd 3.00%
4th 3.00%
5th 2.00%
6th 1.00%
thereafter 0%
- --------------------------------------------------------------------------------
CLASS C SHARES
The offering price of Class C shares is their net asset value, without a
front-end sales charge. However, Class C shares are subject to a CDSC of 1.00%
on redemptions made within one year of the date of purchase. The holding period
for determining the CDSC will continue to run after an exchange to Class C
shares of another Nvest Fund.
ALL FUNDS (EXCEPT MUNICIPAL INCOME FUND AND
GOVERNMENT SECURITIES FUND)
CLASS B CONTINGENT DEFERRED SALES CHARGES
YEAR SINCE PURCHASE CDSC ON SHARES BEING SOLD
- --------------------------------------------------------------------------------
1st 1.00%
thereafter 0%
- --------------------------------------------------------------------------------
HOW THE CDSC IS APPLIED TO YOUR SHARES
The CDSC is a sales charge you pay when you redeem certain Fund shares. The
CDSC:
o is calculated based on the number of shares you are selling:
o is based on either your original purchase price or the then-current net asset
value of the shares being sold, whichever is lower;
o is deducted from the proceeds of the redemption, not from the amount remaining
in your account; and
o for year one applies to redemptions through the day one year after the date on
which your purchase was accepted, and so on for subsequent years.
A CDSC will not be charged on:
o increases in net asset value above the purchase price; or
o shares you acquired by reinvesting your dividends or capital gains
distributions.
To keep your CDSC as low as possible, each time that you place a request to sell
shares we will first sell any shares in your account that carry no CDSC. If
there are not enough of these shares available to meet your request, we will
sell the shares with the lowest CDSC.
EXCHANGES INTO SHARES OF A MONEY MARKET FUND
If you exchange shares of a Fund into shares of the Money Market Funds, the
holding period for purposes of determining the CDSC and conversion 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.
<PAGE>
Fund Services [graphic omitted]
-------------
WAYS TO REDUCE OR ELIMINATE SALES CHARGES
CLASS A SHARES
REDUCING SALES CHARGES
There are several ways you can lower your sales charge utilizing the chart on
the previous page, including:
o LETTER OF INTENT -- allows you to purchase Class A shares of any Nvest Fund
over a 13-month period but pay sales charges as if you had purchased all
shares at once. This program can save you money if you plan to invest $50,000
or more over 13 months. Purchases in Class B and Class C shares may be used
toward meeting the letter of intent.
o COMBINING ACCOUNTS -- allows you to combine shares of multiple Nvest Funds and
classes for purposes of calculating your sales charge. You may combine your
purchases with those of qualified accounts of a spouse, parents, children,
siblings, grandparents, grandchildren, in-laws, individual fiduciary accounts,
sole proprietorships, single trust estates and any other group of individuals
acceptable to the Distributor.
These privileges do not apply to the Money Market Funds unless shares are
purchased through an exchange from another Nvest Fund.
ELIMINATING SALES CHARGES AND CDSC
Class A shares may be offered without front-end sales charges or a CDSC to the
following individuals and institutions:
o Any government entity that is prohibited from paying a sales charge or
commission to purchase mutual fund shares;
o Selling brokers, sales representatives or other intermediaries;
o Fund trustees and other individuals who are affiliated with any Nvest Fund or
Money Market Fund (this also applies to any spouse, parents, children,
siblings, grandparents, grandchildren and in-laws of those mentioned);
o Participants in certain Retirement Plans with at least 100 eligible employees
(one-year CDSC may apply);
o Non-discretionary and non-retirement accounts of bank trust departments or
trust companies only if they principally engage in banking or trust
activities;
o Investments of $250,000 or more in Short Term Corporate Income Fund or $5
million or more in Limited Term U.S. Government Fund by corporations
purchasing shares for their own account, credit unions, or bank trust
departments and trust companies with discretionary accounts which they hold in
a fiduciary capacity; and
o Investments of $25,000 or more in the Nvest Funds or Money Market Funds by
clients of an adviser or subadviser to any Nvest Fund or Money Market Fund.
REPURCHASING FUND SHARES
You may apply proceeds from redeeming Class A shares of any Nvest Fund WITHOUT
PAYING A SALES CHARGE to repurchase Class A shares of the same or any other
Nvest Fund. To qualify, you must reinvest some or all of the proceeds within 120
days after your redemption and notify Nvest Funds or your financial
representative at the time of reinvestment that you are taking advantage of this
privilege. You may reinvest your proceeds either by returning the redemption
check or by sending a new check for some or all of the redemption amount. Please
note: For federal income tax purposes, A REDEMPTION IS A SALE THAT INVOLVES TAX
CONSEQUENCES, EVEN IF THE PROCEEDS ARE LATER REINVESTED. Please consult your tax
adviser for how a redemption would affect you.
If you repurchase Class A shares of $1 million or more within 30 days after you
redeem such shares, the Distributor will rebate the amount of the CDSC charged
on the redemption.
CLASS A, B OR C SHARES
ELIMINATING THE CDSC
As long as we are notified at the time you sell, the CDSC for any share class
may generally be eliminated in the following cases:
o to make distributions from a retirement plan (a plan termination or total plan
redemption may incur a CDSC);
o to make payments through a systematic withdrawal plan; or
o due to shareholder death or disability.
If you think you may be eligible for a sales charge elimination or reduction,
contact your financial representative or Nvest Funds. Check the Statement of
Additional Information for details.
<PAGE>
[graphic omitted] Fund Services
-------------
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 Act $2,500 $100 $100
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*, SIMPLE
IRA, 403(b)(7) and certain
other retirement plans $ 25 N/A $ 25
- --------------------------------------------------------------------------------
* 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.
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.
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 review your account balance, recent transactions, Fund prices and recent
performance;
o order duplicate account statements; and
o obtain tax information.
Please see the following pages for other ways to buy, exchange or sell your
shares.
<PAGE>
Fund Services [graphic omitted]
-------------
BUYING SHARES
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
THROUGH YOUR INVESTMENT DEALER
o Call your investment dealer for o Call your investment dealer for
information. information.
BY MAIL
[graphic omitted]
o Make out a check in U.S. dollars for o Make out a check in U.S. dollars for
the investment amount, payable to the investment amount, payable to
"Nvest Funds." Third party and "Nvest Funds." Third party and
"starter" checks will generally "starter" checks will generally
not be accepted not be accepted
o Mail the check with your completed o Fill out the detachable investment
application to Nvest Funds, P.O. Box slip from an account statement. If
8551, Boston, MA 02266-8551. no slip is available, include with
the check a letter specifying the
Fund name, your class of shares,
your account number and the
registered account name(s). To make
investing even easier, you can order
more investment slips by calling
800-225-5478.
BY EXCHANGE
[graphic omitted]
o The exchange must be for a minimum o The exchange must be for a minimum
of $1,000 or for all of your shares. of $1,000 or for all of your shares.
o Obtain a current prospectus for the o Call your investment dealer or Nvest
Fund into which you are exchanging Funds at 800-225-5478 to request an
by calling your investment dealer or exchange.
Nvest Funds at 800-225-5478.
o See the section entitled "Exchanging
o Call your investment dealer or Nvest Shares" for more details.
Funds to request an exchange.
o See the section entitled "Exchanging
Shares" for more details.
BY WIRE
[graphic omitted]
o Call Nvest Funds at 800-225-5478 to o Visit nvestfunds.com to add shares
obtain an account number and wire to your account by wire
transfer instructions. Your bank may
charge you for such a transfer. o Instruct your bank to transfer funds
to State Street Bank & Trust
Company, ABA# 011000028, DDA#
99011538.
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
[graphic omitted]
o Indicate on your application that o Please call Nvest Funds at
you would like to begin an automatic 800-225-5478 for a Service Options
investment plan through Investment Form. A signature guarantee may be
Builder and the amount of the required to add this privilege.
monthly investment ($100 minimum).
o See the section entitled "Additional
o Send a check marked "Void" or a Investor Services."
deposit slip from your bank account
along with your application.
THROUGH AUTOMATED CLEARING HOUSE (ACH)
[graphic omitted]
o Ask your bank or credit union o Call Nvest Funds at 800-225-5478 or
whether it is a member of the ACH visit nvestfunds.com to add shares
system. to your account through ACH.
o Complete the "Telephone Withdrawal o If you have not signed up for the
and Exchange" and "Bank Information" ACH system, please call Nvest Funds
sections on your account for a Service Options Form. A
application. signature guarantee may be required
to add this privilege.
o Mail your completed application to
Nvest Funds, P.O. Box 8551, Boston,
MA 02266-8551.
<PAGE>
[graphic omitted] 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
[graphic omitted]
o Write a letter to request a redemption specifying the name of the Fund, the
class of shares, your account number, the exact registered account name(s),
the number of shares or the dollar amount to be redeemed and the method by
which you wish to receive your proceeds. Additional materials may be required.
See the section entitled "Selling Shares in Writing."
o The request must be signed by all of the owners of the shares including the
capacity in which they are signing, if appropriate.
o Mail your request to Nvest Funds, P.O. Box 8551, Boston, MA 02266-8551.
o Your proceeds (less any applicable CDSC) will be delivered by the method
chosen in your letter. If you choose to have your proceeds delivered by mail,
they will generally be mailed to you on the business day after the request is
received. You may also choose to redeem by wire or through ACH (see below).
BY EXCHANGE
[graphic omitted]
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
[graphic omitted]
o Fill out the "Telephone Withdrawal and Exchange" and "Bank Information"
sections on your account application.
o Call Nvest Funds at 800-225-5478; visit nvestfunds.com 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)
[graphic omitted]
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 or visit nvestfunds. com 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
[graphic omitted]
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
[graphic omitted]
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 shares of Short Term Corporate Income Fund and Limited
Term U.S. Government Fund only)
[graphic omitted]
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 $500 or more.
o You may not close your account by withdrawal check. Please call your financial
representative or Nvest Funds to close an account.
<PAGE>
Fund Services [graphic omitted]
-------------
SELLING SHARES IN WRITING
If you wish to redeem your shares in writing, all owners of the shares must sign
the redemption request in the exact names in which the shares are registered and
indicate any special capacity in which they are signing. In certain situations,
you will be required to make your request to sell shares in writing. In these
instances, a letter of instruction signed by the authorized owner is necessary.
In certain situations we also may require a signature guarantee or additional
documentation.
A signature guarantee protects you against fraudulent orders and is necessary
if:
o your address of record has been changed within the past 30 days;
o you are selling more than $100,000 worth of shares and you are requesting the
proceeds by check; or
o a proceeds check for any amount is mailed to an address other than the address
of record or not payable to the registered owner(s).
A notary public CANNOT provide a signature guarantee. A signature guarantee can
be obtained from one of the following sources:
o a financial representative or securities dealer;
o a federal savings bank, cooperative or other type of bank;
o a savings and loan or other thrift institution;
o a credit union; or
o a securities exchange or clearing agency.
The following table 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 signatures on the letter must include all
PROPRIETORSHIP, UGMA/UTMA persons authorized to sign, including title, if
(MINOR ACCOUNTS) applicable.
o Signature guarantee, if applicable (see above).
CORPORATE OR ASSOCIATION o The signatures on the letter must include all
ACCOUNTS persons authorized to sign, including title.
OWNERS OR TRUSTEES OF TRUST o The signature on the letter must include all
ACCOUNTS trustees authorized to sign, including title.
o If the names of the trustees are not
registered on the account, please provide a
copy of the trust document certified within
the past 60 days.
o Signature guarantee, if applicable (see above).
JOINT TENANCY WHOSE o The signatures on the letter must include all
CO-TENANTS ARE DECEASED surviving tenants of the account.
o Copy of the death certificate.
o Signature guarantee if proceeds check is
issued to other than the surviving tenants.
POWER OF ATTORNEY (POA) o The signatures on the letter must include the
attorney-in-fact, indicating such title.
o A signature guarantee.
o Certified copy of the POA document stating it
is still in full force and effect, specifying
the exact Fund and account number, and
certified within 30 days of receipt of
instructions.*
QUALIFIED RETIREMENT BENEFIT o The signature on the letter must include all
PLANS (EXCEPT NVEST FUNDS signatures of those authorized to sign,
PROTOTYPE DOCUMENTS) including title.
o Signature guarantee, if applicable (see
above).
EXECUTORS OF ESTATES, o The signature on the letter must include those
ADMINISTRATORS, GUARDIANS, authorized to sign, including capacity.
CONSERVATORS
o A signature guarantee.
o Certified copy of court document where signer
derives authority, e.g.: Letters of
Administration, Conservatorship, Letters
Testamentary.*
INDIVIDUAL RETIREMENT o Additional documentation and distribution
ACCOUNTS (IRAS) forms are required.
* Certification may be made on court documents by the court, usually certified
by the clerk of the court. POA certification may be made by a commercial bank,
broker/member of a domestic stock exchange or a practicing attorney.
<PAGE>
[graphic omitted] Fund Services
-------------
EXCHANGING SHARES
In general, you may exchange shares of your Fund for shares of the same class of
another Nvest Fund without paying a sales charge or a CDSC (see the sections
entitled "Buying Shares" and "Selling Shares"). 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 Nvest Fund or Money Market 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. For federal income tax purposes,
an exchange of Fund shares for shares of another Nvest Fund or Money Market Fund
is treated as a sale on which gain or loss may be recognized. Please refer to
the Statement of Additional Information (the "SAI") for more detailed
information on exchanging Fund shares.
RESTRICTIONS ON BUYING, SELLING AND EXCHANGING SHARES
PURCHASE AND EXCHANGE RESTRICTIONS
Although the Funds do not anticipate doing so, they reserve the right to suspend
or change the terms of purchasing or exchanging shares. Each Fund and the
Distributor reserve the right to refuse or limit any purchase or exchange order
by a particular purchaser (or group of related purchasers) if the transaction is
deemed harmful to the best interest of such Fund's other shareholders or would
disrupt the management of the Fund. The Funds and the Distributor reserve the
right to restrict purchases and exchanges for accounts of "market timers" by
limiting the transaction to a maximum dollar amount. An account will be deemed
to be one of a market timer if: (i) more than two exchange purchases of a given
Fund are made for the account in a calendar quarter or (ii) the account makes
one or more exchange purchases of a given Fund in a calendar quarter in an
aggregate amount in excess of 1% of the Fund's total net assets.
SELLING RESTRICTIONS
The table below describes restrictions placed on selling shares of any Fund
described in this Prospectus:
RESTRICTION SITUATION
The Fund may suspend the right of redemption or o When the New York Stock
postpone payment for more than 7 days: Exchange is closed (other
than a weekend/holiday)
o During an emergency
o Any other period permitted
by the SEC
The Fund reserves the right to suspend account o With a notice of a dispute
services or refuse transaction requests: between registered owners
o With suspicion/evidence of
a fraudulent act
The Fund may pay the redemption price in whole o When it is detrimental for
or part by a distribution in kind of readily a Fund to make cash
marketable securities in lieu of cash or may payments as determined in
take up to 7 days to pay a redemption request in the sole discretion of the
order to raise capital: adviser or subadviser
The Fund may close your account and send you the o When the Fund account
proceeds. You will have 60 days after being falls below a set minimum
notified of the Fund's intention to close your (currently $1,000 as set
account to increase the account to the set by the Fund's Board of
minimum. This does not apply to certain qualified Trustees)
retirement plans, automatic investment plans or
accounts that have fallen below the minimum
solely because of fluctuations in a Fund's net
asset value per share:
The Fund may withhold redemption proceeds until o When redemptions are made
the check or funds have cleared: within 10 calendar days of
purchase by check or ACH
of the shares being
redeemed
Telephone redemptions are not accepted for tax-qualified retirement plan
accounts.
If you hold certificates representing your shares, they must be sent with your
request for it to be honored.
The Funds recommend that certificates be sent by registered mail.
<PAGE>
Fund Services [graphic omitted]
-------------
HOW FUND SHARES ARE PRICED
"Net asset value" is the price of one share of a Fund without a sales charge,
and is calculated each business day using this formula:
TOTAL VALUE OF SECURITIES + CASH AND
NET ASSET VALUE = OTHER ASSETS - LIABILITES
-------------------------------------------
NUMBER OF OUTSTANDING SHARES
The net asset value of Fund shares is determined according to this schedule:
o A share's net asset value is determined at the close of regular trading on the
Exchange on the days the Exchange is open for trading. This is normally 4:00
p.m. Eastern time.
o The price you pay for purchasing, redeeming or exchanging a share will be
based upon the net asset value next calculated after your order is received
"in good order" by State Street Bank and Trust Company, the Funds' custodian
(plus or minus applicable sales charges as described earlier in this
Prospectus).
o Requests received by the Distributor after the Exchange closes will be
processed based upon the net asset value determined at the close of regular
trading on the next day that the Exchange is open, with the exception that
those orders received by your investment dealer before the close of the
Exchange and received by the Distributor before 5:00 p.m. Eastern time* on the
same day will be based on the net asset value determined on that day.
o A Fund heavily invested in foreign securities may have net asset value changes
on days when you cannot buy or sell its shares.
* Under limited circumstances, the Distributor may enter into a contractual
agreement where it may accept orders after 5:00 p.m. and before 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."
Generally, Fund securities are valued as follows:
o EQUITY SECURITIES -- most recent sales or quoted bid price as provided by a
pricing service.
o DEBT SECURITIES (OTHER THAN SHORT-TERM OBLIGATIONS) -- based upon pricing
service valuations, which determines valuations for normal, institutional-size
trading units of such securities using market information, transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders.
o SHORT-TERM OBLIGATIONS (REMAINING MATURITY OF LESS THAN 60 DAYS) -- amortized
cost (which approximates market value).
o SECURITIES TRADED ON FOREIGN EXCHANGES -- most recent sale/bid price on the
non-U.S. exchange, unless an occurrence after the closing of the exchange will
materially affect its value. In that case, it is given fair value as
determined by or under the direction of the Fund's Board of Trustees at the
close of regular trading on the Exchange.
o OPTIONS -- last sale price or, if not available, last offering price.
o FUTURES -- unrealized gain or loss on the contract using current settlement
price. When a settlement price is not used, futures contracts will be valued
at their fair value as determined by or under the direction of the Funds'
Board of Trustees.
o ALL OTHER SECURITIES -- fair market value as determined by the adviser or
subadviser of the Fund under the direction of each Fund's Board of Trustees.
The effect of fair value pricing as described above under "Securities traded on
foreign exchanges" and "All other securities" is that securities may not be
priced on the basis of quotations from the primary market in which they are
traded but rather may be priced by another method that the Fund's Board of
Trustees believes accurately reflects fair value.
<PAGE>
[graphic omitted] Fund Services
-------------
DIVIDENDS AND DISTRIBUTIONS
The Funds generally distribute most or all of their net investment income (other
than 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. 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 in
shares of the same class of another Nvest Fund registered in your name.
Certain investment minimums and restrictions may apply. For more information
about this program, see the section entitled "Additional Investor Services."
o Receive distributions from dividends and interest in cash while reinvesting
distributions from capital gains in additional shares of the same class of the
Fund or in the same class of another 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
Fund, you will receive a Form 1099 to help you report the prior calendar year's
distributions on your federal income tax return. Be sure to keep the Form 1099
as a permanent record. A fee may be charged for any duplicate information
requested.
TAX CONSEQUENCES
Each Fund intends to meet all requirements of the Internal Revenue Code
necessary to qualify as a "regulated investment company" and thus does not
expect to pay any federal income tax on income and capital gains distributed to
shareholders.
Fund distributions paid to you either in cash or reinvested in additional shares
are generally taxable to you either as ordinary income (except for
exempt-interest dividends earned by Municipal Income Fund -- see below) or as
capital gains. Distributions derived from short-term capital gains or investment
income are generally taxable at ordinary income rates. If you are a corporation
investing in a Fund, a portion of these dividends may qualify for the
dividends-received deduction provided that you meet certain holding period
requirements. Distributions of gains from investments that a Fund owned for more
than one year that are designated by a Fund as capital gain dividends will
generally be taxable to a shareholder receiving such distributions as long-term
capital gain, regardless of how long the shareholder has held Fund shares.
An exchange of shares for shares of another Nvest Fund or Money Market Fund is
treated as a sale, and any resulting gain or loss may be subject to federal
income tax. If you purchase shares of a Fund shortly before it declares a
capital gain distribution or a dividend, a portion of the purchase price may be
returned to you as a taxable distribution.
Dividends derived from interest on U.S. government securities may be exempt from
state and local income taxes. The Funds advise shareholders of the proportion of
each Fund's dividends that are derived from such interest. You should consult
your tax adviser about any federal, state and local taxes that may apply to the
distributions you receive. Shareholders of Funds investing in foreign securities
should also consult their tax advisers about consequences of their investments
under foreign laws.
Special Tax Considerations for Municipal Income Fund
Dividends paid to you as a shareholder of the Municipal Income Fund 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 benefits, you may be taxed on a portion of those
benefits as a result of receiving tax-exempt income. In addition, an investment
in the Fund may result in a liability for federal alternative minimum tax as
well as State and local taxes, both for corporate and individual shareholders.
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.
The Fund also may invest a portion of its assets in securities that generate
income that is not generally exempt from federal and state taxes.
<PAGE>
Fund Services [graphic omitted]
-------------
COMPENSATION TO SECURITIES DEALERS
As part of their business strategies, the Funds pay securities dealers that sell
their shares. This compensation originates from two sources: sales charges
(front-end or deferred) and 12b-1 fees (comprising the annual service and/or
distribution fees of a plan adopted pursuant to Rule 12b-1 of the Investment
Company Act of 1940). The sales charges are detailed in the section entitled
"How Sales Charges are Calculated." Each class of Fund shares pays an annual
service fee of 0.25% of its average daily net assets. Class A shares of the
Limited Term U.S. Government Fund pay a distribution fee of 0.10% of its average
daily net assets. Class B shares for all of the Funds pay an annual distribution
fee of 0.75% of their average daily net assets for 8 years (at which time they
automatically convert into Class A shares). Class C shares for all Funds are
subject to a distribution fee of 0.75% of their average daily net assets.
Generally, the 12b-1 fees are paid to securities dealers on a quarterly basis.
The Distributor retains the first year of such fees for Class C shares. Because
these distribution fees are paid out of the Fund's assets on an ongoing basis,
over time these fees for Class B and Class C shares will increase the cost of
your investment and may cost you more than paying the front-end sales charge on
Class A shares.
The Distributor may, at its expense, pay concessions in addition to the payments
described above to dealers which satisfy certain criteria established from time
to time by the Distributor relating to increasing net sales of shares of the
Nvest Funds over prior periods, and certain other factors. See the SAI for more
details.
<PAGE>
[graphic omitted] Fund Services
-------------
ADDITIONAL INVESTOR SERVICES
RETIREMENT PLANS
Nvest Funds offer 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
Money Market Fund, subject to the eligibility requirements of that other Fund
and to state securities law requirements. Shares will be purchased at the
selected Fund's net asset value without a front-end sales charge or CDSC on the
dividend record date. Before establishing a Dividend Diversification Program
into any other Nvest Fund or 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 Fund or 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 your current account balance, 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.
<PAGE>
[graphic omitted] Fund Performance
----------------
The financial highlights table is intended to help you understand each Fund's
financial performance for the past 5 years (or, if shorter, the 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 each 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, are incorporated by reference in the Statement
of Additional Information, which is available upon request.
<TABLE>
<CAPTION>
NVEST SHORT TERM CORPORATE INCOME FUND
CLASS A CLASS B
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period $ 7.20 $ 7.37 $ 7.37 $ 7.39 $ 7.30 $ 7.20 $ 7.37 $ 7.36 $ 7.38 $ 7.29
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.47 0.43 0.47(d) 0.38 0.41 0.41 0.37 0.41(d) 0.33 0.36
Net Realized and
Unrealized Gain
(Loss) on
Investments 0.14 (0.01) (0.02) (0.09) (0.28) 0.14 (0.02) (0.02) (0.09) (0.28)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total From
Investment
Operations 0.61 0.42 0.45 0.29 0.13 0.55 0.35 0.39 0.24 0.08
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From
Net Investment
Income (0.44) (0.42) (0.43) (0.38) (0.42) (0.38) (0.36) (0.37) (0.33) (0.37)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions (0.44) (0.42) (0.43) (0.38) (0.42) (0.38) (0.36) (0.37) (0.33) (0.37)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value,
End of Period $ 7.37 $ 7.37 $ 7.39 $ 7.30 $ 7.01 $ 7.37 $ 7.36 $ 7.38 $ 7.29 $ 7.00
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN (%) (c) 8.6 5.8 6.2 4.0 1.9 7.8 4.9 5.4 3.4 1.1
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to
Average Net
Assets (%) (b) 0.66 0.70 0.70 0.70 0.70 1.41 1.45 1.45 1.45 1.45
Ratio of Net
Investment Income
to Average Net
Assets (%) 6.29 6.39 6.27 5.93 5.88 5.54 5.64 5.52 5.18 5.13
Portfolio Turnover
Rate (%) 73 54 49 105 139 73 54 49 105 139
Net Assets, End of
Period (000) $331,112 $222,809 $196,928 $ 92,669 $ 72,680 $ 2,368 $ 2,821 $ 2,961 $ 3,761 $ 3,796
(a) Commencement of operations.
(b) The ratio of operating expenses to average net assets without giving effect to an expense limitation would have been (%):
0.89 0.94 0.98 1.05 1.22 1.65 1.69 1.73 1.80 1.97
(c) A sales charge for Class A shares and a contingent deferred sales charge for Class B and C shares is not reflected in total
return calculations.
(d) Per share net investment income does not reflect the period's reclassification of permanent differences between book and tax
basis net investment income.
(e) Computed on an annualized basis.
(f) The amount shown for a share outstanding does not correspond with the aggregate net gain/loss on investments for the period
ended December 31, 1998, due to the timing of purchases and redemption of Fund shares in relation to fluctuating market values
of the investments of the Fund.
<CAPTION>
CLASS C
DECEMBER 7, 1998(A) YEAR ENDED
THROUGH DECEMBER 31,
DECEMBER 31, 1998 1999
<S> <C> <C>
Net Asset Value, Beginning of Period $ 7.28 $ 7.29
-------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.01 0.36
Net Realized and Unrealized Gain (Loss) on Investments 0.01(f) (0.28)
-------- --------
Total From Investment Operations 0.02 0.08
-------- --------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.01) (0.37)
-------- --------
Total Distributions (0.01) (0.37)
-------- --------
Net Asset Value, End of Period $ 7.29 $ 7.00
======== ========
TOTAL RETURN (%) (C) 0.3 1.2
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) (b) 1.45(e) 1.45
Ratio of Net Investment Income to Average Net Assets (%) 5.18(e) 5.13
Portfolio Turnover Rate (%) 105 139
Net Assets, End of Period (000) $ 233 $ 489
(a) Commencement of operations.
(b) The ratio of operating expenses to average net assets without giving effect to an expense limitation would have been (%):
1.80(e) 1.97
(c) A sales charge for Class A shares and a contingent deferred sales charge for Class B and C shares is not reflected in total
return calculations.
(d) Per share net investment income does not reflect the period's reclassification of permanent differences between book and tax
basis net investment income.
(e) Computed on an annualized basis.
(f) The amount shown for a share outstanding does not correspond with the aggregate net gain/loss on investments for the period
ended December 31, 1998, due to the timing of purchases and redemption of Fund shares in relation to fluctuating market values
of the investments of the Fund.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
[graphic omitted] Fund Performance
----------------
NVEST BOND INCOME FUND
CLASS A CLASS B
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Year $ 10.95 $ 12.36 $ 12.05 $ 12.39 $ 12.36 $ 10.95 $ 12.36 $ 12.04 $ 12.39 $ 12.36
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.81 0.84 0.83 0.81 0.81 0.72 0.75 0.74 0.71 0.72
Net Realized and
Unrealized Gain
(Loss) on
Investments 1.40 (0.31) 0.45 0.15 (0.86) 1.40 (0.32) 0.46 0.15 (0.86)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total From
Investment
Operations 2.21 0.53 1.28 0.96 (0.05) 2.12 0.43 1.20 0.86 (0.14)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends From Net
Investment Income (0.80) (0.84) (0.81) (0.78) (0.79) (0.71) (0.75) (0.72) (0.69) (0.70)
Distributions in
Excess of Net
Investment Income 0.00 0.00 (0.01) (0.03) 0.00 0.00 0.00 (0.01) (0.02) 0.00
Distributions From
Net Realized
Capital Gains 0.00 0.00 (0.12) (0.17) (0.01) 0.00 0.00 (0.12) (0.17) (0.01)
Distributions in
Excess of Net
Realized Capital
Gains 0.00 0.00 0.00 (0.01) 0.00(b) 0.00 0.00 0.00 (0.01) 0.00(b)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions (0.80) (0.84) (0.94) (0.99) (0.80) (0.71) (0.75) (0.85) (0.89) (0.71)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value,
End of the Year $ 12.36 $ 12.05 $ 12.39 $ 12.36 $ 11.51 $ 12.36 $ 12.04 $ 12.39 $ 12.36 $ 11.51
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN (%) (a) 20.8 4.6 11.0 8.0 (0.3) 19.9 3.7 10.3 7.2 (1.1)
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to
Average Net
Assets (%) 1.14 1.05 1.05 1.01 0.97 1.89 1.80 1.80 1.76 1.72
Ratio of Net
Investment Income
to Average Net
Assets (%) 6.81 7.00 6.73 6.44 6.87 6.06 6.25 5.98 5.69 6.12
Portfolio Turnover
Rate (%) 81 104 54 65 63 81 104 54 65 63
Net Assets, End of
the Year (000) $200,285 $189,685 $193,513 $221,799 $213,769 $ 23,398 $ 31,191 $ 37,559 $ 64,240 $ 89,213
<CAPTION>
CLASS C
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $ 10.95 $ 12.36 $ 12.06 $ 12.40 $ 12.37
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.56 0.75 0.74 0.71 0.72
Net Realized and Unrealized Gain (Loss) on Investments 1.40 (0.30) 0.45 0.15 (0.86)
-------- -------- -------- -------- --------
Total From Investment Operations 1.96 0.45 1.19 0.86 (0.14)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends From Net Investment Income (0.55) (0.75) 0.72 (0.69) (0.70)
Distributions in Excess of Net Investment Income 0.00 0.00 (0.01) (0.02) 0.00
Distributions From Net Realized Capital Gains 0.00 0.00 (0.12) (0.17) (0.01)
Distributions in Excess of Net Realized Capital Gains 0.00 0.00 0.00 (0.01) 0.00(b)
-------- -------- -------- -------- --------
Total Distributions (0.55) (0.75) (0.85) (0.89) (0.71)
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 12.36 $ 12.06 $ 12.40 $ 12.37 $ 11.52
======== ======== ======== ======== ========
TOTAL RETURN (%) (a) 18.1 3.9 10.2 7.2 (1.1)
Ratios/Supplemental Data
Ratio of Operating Expenses to Average Net Assets (%) 1.89 1.80 1.80 1.76 1.72
Ratio of Net Investment Income to Average Net Assets (%) 6.06 6.25 5.98 5.69 6.12
Portfolio Turnover Rate (%) 81 104 54 65 63
Net Assets, End of the Year (000) $ 1,009 $ 2,391 $ 5,276 $ 8,969 $ 14,872
(a) A sales charge for Class A shares and a contingent deferred sales charge for Class B and C shares is not reflected in total
return calculations.
(b) Amount is less than $0.01.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
[graphic omitted] Fund Performance
----------------
NVEST HIGH INCOME FUND
CLASS A CLASS B
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period $ 8.89 $ 8.98 $ 9.42 $ 9.94 $ 8.86 $ 8.88 $ 8.98 $ 9.42 $ 9.93 $ 8.85
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.88 0.84 0.87 0.92 0.89 0.83 0.79 0.80 0.85 0.82
Net Realized and
Unrealized Gain
(Loss) on
Investments 0.13 0.44 0.52 (1.08) (0.54) 0.13 0.42 0.51 (1.08) (0.53)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total From
Investment
Operations 1.01 1.28 1.39 (0.16) 0.35 0.96 1.21 1.31 (0.23) 0.29
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From
Net Investment
Income (0.88) (0.83) (0.87) (0.92) (0.90) (0.81) (0.76) (0.80) (0.85) (0.83)
Distributions in
Excess of Net
Investment Income (0.04) (0.01) 0.00 0.00 (0.01) (0.05) (0.01) 0.00 0.00 (0.01)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions (0.92) (0.84) (0.87) (0.92) (0.91) (0.86) (0.77) (0.80) (0.85) (0.84)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End
of the Period $ 8.98 $ 9.42 $ 9.94 $ 8.86 $ 8.30 $ 8.98 $ 9.42 $ 9.93 $ 8.85 $ 8.30
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN (%) (c) 11.8 14.9 15.4 (1.8) 4.0 11.2 14.1 14.4 (2.5) 3.3
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to
Average Net
Assets (%)(b) 1.60 1.53 1.36 1.32 1.28 2.25 2.19 2.11 2.07 2.03
Ratio of Net
Investment
Income to Average
Net Assets (%) 9.71 9.32 9.03 9.81 10.22 8.96 8.33 8.28 9.06 9.47
Portfolio Turnover
Rate (%) 30 134 99 75 89 30 134 99 75 89
Net Assets, End of
the Period (000) $ 39,148 $ 42,992 $ 62,739 $ 73,023 $ 74,589 $ 10,625 $ 17,767 $ 42,401 $ 60,322 $ 70,218
(a) Commencement of operations.
(b) The ratio of operating expenses to average net assets without giving effect to an expense limitation would have been (%):
1.72 1.69 -- -- -- 2.37 2.35 -- -- --
(c) A sales charge for Class A shares and a contingent deferred sales charge for Class B and C shares is not reflected in total
return calculations. Periods of less than one year are not annualized.
(d) Computed on an annualized basis.
The subadviser to the Fund prior to July 1, 1996 was Back Bay Advisers, L.P. Effective July 1, 1996, Loomis, Sayles &
Company, L.P. became the subadviser to the Fund.
<CAPTION>
CLASS C
MARCH 2, 1998(A) YEAR ENDED
THROUGH DECEMBER 31,
DECEMBER 31, 1998 1999
<S> <C> <C>
Net Asset Value, Beginning of the Period $ 9.96 $ 8.85
-------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.69 0.82
Net Realized and Unrealized Gain (Loss) on Investments (1.08) (0.53)
-------- --------
Total From Investment Operations (0.39) 0.29
-------- --------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.72) (0.83)
Distributions in Excess of Net Investment Income 0.00 (0.01)
-------- --------
Total Distributions (0.72) (0.84)
-------- --------
Net Asset Value, End of the Period 8.85 $ 8.30
======== ========
TOTAL RETURN (%) (c) (4.1) 3.3
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%)(b) 2.07(d) 2.03
Ratio of Net Investment Income to Average Net Assets (%) 9.06(d) 9.47
Portfolio Turnover Rate (%) 75 89
Net Assets, End of the Period (000) $ 7,732 $ 9,138
(a) Commencement of operations.
(b) The ratio of operating expenses to average net assets without giving effect to an expense
limitation would have been (%):
-- --
(c) A sales charge for Class A shares and a contingent deferred sales charge for Class B and C shares
is not reflected in total return calculations. Periods of less than one year are not annualized.
(d) Computed on an annualized basis.
The subadviser to the Fund prior to July 1, 1996 was Back Bay Advisers, L.P. Effective July 1, 1996,
Loomis, Sayles & Company, L.P. became the subadviser to the Fund.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
[graphic omitted] Fund Performance
----------------
NVEST STRATEGIC INCOME FUND
CLASS A CLASS B
MAY 1,(A) MAY 1,(A)
THROUGH THROUGH
DECEMBER 31, YEAR ENDED DECEMBER 31, DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period $ 12.50 $ 12.99 $ 13.36 $ 13.42 $ 11.37 $ 12.50 $ 12.99 $ 13.36 $ 13.42 $ 11.37
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.74 1.05 1.01 1.05 1.03 0.68 0.95 0.91 0.95 0.94
Net Realized and
Unrealized Gain
(Loss) on
Investments 0.49 0.73 0.21 (1.30) 0.31 0.49 0.73 0.21 (1.30) 0.31
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total From
Investment
Operations 1.23 1.78 1.22 (0.25) 1.34 1.17 1.68 1.12 (0.35) 1.25
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends From
Net Investment
Income (0.73) (1.05) (1.01) (1.05) (1.02) (0.67) (0.95) (0.91) (0.95) (0.93)
Distributions in
Excess of Net
Investment Income (0.01) 0.00 0.00 0.00 0.00 (0.01) 0.00 0.00 0.00 0.00
Distributions From
Net Realized
Capital Gains 0.00 (0.36) (0.15) (0.70) (0.04) 0.00 (0.36) (0.15) (0.70) (0.04)
Distributions in
Excess of Net
Realized Capital
Gains 0.00 0.00 0.00 (0.05) 0.00(e) 0.00 0.00 0.00 (0.05) 0.00(e)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions (0.74) (1.41) (1.16) (1.80) (1.06) (0.68) (1.31) (1.06) (1.70) (0.97)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value,
End of the Period $ 12.99 $ 13.36 $ 13.42 $ 11.37 $ 11.65 $ 12.99 $ 13.36 $ 13.42 $ 11.37 $ 11.65
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN (%) (c) 10.3 14.5 9.3 (1.7) 12.2 9.7 13.7 8.5 (2.5) 11.3
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to
Average Net
Assets (%)(d) 0.93(b) 0.96 1.18 1.19 1.21 1.68(b) 1.71 1.93 1.94 1.96
Ratio of Net
Investment
Income to Average
Net Assets (%) 8.75(b) 8.23 7.36 8.33 9.09 8.00(b) 7.48 6.61 7.58 8.34
Portfolio Turnover
Rate (%) 22 52 37 33 19 22 52 37 33 19
Net Assets, End of
the Period (000) $ 36,939 $ 90,729 $144,706 $127,306 $124,869 $ 38,767 $ 93,408 $146,083 $134,049 $127,723
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) A sales charge for Class A shares and a contingent deferred sales charge for Class B and C shares is not reflected in total
return calculations. Periods of less than one year are not computed on an annualized basis.
(d) The ratio of operating expenses to average net assets without giving effect to an expense limitation would have been (%):
1.58(b) 1.31 -- -- -- 2.33(b) 2.06 -- -- --
(e) Amount is less than $0.01
<CAPTION>
CLASS C
MAY 1,(A)
THROUGH
DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period $ 12.50 $ 12.99 $ 13.35 $ 13.41 $ 11.36
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.67 0.95 0.91 0.95 0.94
Net Realized and Unrealized Gain (Loss) on Investments 0.49 0.72 0.21 (1.30) 0.31
-------- -------- -------- -------- --------
Total From Investment Operations 1.16 1.67 1.12 (0.35) 1.25
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends From Net Investment Income (0.66) (0.95) (0.91) (0.95) (0.93)
Distributions in Excess of Net Investment Income (0.01) 0.00 0.00 0.00 0.00
Distributions From Net Realized Capital Gains 0.00 (0.36) (0.15) (0.70) (0.04)
Distributions in Excess of Net Realized Capital Gains 0.00 0.00 0.00 (0.05) 0.00(e)
-------- -------- -------- -------- --------
Total Distributions (0.67) (1.31) (1.06) (1.70) (0.97)
-------- -------- -------- -------- --------
Net Asset Value, End of the Period $ 12.99 $ 13.35 $ 13.41 $ 11.36 $ 11.64
======== ======== ======== ======== ========
TOTAL RETURN (%) (c) 9.7 13.6 8.5 (2.5) 11.3
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%)(d) 1.68(b) 1.71 1.93 1.94 1.96
Ratio of Net Investment Income to Average Net Assets (%) 8.00(b) 7.48 6.61 7.58 8.34
Portfolio Turnover Rate (%) 22 52 37 33 19
Net Assets, End of the Period (000) $ 12,252 $ 31,746 $ 56,515 $ 45,457 $ 40,265
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) A sales charge for Class A shares and a contingent deferred sales charge for Class B and C shares is not reflected in total
return calculations. Periods of less than one year are not computed on an annualized basis.
(d) The ratio of operating expenses to average net assets without giving effect to an expense limitation would have been (%):
2.33(b) 2.06 -- -- --
(e) Amount is less than $0.01
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
[graphic omitted] Fund Performance
----------------
NVEST LIMITED TERM U.S. GOVERNMENT FUND
CLASS A CLASS B
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $ 11.49 $ 12.10 $ 11.55 $ 11.64 $ 11.70 $ 11.48 $ 12.09 $ 11.54 $ 11.62 $ 11.69
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.86 0.81 0.72 0.67 0.66 0.76 0.73 0.65 0.60 0.59
Net Realized and
Unrealized Gain
(Loss) on
Investments 0.59 (0.54) 0.09 0.06 (0.74) 0.61 (0.54) 0.08 0.07 (0.75)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total From
Investment
Operations 1.45 0.27 0.81 0.73 (0.08) 1.37 0.19 0.73 0.67 (0.16)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From
Net Investment
Income (0.84) (0.82) (0.72) (0.67) (0.65) (0.76) (0.74) (0.65) (0.60) (0.58)
Distributions in
Excess of Net
Investment Income 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions (0.84) (0.82) (0.72) (0.67) (0.65) (0.76) (0.74) (0.65) (0.60) (0.58)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value,
End of the Year $ 12.10 $ 11.55 $ 11.64 $ 11.70 $ 10.97 $ 12.09 $ 11.54 $ 11.62 $ 11.69 $ 10.95
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN (%) (a) 13.0 2.4 7.3 6.5 (0.7) 12.3 1.7 6.5 5.9 (1.4)
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to
Average Net
Assets (%) 1.22 1.25 1.28 1.31 1.33 1.87 1.90 1.93 1.96 1.98
Ratio of Net
Investment Income
to Average Net
Assets (%) 7.18 7.13 6.40 5.81 5.91 6.53 6.48 5.75 5.16 5.26
Portfolio Turnover
Rate (%) 247 327 533 1,376 400 247 327 533 1,376 400
Net Assets, End of
Year (000) $361,520 $276,178 $222,185 $194,032 $149,756 $ 18,056 $ 18,503 $ 16,060 $ 18,116 $ 14,601
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS C
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 11.48 $ 12.10 $ 11.54 $ 11.63 $ 11.70
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.64 0.75 0.65 0.60 0.59
Net Realized and Unrealized Gain (Loss) on Investments 0.64 (0.57) 0.09 0.07 (0.75)
-------- -------- -------- -------- --------
Total From Investment Operations 1.28 0.18 0.74 0.67 (0.16)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.65) (0.74) (0.65) (0.60) (0.58)
Distributions in Excess of Net Investment Income (0.01) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- --------
Total Distributions (0.66) (0.74) (0.65) (0.60) (0.58)
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 12.10 $ 11.54 $ 11.63 $ 11.70 $ 10.96
======== ======== ======== ======== ========
TOTAL RETURN (%) (a) 11.4 1.6 6.6 5.9 (1.4)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) 1.87 1.90 1.93 1.96 1.98
Ratio of Net Investment Income to Average Net Assets (%) 6.53 6.48 5.75 5.16 5.26
Portfolio Turnover Rate (%) 247 327 533 1,376 400
Net Assets, End of Year (000) $ 5,936 $ 14,903 $ 15,699 $ 13,962 $ 9,054
(a) A sales charge for Class A shares and a contingent deferred sales charges for Class B and C shares is not reflected
in total return calculations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
[graphic omitted] Fund Performance
-----------------
NVEST GOVERNMENT SECURITIES FUND
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Year $ 10.43 $ 11.73 $ 11.08 $ 11.56 $ 11.90 $ 10.43 $ 11.74 $ 11.08 $ 11.56 $ 11.90
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.74 0.71 0.62 0.68 0.67 0.65 0.63 0.54 0.58 0.59
Net Realized and Unrealized
Gain (Loss) on Investments 1.29 (0.64) 0.48 0.33 (1.42) 1.30 (0.65) 0.48 0.34 (1.42)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations 2.03 0.07 1.10 1.01 (0.75) 1.95 (0.02) 1.02 0.92 (0.83)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From Net
Investment Income (0.73) (0.72) (0.62) (0.67) (0.68) (0.64) (0.64) (0.54) (0.58) (0.60)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions (0.73) (0.72) (0.62) (0.67) (0.68) (0.64) (0.64) (0.54) (0.58) (0.60)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End
of the Year $ 11.73 $ 11.08 $ 11.56 $ 11.90 $ 10.47 $ 11.74 $ 11.08 $ 11.56 $ 11.90 $ 10.47
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN (%) (a) 20.0 0.8 10.3 9.0 (6.4) 19.2 (0.1) 9.5 8.2 (7.1)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 1.35 1.32 1.36 1.38 1.36 2.10 2.07 2.11 2.13 2.11
Ratio of Net Investment
Income to Average
Net Assets (%) 6.69 6.45 5.63 5.80 6.00 5.94 5.70 4.88 5.05 5.25
Portfolio Turnover Rate (%) 559 462 391 106 313 559 462 391 106 313
Net Assets, End of the
Year (000) $147,503 $120,607 $103,583 $103,032 $ 84,904 $ 4,858 $ 5,385 $ 5,654 $ 9,657 $ 9,430
(a) A sales charge for Class A shares and a contingent deferred sales charge for Class B shares is not reflected in total
return calculations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
[graphic omitted] Fund Performance
----------------
NVEST MUNICIPAL INCOME FUND
CLASS A CLASS B
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Year $ 6.85 $ 7.60 $ 7.53 $ 7.75 $ 7.76 $ 6.85 $ 7.60 $ 7.53 $ 7.75 $ 7.76
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.42 0.41 0.40 0.39 0.39 0.36 0.35 0.34 0.33 0.33
Net Realized and
Unrealized Gain
(Loss) on Investments 0.74 (0.07) 0.23 0.01 (0.59) 0.74 (0.07) 0.23 0.01 (0.59)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations 1.16 0.34 0.63 0.40 (0.20) 1.10 0.28 0.57 0.34 (0.26)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From
Net Investment Income (0.41) (0.41) (0.41) (0.39) (0.39) (0.35) (0.35) (0.35) (0.33) (0.33)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions (0.41) (0.41) (0.41) (0.39) (0.39) (0.35) (0.35) (0.35) (0.33) (0.33)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End
of the Year $ 7.60 $ 7.53 $ 7.75 $ 7.76 $ 7.17 $ 7.60 $ 7.53 $ 7.75 $ 7.76 $ 7.17
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN (%) (a) 17.2 4.6 8.6 5.3 (2.8) 16.3 3.9 7.8 4.5 (3.5)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets (%) 0.93 0.92 0.93 0.93 0.93 1.68 1.67 1.68 1.68 1.68
Ratio of Net Investment
Income to Average
Net Assets (%) 5.52 5.46 5.19 5.03 5.13 4.77 4.71 4.44 4.28 4.38
Portfolio Turnover
Rate (%) 93 24 14 26 137 93 24 14 26 137
Net Assets, End of
the Year (000) $195,301 $180,983 $177,099 $172,643 $152,829 $ 12,069 $ 12,568 $ 13,356 $ 15,878 $ 15,644
(a) A sales charge for Class A shares and a contingent deferred sales charge for Class B shares is not reflected in total return
calculations.
</TABLE>
<PAGE>
GLOSSARY OF TERMS
BID PRICE -- The price a prospective buyer is ready to pay. This term is used by
traders who maintain firm bid and offer prices in a given security by standing
ready to buy or sell security units at publicly quoted prices.
BOTTOM-UP ANALYSIS -- The search for outstanding performance of individual
stocks before considering the impact of economic trends. Such companies may be
identified from research reports, stock screens or personal knowledge of the
products and services.
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
S&P, Moody's or Fitch Investor Services, Inc. ("Fitch"). Bonds with a credit
rating of BBB or higher by S&P, Baa or higher by Moody's or BBB by Fitch are
generally considered investment grade.
DERIVATIVE -- A financial instrument whose value and performance are based on
the value and performance of another security or financial instrument.
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 companies or
industries to reduce the risk if an individual company or one sector of the
market suffers losses.
DIVIDEND YIELD -- The current or estimated annual dividend divided by the market
price per share of a security.
DURATION -- A measure of how much a bond's price fluctuates with changes in
comparable interest rates.
EARNINGS GROWTH -- A pattern of increasing rate of growth in earnings per share
from one period to another, which usually causes a stock's price to rise.
FUNDAMENTAL ANALYSIS -- An analysis of the balance sheet and income statements
of a company in order to forecast its future stock price movements. Fundamental
analysis considers past records of assets, earnings, sales, products, management
and markets in predicting future trends in these indicators of a company's
success or failure. By appraising a company's prospects, analysts using such an
approach assess whether a particular stock or group of stocks is undervalued or
overvalued at its current market price.
GROWTH INVESTING -- An investment style that emphasizes companies with strong
earnings growth. Growth investing is generally considered more aggressive than
"value" investing.
INCOME DISTRIBUTIONS -- Payments to 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.
MARKET CAPITALIZATION -- The market price of a company's shares multiplied by
number of shares outstanding. Large capitalization companies generally have over
$5 billion in market capitalization; medium cap companies between $1.5 billion
and $5 billion; and small cap companies less than $1.5 billion. These
capitalization figures may vary depending upon the index being used and/or the
guidelines used by the portfolio manager.
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.
PRICE-TO-BOOK VALUE RATIO -- Current market price of a stock divided by its book
value, or net asset value.
PRICE-TO-EARNINGS RATIO -- Current market price of a stock divided by its
earnings per share. Also known as the "multiple," the price-to-earnings ratio
gives investors an idea of how much they are paying for a company's earning
power and is a useful tool for evaluating the costs of different securities.
Some firms use the inverse ratio for this calculation (i.e. earnings-to-price
ratio).
QUALITATIVE ANALYSIS -- An analysis of the qualities possessed by a company,
including its management, products and competitive positions, to help determine
if the company can execute its strategy.
RETURN ON EQUITY -- The amount, expressed as a percentage, earned on a company's
common stock investment for a given period. It is calculated by dividing common
stock equity (net worth) at the beginning of the accounting period into net
income for the period after preferred stock dividends but before common stock
dividends. This tells common shareholders how effectively their money is being
employed.
RULE 144A SECURITIES -- Rule 144A securities are privately offered securities
that can be resold only to certain qualified institutional buyers. Rule 144A
securities are treated as illiquid, unless a manager has determined, under
guidelines established by a Fund's trustees, that a particular issue of Rule
144A securities is liquid.
TARGET PRICE -- Price that an investor is hoping a stock he or she has just
bought will rise to within a specified period of time. An investor may buy XYZ
at $20, with a target price of $40 in one year's time, for instance.
TECHNICAL ANALYSIS -- The research into the demand and supply for securities,
options, mutual funds and commodities based on trading volume and price studies.
Technical analysis uses charts or computer programs to identify and project
price trends in a market, security, mutual fund or futures contract.
TOP-DOWN APPROACH -- The method in which an investor first looks at trends in
the general economy, and next selects attractive industries and then companies
that should benefit from those trends.
TOTAL RETURN -- The change in value of an investment in a Fund over a specific
time period expressed as a percentage. Total returns assume all earnings are
reinvested in additional shares of a Fund.
VALUE INVESTING -- A relatively conservative investment approach that focuses on
companies that may be temporarily out of favor or whose earnings or assets are
not fully reflected in their stock prices. Value stocks will tend to have a
lower price-to-earnings ratio than growth stocks.
VOLATILITY -- The general variability of a portfolio's value resulting from
price fluctuations of its investments. In most cases, the more diversified a
portfolio is, the less volatile it will be.
YIELD -- The rate at which a fund earns income, expressed as a percentage.
Mutual fund yield calculations are standardized, based upon a formula developed
by the SEC.
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.
<PAGE>
IF YOU WOULD LIKE MORE INFORMATION ABOUT THE FUNDS, THE FOLLOWING
DOCUMENTS ARE AVAILABLE FREE UPON REQUEST:
ANNUAL AND SEMIANNUAL REPORTS -- Provide
additional information about each Fund's
investments. Each report includes a discussion of
the market conditions and investment strategies
that significantly affected the Fund's performance
during its last fiscal year. 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 (SAI) --
Provides more detailed information about the
Funds, has been filed with the Securities and
Exchange Commission and is incorporated into this
Prospectus by reference.
TO ORDER A FREE COPY OF A FUND'S ANNUAL OR
SEMIANNUAL REPORT OR ITS SAI, CONTACT YOUR
FINANCIAL REPRESENTATIVE, OR THE FUNDS AT:
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 Funds' reports and SAIs at the
Public Reference Room of the Securities and
Exchange Commission 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.
NVEST FUNDS
BOND FUNDS
Nvest Short Term
Corporate Income Fund
Nvest Bond Income Fund
Nvest High Income Fund
Nvest Strategic Income Fund
Nvest Limited Term
U.S. Government Fund
Nvest Government Securities Fund
Nvest Municipal Income Fund
(Investment Company Act File No. 811-4323)
(Investment Company Act File No. 811-242)
XB51-0500
<PAGE>
NVESTFUNDS(SM)
Where The Best Minds Meet (R)
- --------------------------------------------------------------------------------
NVEST
BOND FUNDS -- CLASS Y SHARES
[graphic omitted]
- --------------------------------------------------------------------------------
CORPORATE INCOME
Nvest Short Term Corporate Income Fund
Back Bay Advisors, L.P.
Nvest Bond Income Fund
Back Bay Advisors, L.P.
Nvest High Income Fund
Loomis, Sayles & Company, L.P.
Nvest Strategic Income Fund
Loomis, Sayles & Company, L.P.
GOVERNMENT INCOME
Nvest Limited Term U.S. Government Fund
Back Bay Advisors, L.P.
Nvest Government Securities Fund
Back Bay Advisors, L.P.
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved any Fund's shares or
determined whether this Prospectus is accurate or complete. Anyone who tells you
otherwise is committing a crime.
For general information on the Funds or any of their services and for assistance
in opening an account, contact your financial representative or call Nvest
Funds.
PROSPECTUS
May 1, 2000
WHAT'S INSIDE
Goals, Strategies & Risks
[graphic omitted] Page 1
- --------------------------------------------------------------------------------
Fund Fees & Expenses
[graphic omitted] Page 13
- --------------------------------------------------------------------------------
Management Team
[graphic omitted] Page 16
- --------------------------------------------------------------------------------
Fund Services
[graphic omitted] Page 18
- --------------------------------------------------------------------------------
Fund Performance
[graphic omitted] Page 25
- --------------------------------------------------------------------------------
Nvest Funds
399 Boylston Street, Boston, Massachusetts 02116
800-225-5478
www.nvestfunds.com
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GOALS, STRATEGIES & RISKS
- --------------------------------------------------------------------------------
Nvest Short Term Corporate Income Fund ............................... 1
Nvest Bond Income Fund ............................................... 3
Nvest High Income Fund ............................................... 5
Nvest Strategic Income Fund .......................................... 7
Nvest Limited Term U.S. Government Fund .............................. 9
Nvest Government Securities Fund ..................................... 11
- --------------------------------------------------------------------------------
FUND FEES & EXPENSES
- --------------------------------------------------------------------------------
Fund Fees & Expenses ................................................. 13
- --------------------------------------------------------------------------------
MORE ABOUT RISK
- --------------------------------------------------------------------------------
More About Risk ...................................................... 15
- --------------------------------------------------------------------------------
MANAGEMENT TEAM
- --------------------------------------------------------------------------------
Meet the Funds' Investment Advisers and Subadvisers .................. 16
Meet the Funds' Portfolio Managers ................................... 17
- --------------------------------------------------------------------------------
FUND SERVICES
- --------------------------------------------------------------------------------
It's Easy to Open an Account ......................................... 18
Buying Shares ........................................................ 19
Selling Shares ....................................................... 20
Selling Shares in Writing ............................................ 21
Exchanging Shares .................................................... 22
Restrictions on Buying, Selling and Exchanging Shares ................ 22
How Fund Shares Are Priced ........................................... 23
Dividends and Distributions .......................................... 24
Tax Consequences ..................................................... 24
Compensation to Securities Dealers ................................... 24
- --------------------------------------------------------------------------------
FUND PERFORMANCE
- --------------------------------------------------------------------------------
Nvest Short Term Corporate Income Fund ............................... 25
Nvest Bond Income Fund ............................................... 26
Nvest High Income Fund ............................................... 27
Nvest Strategic Income Fund .......................................... 28
Nvest Limited Term U.S. Government Fund .............................. 29
Nvest Government Securities Fund ..................................... 30
Glossary of Terms .................................................... 31
If you have any questions about any of the terms used in this Prospectus, please
refer to the "Glossary of Terms."
To learn more about the possible risks of investing in a Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Funds may engage. Please read this section carefully
before you invest.
Fund shares are not bank deposits and are not guaranteed, endorsed or insured by
the Federal Deposit Insurance Corporation or any other government agency, and
are subject to investment risks, including possible loss of the principal
invested.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS DURATION
------------------------- ---------------------------- ----------------------------
NVEST SHORT TERM CORPORATE INCOME FUND Stability Income Growth Short Int. Long
Quality
High X High X
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") --------- ------ ------ --------- ------ ------
Mod. X Mod.
SUBADVISER: Back Bay Advisors, L.P. ("Back Bay Advisors") --------- ------ ------ --------- ------ ------
Low X Low
MANAGERS: J. Scott Nicholson and Richard G. Raczkowski
CATEGORY: Corporate Income
</TABLE>
INVESTMENT GOAL
The Fund seeks a high level of current income consistent with preservation of
capital.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund intends to invest in corporate bonds
and will invest at least 10% of its assets in U.S. Treasury and Agency
securities. The Fund may invest up to 25% of its assets in U.S.
dollar-denominated foreign securities and up to 10% of its assets in securities
denominated in foreign currencies (and related currency hedging transactions).
It may also invest up to 10% of its assets in lower-rated bonds, which may
include emerging market bonds, (rated BB or lower by Standard & Poor's Ratings
Group ("S&P") and Ba or lower by Moody's Investors Service, Inc. ("Moody's")).
Back Bay Advisors follows a total return oriented investment approach in
selecting securities for the Fund. It seeks corporate, mortgage-related or U.S.
government securities that give the Fund's portfolio the following
characteristics, although Back Bay Advisors may look for other characteristics
if market conditions change:
x average credit rating of "A" by S&P or Moody's
x average maturity of 3 years or less
In selecting investments for the Fund, Back Bay Advisors employs the following
strategies:
o Its research analysts work closely with the Fund's portfolio manager to
develop an outlook on the economy from research produced by various Wall
Street firms and specific forecasting services or from economic data released
by U.S. and foreign governments as well as the Federal Reserve Bank.
o Next, the analysts conduct a thorough review of individual securities to
identify what they consider attractive values in the corporate and mortgage
marketplace. This value analysis uses quantitative tools such as internal and
external computer systems and software.
o Back Bay Advisors continuously monitors an issuer's creditworthiness to assess
whether the obligation remains an appropriate investment for the Fund.
o Back Bay Advisors seeks to balance opportunities for yield and price
performance by combining macroeconomic analysis with individual security
selection. The short-term maturity of the Fund's investments creates the
opportunity for greater price stability in addition to the conservative
income-producing capabilities of higher quality fixed-income securities.
The Fund may:
o Invest in 144A securities, collateralized mortgage obligations, asset-backed
securities and zero-coupon bonds.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
FIXED INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise.
Lower-quality fixed-income securities and zero-coupon bonds may be subject to
these risks to a greater extent than other fixed-income securities.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency. Investments in emerging markets may
be subject to these risks to a greater extent than those in more developed
markets.
MORTGAGE-RELATED AND ASSET-BACKED SECURITIES: Subject to prepayment risk. With
prepayment, the Fund may reinvest the prepaid amounts in securities with lower
yields than the prepaid obligations. The Fund may also incur a realized loss
when there is a prepayment of securities that were purchased at a premium.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Short Term Corporate Income Fund by showing changes in the Fund's
performance from year to year and by showing how the Fund's average annual
returns for one-year, five-year and since-inception periods compare with those
of a broad measure of market performance and those of indices of funds with
similar objectives. The returns shown are those of the Fund's Class A, B and C
shares which are not offered in this Prospectus. Class Y shares would have
substantially similar annual returns because they would be invested in the same
portfolio of securities as the Class A and B shares and would only differ to the
extent that the classes do not have the same expenses. The Class Y returns may
be higher than the returns of Class A shares because Class A shares are subject
to sales charges and higher expenses. The Fund, formerly known as Adjustable
Rate U.S. Government Fund, changed its name and investment policies on December
1, 1998. The Fund is still managed by the same subadviser and portfolio manager.
The bar chart and table reflect results achieved under different investment
policies prior to December 1, 1998. The Fund's past performance does not
necessarily indicate how it will perform in the future.
The bar chart shows the Fund's total returns for Class A shares for each
calendar year since the Fund's first full year of operations. The returns for
Class B and C shares differ from the Class A returns shown in the bar chart,
depending upon the respective expenses of each class. The chart does not reflect
any sales charge that you may be required to pay when you buy or redeem the
Fund's shares. A sales charge will reduce your return.
(total return)
1992 4.93%
1993 4.10%
1994 0.82%
1995 8.60%
1996 5.83%
1997 6.21%
1998 4.07%
1999 1.87%
/\ Highest Quarterly Return: First Quarter 1995, up 3.35%
\/ Lowest Quarterly Return: Second Quarter 1999, down 0.07%
The table below shows the Fund's average annual total returns for the one-year,
five-year and since-inception periods compared to those of the Lehman Mutual
Fund Short (1-5) Investment Grade Debt Index (the "Lehman Short Index"), an
unmanaged index of corporate bonds with maturities between one and five years.
They are also compared to the Morningstar Short Term Bond Average and the Lipper
Short Term Investment Grade Average, each an average of the total return of
mutual funds with similar investment objectives as the Fund as calculated by
Morningstar, Inc. and Lipper, Inc. The Fund changed investment policies and
comparative indices on December 1, 1998. You may not invest directly in an
index. The Fund's total returns reflect its expenses and the maximum sales
charge you pay when you buy or redeem the Fund's shares. The Lehman Short Index
percentages have not been adjusted for ongoing management, distribution and
operating expenses and sales charges applicable to mutual fund investments. The
Morningstar Short Term Bond Average and Lipper Short Term Investment Grade
Average percentages have been adjusted for these expenses but do not reflect any
sales charges.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999) SINCE CLASS A SINCE CLASS B SINCE CLASS C
PAST 1 YEAR PAST 5 YEARS INCEPTION INCEPTION INCEPTION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NVEST SHORT TERM CORPORATE INCOME FUND
(formerly Adjustable Rate U.S. Government Fund)
Class A (inception 10/18/91) -1.24% 4.65% 4.17%
Class B (inception 9/13/93) -3.69% 4.18% 3.56%
Class C (inception 12/7/98) 0.24% 1.38%
Lehman Mutual Fund Short (1-5) Investment Grade Index 2.49% 7.30% 6.72% 5.88% 2.49%
Morningstar Short Term Bond Average 2.14% 6.09% 5.55% 4.75% 2.13%
Lipper Short Term Investment Grade Average 2.81% 5.95% 5.59% 4.88% 2.81%
- ------------------------------------------------------------------------------------------------------------------------------------
Each Index is calculated from 10/31/91 for Class A shares, from 9/30/93 for Class B Shares and from 12/31/98 for Class C Shares.
For the expenses of Class Y shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS DURATION
------------------------- ---------------------------- ----------------------------
NVEST BOND INCOME FUND Stability Income Growth Short Int. Long
Quality
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") High X High X
--------- ------ ------ --------- ------ ------
SUBADVISER: Back Bay Advisors, L.P. ("Back Bay Advisors") Mod. X Mod.
--------- ------ ------ --------- ------ ------
MANAGERS: Peter W. Palfrey and Richard G. Raczkowski Low X Low
CATEGORY: Corporate Income TICKER SYMBOL: CLASS Y
-------
NERYX
</TABLE>
INVESTMENT GOAL
The Fund seeks a high level of current income consistent with what the Fund
considers reasonable risk. It invests primarily in corporate and U.S.
government bonds.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest primarily in U.S. corporate
and U.S. government bonds. It will adjust to changes in the relative strengths
of the U.S. corporate or U.S. government bond markets by shifting the relative
balance between the two. The Fund will invest at least 80% of its assets in
investment-grade bonds (rated BBB or higher by Standard & Poor's Ratings Group
("S&P") or Baa or higher by Moody's Investors Service, Inc. ("Moody's")) and
will generally maintain an average effective maturity of ten years or less. The
Fund may also purchase lower-quality bonds (those rated below BBB by S&P and
below Baa by Moody's).
Back Bay Advisors follows a total return oriented investment approach in
selecting securities for the Fund. It takes into account economic and market
conditions as well as issuer-specific data, such as:
x fixed charge coverage
x the relationship between cash flows and dividend
obligations
x the experience and perceived strength of management
x price responsiveness of the security to interest rate changes
x earnings prospects
x debt as a percentage of assets
x borrowing requirements, debt maturity schedules and liquidation value
In selecting investments for the Fund, Back Bay Advisors employs the following
strategies:
o Its research analysts work closely with the Fund's portfolio manager to
develop an outlook for the economy from research produced by various Wall
Street firms and specific forecasting services or from economic data released
by U.S. and foreign governments as well as the Federal Reserve Bank.
o Next, the analysts conduct a thorough review of individual securities to
identify what they consider attractive values in the high quality bond market.
This value analysis uses quantitative tools such as internal and external
computer systems and software.
o Back Bay Advisors continuously monitors an issuer's creditworthiness to assess
whether the obligation remains an appropriate investment to the Fund. It may
relax its emphasis on quality with respect to a given security if it believes
that the issuer's financial outlook is solid. This may create an opportunity
for higher return.
o Back Bay Advisors seeks to balance opportunities for yield and price
performance by combining macroeconomic analysis with individual security
selection. Fund holdings are diversified across industry groups such as
utilities or telecommunications, which tend to move independently of the ebbs
and flows in economic growth.
The Fund may:
o Invest in foreign securities, including those in emerging markets and related
currency hedging transactions.
o Invest in Rule 144A and mortgage-backed securities.
o Invest substantially all of its assets in U.S. government securities for
temporary defensive purposes in response to adverse market, economic or
political conditions. These investments may prevent the Fund from achieving
its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise. Lower
quality fixed-income securities may be subject to these risks to a greater
extent than other fixed-income securities.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency. Investments in emerging markets may
be subject to these risks to a greater extent than those in more developed
markets.
MORTGAGE-RELATED SECURITIES: Subject to prepayment risk. With prepayment, the
Fund may reinvest the prepaid amounts in securities with lower yields than the
prepaid obligation. The Fund may also incur a realized loss when there is a
prepayment of securities that were purchased at a premium.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Bond Income Fund by showing changes in the Fund's performance from year
to year and by showing the Fund's average annual returns for one-year, five-year
and since-inception periods compared with those of a broad measure of market
performance and those indices of funds with similar objectives. The Fund's past
performance does not necessarily indicate how it will perform in the future.
The bar chart shows the Fund's total returns for Class Y shares for each
calendar year since it first offered class Y shares. Class Y returns shown in
the bar chart are generally higher than the returns for Class A, B and C shares
because of the sales charges and higher expenses of those classes.
(total return)
1995 20.72%
1996 4.59%
1997 11.40%
1998 8.29%
1999 -0.01%
/\ Highest Quarterly Return: Second Quarter 1995, up 7.46%
\/ Lowest Quarterly Return: First Quarter 1996, down 2.21%
The table below shows the Fund's average annual total returns for the one-
year, five year and since-inception periods compared to those of the Lehman
Aggregate Bond Index, an unmanaged index of investment-grade bonds with one-
to ten-year maturities issued by the U.S. government and U.S. corporations.
The returns are also compared to the the Morningstar Intermediate Term Bond
Average ("Morningstar Int. Bond Average") and Lipper Intermediate Investment
Grade Debt Average ("Lipper Int. Invest. Grade Debt Average"), each an
average of the total return of mutual funds with similar investment
objectives as the Fund as calculated by Morningstar, Inc. and Lipper, Inc.
You may not invest directly in an index. The Fund's total returns reflect the
expenses of the Fund's Class Y shares. The Lehman Aggregate Bond Index
returns have not been adjusted for ongoing management, distribution and
operating expenses applicable to mutual fund investments. The Morningstar
Int. Bond Average and Lipper Int. Invest. Grade Debt Average returns have
been adjusted for these expenses.
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS SINCE INCEPTION
(for the periods ended December 31, 1999) PAST 1 YEAR PAST 5 YEARS OF CLASS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nvest Bond Income Fund: Class Y (inception 12/30/94) -0.01% 8.77% 8.76%
Lehman Aggregate Bond Index ....................... -0.82% 7.73% 7.73%
Morningstar Int. Bond Avg ......................... -1.38% 6.82% 6.84%
Lipper Int. Invest. Grade Debt Avg ................ -1.31% 6.79% 6.79%
- -------------------------------------------------------------------------------------------------------------
For actual past expenses of Class Y shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
[graphic omitted] Goals, Strategies & Risks
-------------------------
NVEST HIGH INCOME FUND FUND FOCUS DURATION
---------------------------- ----------------------------
Stability Income Growth Short Int. Long
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") Quality
High X High
SUBADVISER: Loomis, Sayles & Company, L.P. ("Loomis Sayles") --------- ------ ------ --------- ------ ------
Mod. X Mod.
MANAGER: Gary L. Goodenough --------- ------ ------ --------- ------ ------
Low X Low X
CATEGORY: Corporate Income
</TABLE>
INVESTMENT GOAL
The Fund seeks high current income plus the opportunity for capital appreciation
to produce a high total return.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest at least 65% of its assets
in lower-quality fixed-income securities, commonly known as "junk bonds." Junk
bonds are generally rated below BBB by Standard & Poor's Ratings Group ("S&P")
and below Baa by Moody's Investors Service, Inc. ("Moody's"). The Fund will
normally invest at least 80% of its assets in U.S. corporate or U.S.
dollar-denominated foreign fixed-income securities. The Fund may also invest up
to 20% of its assets in foreign currency-denominated fixed-income securities,
including those in emerging markets.
Loomis Sayles performs its own extensive credit analyses to determine the
creditworthiness and potential for capital appreciation of a security. The
Fund's management minimizes market timing or interest rate forecasting. Instead,
it uses a strategy based on gaining a thorough understanding of industry and
company dynamics as well as individual security characteristics such as:
x issuer debt and debt maturity schedules
x earnings prospects
x responsiveness to changes in interest rates
x experience and perceived strength of management
x borrowing requirements and liquidation value
x market price in relation to cash flow, interest and dividends
In selecting investments for the Fund, Loomis Sayles employs the following
strategies:
o It utilizes the skills of its in-house team of more than 40 research analysts
to cover a broad universe of industries, companies and markets. The Fund's
portfolio manager takes advantage of these extensive resources to identify
securities that meet the Funds investment criteria.
o Loomis Sayles employs a selection strategy that focuses on a value-driven,
bottom-up approach to identify securities that provide an opportunity for both
generous yields and capital appreciation. Loomis Sayles analyzes an individual
company's potential for positive financial news to determine if it has growth
potential. Examples of positive financial news include an upward turn in the
business cycle, improvement in cash flows, rising profits or the awarding of
new contracts.
o Loomis Sayles emphasizes in-depth credit analysis, appreciation potential and
diversification in its bond selection. Each bond is evaluated to assess the
ability of its issuer to pay interest and, ultimately, principal (which helps
the Fund generate an ongoing flow of income). Loomis Sayles also assesses a
bond's relation to market conditions within its industry and favors bonds
whose prices may benefit from positive business developments.
o Loomis Sayles seeks to diversify the Fund's holdings to reduce the inherent
risk in lower-quality fixed-income securities. The Fund's portfolio will
generally include 45 to 50 holdings across many industries.
The Fund may:
o Invest in zero-coupon, pay-in-kind securities and Rule 144A securities.
o Purchase higher quality debt securities (such as U.S. government securities
and obligations of U.S. banks with at least $2 billion of deposits) for
temporary defensive purposes in response to adverse market, economic or
political conditions, such as a rising trend in interest rates. These
investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise.
Lower-quality fixed-income securities and zero-coupon bonds may be subject to
these risks to a greater extent than other fixed-income securities.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency. Investments in emerging markets may
be subject to these risks to a greater extent than those in more developed
markets.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest High Income Fund by showing changes in the Fund's performance from year
to year and by showing how the Fund's average annual returns for one-, five- and
ten year periods (or since-inception period if shorter) compare with those of a
broad measure of market performance and those of indices of funds with similar
objectives. The returns shown are those of the Fund's Class A, B and C shares
which are not offered in this Prospectus. Class Y shares would have
substantially similar annual returns because they would be invested in the same
portfolio of securities as the Class A, B and C shares and would only differ to
the extent that the classes do not have the same expenses. The Class Y returns
may be higher than the returns of Class A shares because Class A shares are
subject to sales charges and higher expenses. The Fund's past performance does
not necessarily indicate how it will perform in the future. The Fund's current
subadviser assumed that function on July 1, 1996. This chart and table reflect
results achieved by the previous subadviser using different investment
principles for periods prior to July 1, 1996.
The bar chart shows the Fund's total returns for Class A shares for each of the
last ten calendar years. The returns for Class B and C shares differ from the
Class A returns shown in the bar chart, depending upon the respective expenses
of each class. The chart does not reflect any sales charge that you may be
required to pay when you buy or redeem the Fund's shares. A sales charge will
reduce your return.
(total return)
1990 -13.28%
1991 36.42%
1992 15.73%
1993 16.57%
1994 -3.22%
1995 11.75%
1996 14.88%
1997 15.37%
1998 -1.66%
1999 4.00%
/\ Highest Quarterly Return: First Quarter 1991, up 11.92%
\/ Lowest Quarterly Return: Fourth Quarter 1990, down 9.10%
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' inception if shorter)
compared to those of the Lehman High Yield Composite Index, a market- weighted
unmanaged index of fixed-rate, noninvestment grade debt. They are also compared
to the Morningstar High Yield Bond Average and Lipper High Current Yield
Average, each an average of the total return of mutual funds with similar
investment objectives as the Fund as calculated by Morningstar, Inc. and Lipper,
Inc. You may not invest directly in an index. The Fund's total returns reflect
its expenses and the maximum sales charge that you may pay when you buy or
redeem the Fund's shares. The Lehman High Yield Composite Index returns have not
been adjusted for ongoing management, distribution and operating expenses and
sales charges applicable to mutual fund investments. The Morningstar High Yield
Bond Average and Lipper High Current Yield Average returns have been adjusted
for these expenses but do not reflect any sales charges.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------ *Since
AVERAGE ANNUAL TOTAL RETURNS Class
(for the periods ended December 31, 1999) PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS inception
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NVEST HIGH INCOME FUND: Class A (inception 2/22/84) -0.71% 7.66% 8.38%
Lehman High Yield Composite Index 2.39% 9.31% 10.72%
Morningstar High Yield Bond Average 4.19% 8.79% 9.98%
Lipper High Current Yield Average 4.53% 8.84% 10.03%
NVEST HIGH INCOME FUND: Class B (inception 9/20/93) -1.35% 7.63% 6.27%*
Lehman High Yield Composite Index (calculated from 9/30/93) 2.39% 9.31% 7.85%*
Morningstar High Yield Bond Average (calculated from 9/30/93) 4.19% 8.79% 7.51%*
Lipper High Current Yield Average (calculated from 9/30/93) 4.53% 8.84% 7.39%*
NVEST HIGH INCOME FUND: Class C (inception 3/2/98) 2.40% -0.40%*
Lehman High Yield Composite Index (calculated from 2/28/98) 2.39% 1.01%*
Morningstar High Yield Bond Average (calculated from 2/28/98) 4.19% 0.48%*
Lipper High Current Yield Average (calculated from 2/28/98) 4.53% 0.14%*
- ------------------------------------------------------------------------------------------------------------------------
For actual past expenses of Class Y shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
[graphic omitted] Goals, Strategies & Risks
-------------------------
NVEST STRATEGIC FUND FOCUS DURATION
INCOME FUND ---------------------------- ----------------------------
Stability Income Growth Short Int. Long
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") Quality
High X High
SUBADVISER: Loomis, Sayles & Company, L.P. ("Loomis Sayles") --------- ------ ------ --------- ------ ------
Mod. X Mod. X
MANAGERS: Daniel J. Fuss and Kathleen C. Gaffney --------- ------ ------ --------- ------ ------
Low X Low
CATEGORY: Corporate Income
TICKER SYMBOL: CLASS Y
-------
NEZYX
</TABLE>
INVESTMENT GOAL
The Fund seeks high current income with a secondary objective of capital growth.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all of its
assets in debt instruments (including lower-quality securities) with a focus on
U.S. corporate bonds, foreign debt instruments, including those in emerging
markets and U.S. government securities. The Fund may invest up to 35% of its
assets in preferred stocks and dividend-paying common stocks. The portfolio
managers shift the Fund's assets among various bond segments based upon changing
market conditions.
Loomis Sayles performs its own extensive credit analyses to determine the
creditworthiness and potential for capital appreciation of a security. The
Fund's management refrains from market timing or interest rate forecasting.
Instead, it uses a flexible approach to identify securities in the global
marketplace with the following characteristics, although not all of the
securities selected will have these attributes:
x discounted share price compared to economic value
x undervalued credit ratings with strong or improving credit profiles
x yield premium relative to its benchmark
In selecting investments for the Fund, Loomis Sayles generally employs the
following strategies:
o It utilizes the skills of its in-house team of more than 40 research analysts
to cover a broad universe of industries, companies and markets. The Fund's
portfolio managers take advantage of these extensive resources to identify
securities that meet the Fund's investment criteria.
o Loomis Sayles seeks to buy bonds at a discount -- bonds that offer a positive
yield advantage over the market and, in its view, have room to go up in price.
It may also invest to take advantage of what the portfolio managers believe
are temporary disparities in the yield of different segments of the market for
U.S. government securities.
o Loomis Sayles provides the portfolio managers with maximum flexibility to find
investment opportunities in a wide range of markets, both domestic and
foreign. This flexible approach offers investors one-stop access to a wide
array of investment opportunities. The three key sectors that the portfolio
managers focus upon are U.S. corporate issues, foreign bonds and U.S.
government securities.
o The Fund's portfolio managers maintain a core of the Fund's investments in
corporate bond issues and shift its assets among other bond segments as
opportunities develop. The Fund maintains a high level of diversification as a
form of risk management.
The Fund may:
o Invest in mortgage-backed securities, zero-coupon or pay-in-kind bonds, and
stripped securities.
o Invest substantially in U.S. government securities for temporary defensive
purposes in response to adverse market, economic or political conditions.
These investments may prevent the Fund from achieving its goal.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise.
Lower-quality fixed-income securities and zero-coupon bonds may be subject to
these risks to a greater extent than other fixed-income securities.
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in value or periods of
below-average performance in a given stock or in the stock market as a whole.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency. Investments in emerging markets may
be subject to these risks to a greater extent than those in more developed
markets.
MORTGAGE-RELATED SECURITIES: Subject to prepayment risk. With prepayment, the
Fund may reinvest the prepaid amounts in securities with lower yields than the
prepaid obligations. The Fund may also incur a realized loss when there is a
prepayment of securities that were purchased at a premium. Stripped securities
are more sensitive to changes in the prevailing interest rates and the rate of
principal payments on the underlying assets than regular mortgage-backed
securities.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Strategic Income Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual returns for one-year
and since-inception periods compare with those of a broad measure of market
performance and those of indices of funds with similar objectives. The returns
shown are those of the Fund's Class A, B and C shares which are not offered in
this Prospectus. Class Y shares would have substantially similar annual returns
because they would be invested in the same portfolio of securities as the Class
A, B and C shares and would only differ to the extent that the classes do not
have the same expenses. Class Y returns may be higher than Class A returns
because Class A shares are subject to sales charges and higher expenses. The
Fund's past performance does not necessarily indicate how it will perform in the
future.
The bar chart shows the Fund's total returns for Class A shares for each
calendar year since its first full year of operations. The returns for Class B
and C shares differ from the Class A returns shown in the bar chart, depending
upon the respective expenses of each class. The chart does not reflect any sales
charge that you may be required to pay when you buy or redeem the Fund's shares.
A sales charge will reduce your return.
(total return)
1996 14.49%
1997 9.33%
1998 -1.69%
1999 12.17%
/\ Highest Quarterly Return: Fourth Quarter 1998, up 7.42%
\/ Lowest Quarterly Return: Third Quarter 1998, down 10.57%
The table below shows the Fund's average annual total returns for the one-year
and since-inception periods compared to those of the Lehman Aggregate Bond
Index, a market-weighted aggregate index that includes nearly all debt issued by
the U.S. Treasury, U.S. government agencies and U.S. corporations rated
investment grade, and U.S. agency debt backed by mortgage pools. They are also
compared to the Lehman Universal Bond Index, an unmanaged index representing 85%
of the return of the Lehman Brothers Aggregate Bond Index, 5% of the Lehman
Brothers High Yield Corporate Bond Index, 4% of the Lehman Brothers Emerging
Market Index, 5% of Eurodollar instruments and 1% of 144A Commercial Paper. They
are also compared to the Morningstar Multi-Sector Bond Average and Lipper
Multi-Sector Income Average, each an average of the total return of mutual funds
with similar investment objectives as the Fund as calculated by Morningstar,
Inc. and Lipper, Inc. You may not invest directly in an index. The Fund's total
returns reflect its expenses and the maximum sales charges that you may pay when
you buy or redeem the Fund's shares. The Lehman Aggregate Bond Index and the
Lehman Universal Bond Index returns have not been adjusted for ongoing
management, distribution and operating expenses and sales charges applicable to
mutual fund investments. The Morningstar Multi-Sector Bond Average and Lipper
Multi-Sector Income Average returns have been adjusted for these expenses but do
not reflect any sales charges.
<TABLE>
- ---------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS SINCE CLASS
(for the periods ended December 31, 1999) PAST 1 YEAR INCEPTION
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
NVEST STRATEGIC INCOME FUND: Class A (inception 5/1/95) 7.08% 8.35%
Lehman Aggregate Bond Index (calculated from 4/30/95) -0.82% 6.85%
Lehman Universal Bond Index (calculated from 4/30/95) 0.17% 6.22%
Morningstar Multi-Sector Bond Average (calculated from 4/30/95) -2.55% 7.26%
Lipper Multi-Sector Income Average (calculated from 4/30/95) 2.58% 7.27%
NVEST STRATEGIC INCOME FUND: Class B (inception 5/1/95) 6.33% 8.29%
Lehman Aggregate Bond Index (calculated from 4/30/95) -0.82% 6.85%
Lehman Universal Bond Index (calculated from 4/30/95) 0.17% 6.22%
Morningstar Multi-Sector Bond Average (calculated from 4/30/95) -2.55% 7.26%
Lipper Multi-Sector Income Average (calculated from 4/30/95) 2.58% 7.27%
NVEST STRATEGIC INCOME FUND: Class C (inception 5/1/95) 10.34% 8.53%
Lehman Aggregate Bond Index (calculated from 4/30/95) -0.82% 6.85% For the expenses of Class Y
Lehman Universal Bond Index (calculated from 4/30/95) 0.17% 6.22% shares, see the section
Morningstar Multi-Sector Bond Average (calculated from 4/30/95) -2.55% 7.26% entitled "Fund Fees & Expenses."
Lipper Multi-Sector Income Average (calculated from 4/30/95) 2.58% 7.27%
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
[graphic omitted] Goals, Strategies & Risks
-------------------------
NVEST LIMITED TERM FUND FOCUS DURATION
U.S. GOVERNMENT FUND ---------------------------- ----------------------------
Stability Income Growth Short Int. Long
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") Quality
High X X High X
SUBADVISER: Back Bay Advisors, L.P. ("Back Bay Advisors") --------- ------ ------ --------- ------ ------
Mod. Mod.
MANAGERS: James S. Welch and J. Scott Nicholson --------- ------ ------ --------- ------ ------
Low X Low
CATEGORY: Government Income
TICKER SYMBOL: CLASS Y
-------
NELYX
</TABLE>
INVESTMENT GOAL
The Fund seeks a high current return consistent with preservation of capital.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest primarily in U.S.
government securities, including U.S. Treasury and Agency bills, notes and
bonds, pass through mortgage securities issued or guaranteed by U.S.
government agencies and zero-coupon bonds.
Back Bay Advisors follows a total return oriented investment approach in
selecting securities for the Fund. It seeks securities that give the Fund's
portfolio the following characteristics, although Back Bay Advisors may look for
other characteristics if market conditions change:
x average credit rating of "AAA" by Standard & Poor's Ratings Group ("S&P") or
"Aaa" by Moody's Investors Service, Inc., ("Moody's")
x effective duration range of 2 to 4 years
In selecting investments for the Fund, Back Bay Advisors employs the following
strategies:
o Its research analysts work closely with the Fund's portfolio managers to
develop an outlook on the economy from research produced by various Wall
Street firms and specific forecasting services or from economic data released
by the U.S. and foreign governments as well as the Federal Reserve Bank.
o Next, the analysts conduct a thorough review of individual securities to
identify what they consider attractive values in the U.S. government security
marketplace. This value analysis uses quantitative tools such as internal and
external computer systems and software.
o Back Bay Advisors continuously monitors an issuer's creditworthiness to assess
whether the obligation remains an appropriate investment to the Fund.
o It seeks to balance opportunities for yield and price performance by combining
macroeconomic analysis with individual security selection. It emphasizes
securities that tend to perform particularly well in response to interest rate
changes, such as U.S. Treasury securities in a declining interest rate
environment and mortgage-backed or U.S. government agency securities in a
steady or rising interest rate environment.
o Back Bay Advisors seeks to increase the opportunity for higher yields while
maintaining the greater price stability that intermediate-term bonds have
compared to bonds with longer maturities.
The Fund may:
o Invest in investment-grade corporate notes and bonds (rated BBB or higher by
S&P and Baa or higher by Moody's).
o Invest in asset-backed securities rated AAA by S&P or Aaa by Moody's.
o Invest in foreign bonds denominated in U.S. dollars.
o Engage in active and frequent trading of its securities. Frequent trading may
produce higher transaction costs and a higher level of taxable capital gains,
which may lower your return.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise. Zero-coupon
bonds may be subject to these risks to a greater extent than other
fixed-income securities.
MORTGAGE-AND ASSET-BACKED SECURITIES: Subject to prepayment risk. With
prepayment, the Fund may reinvest the prepaid amounts in securities with lower
yields than the prepaid obligations. The Fund may also incur a realized loss
when there is a prepayment of securities that were purchased at a premium.
FOREIGN SECURITIES: Foreign bonds denominated in U.S. dollars may be more
volatile than U.S. securities and carry political, economic and information
risks that are also associated with foreign securities.
<PAGE>
GOALS, STRATEGIES & RISKS [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Limited Term U.S. Government Fund by showing changes in the Fund's
performance from year to year and by showing how the Fund's average annual
returns for one-year, five-year and since-inception periods compare with those
of a broad measure of market performance and those of indices of funds with
similar objectives. The Fund's past performance does not necessarily indicate
how it will perform in the future.
The bar chart shows the Fund's total returns for Class Y shares for each
calendar year since it first offered Class Y shares. The Class Y returns shown
in the bar chart are generally higher than the returns for the Class A, B and C
shares are generally lower than the Class Y returns shown in the bar chart
because of the sales charges and higher expenses of those classes.
(total return)
1995 13.34%
1996 2.73%
1997 7.53%
1998 6.94%
1999 -0.32%
/\ Highest Quarterly Return: Third Quarter 1998, up 4.80%
\/ Lowest Quarterly Return: First Quarter 1996, down 1.21%
The table below shows the Fund's average annual total returns for the one-year,
five year and since-inception periods compared to those of the Lehman
Intermediate Government Bond Index ("Lehman Int. Gov't Bond Index"), an
unmanaged index of bonds issued by the U.S. Government and its agencies having
maturities between one and ten years. The returns are also compared to the the
Morningstar Short Government Average and Lipper Short Intermediate U.S.
Government Average ("Lipper Short Int. U.S. Gov't Average"), each an average of
the total return of mutual funds with similar investment objectives as the Fund
as calculated by Morningstar, Inc. and Lipper, Inc. You may not invest directly
in an index. The Fund's total returns reflect the expenses of the Fund's Class Y
shares. The Lehman Int. Gov't Bond Index returns have not been adjusted for
ongoing management, distribution and operating expenses applicable to mutual
fund investments. The Morningstar Short Government Average and the Lipper Short
Int. U.S. Gov't Average returns have been adjusted for these expenses.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999) SINCE CLASS
PAST 1 YEAR PAST 5 YEARS INCEPTION
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NVEST LIMITED TERM U.S. GOVERNMENT FUND: Class Y (inception 3/31/94) -0.32% 5.94% 5.10%
Lehman Int. Gov't. Bond Index 0.49% 6.93% 6.02%
Morningstar Short Government Average 1.59% 5.78% 5.00%
Lipper Short Int. U.S. Gov't. Average 0.64% 6.00% 5.07%
- ------------------------------------------------------------------------------------------------------------------------
For actual past expenses of Class Y shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
[graphic omitted] Goals, Strategies & Risks
-------------------------
NVEST GOVERNMENT FUND FOCUS DURATION
SECURITIES FUND ---------------------------- ----------------------------
Stability Income Growth Short Int. Long
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") Quality
High X High X
SUBADVISER: Back Bay Advisors, L.P. ("Back Bay Advisors") --------- ------ ------ --------- ------ ------
Mod. X Mod.
MANAGERS: James S. Welch and J. Scott Nicholson --------- ------ ------ --------- ------ ------
Low X Low
CATEGORY: Government Income
TICKER SYMBOL: CLASS Y
-------
NEUYX
</TABLE>
INVESTMENT GOAL
The Fund seeks a high level of current income consistent with safety of
principal by investing in U.S. government securities.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest its assets in U.S.
government securities, including U.S. Treasury bills, notes and bonds, and
mortgage-backed securities issued or guaranteed by U.S. government agencies.
Back Bay Advisors follows a total return oriented investment approach in
selecting securities for the Fund. It seeks securities that give the Fund's
portfolio the following characteristics, although these characteristics may
change depending on market conditions:
x average credit quality of "AAA" by Standard & Poor's Ratings Group or "Aaa" by
Moody's Investors Service, Inc.
x average maturity of 10 years or more
In selecting investments for the Fund's portfolio, Back Bay Advisors employs the
following strategies:
o Its research analysts work closely with the Fund's portfolio managers to
develop an outlook on the economy from research produced by various Wall
Street firms and specific forecasting services or from economic data released
by U.S. and foreign governments as well as the Federal Reserve Bank.
o Next, the analysts conduct a thorough review of individual securities to
identify what they consider attractive values in the U.S. government security
marketplace. This value analysis uses quantitative tools such as internal and
external computer systems and software.
o Back Bay Advisors seeks to balance opportunities for yield and price
performance by combining macroeconomic analysis with individual security
selection. They will emphasize securities that tend to perform particularly
well in response to interest rate changes, such as U.S. Treasury securities in
a declining interest rate environment and mortgage-backed or U.S. government
agency securities in a steady or rising interest rate environment.
o Back Bay Advisors seeks to maximize the opportunity for high yields while
taking into account the price volatility inherent in bonds with longer
maturities.
The Fund may:
o Invest in zero-coupon bonds.
o Invest in mortgage-related securities, including collateralized mortgage
obligations and stripped securities.
o Engage in active and frequent trading of securities. Frequent trading may
produce higher transaction costs and a higher level of taxable capital gains,
which may lower your return.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise. Zero-coupon
bonds may be subject to these risks to a greater extent than other
fixed-income securities.
MORTGAGE-RELATED SECURITIES: Subject to prepayment risk. With prepayment, the
Fund may reinvest the prepaid amounts in securities with lower yields than the
prepaid obligations. The Fund may also incur a realized loss when there is a
prepayment of securities that were purchased at a premium.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Government Securities Fund by showing changes in the Fund's performance
from year to year and by showing how the Fund's average annual returns for
one-year, five-year and since-inception periods compare with those of a broad
measure of market performance and those of indices of funds with similar
objectives. The Fund's past performance does not necessarily indicate how it
will perform in the future.
The bar chart shows the Fund's total returns for Class Y shares for each
calendar year since it first offered Class Y shares. The Class Y returns shown
in the bar chart are generally higher than the returns for the Class A and B
shares because of the sales charges and higher expenses of those classes.
(total return)
1995 20.29%
1996 1.12%
1997 10.51%
1998 9.34%
1999 -6.28%
/\ Highest Quarterly Return: Second Quarter 1995, up 7.37%
\/ Lowest Quarterly Return: First Quarter 1996, down 3.13%
The table below shows the Fund's average annual total returns for the one-year,
five-year and since-inception periods compared to those of the Lehman Government
Bond Index ("Lehman Gov't Bond Index"), an unmanaged index of public debt of the
U.S. Treasury, government agencies and their obligations. The returns are also
compared to the Morningstar Long Government Average and Lipper General
Government Average ("Lipper General Gov't. Average"), each an average of the
total return of mutual funds with similar investment objectives as the Fund as
calculated by Morningstar, Inc. and Lipper Inc. You may not invest directly in
an index. The Fund's total returns reflect the expenses of the Fund's Class Y
shares. The Lehman Gov't Bond Index returns have not been adjusted for ongoing
management, distribution and operating expenses applicable to mutual fund
investments. The Morningstar Long Government Average and the Lipper General
Gov't. Average have been adjusted for these expenses.
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS SINCE CLASS
(for the periods ended December 31, 1999) PAST 1 YEAR PAST 5 YEARS INCEPTION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NVEST GOVERNMENT SECURITIES FUND: Class Y (inception 3/31/94) -6.28% 6.62% 5.35%
Lehman Gov't. Bond Index -2.23% 7.44% 6.37%
Morningstar Long Government Average -7.10% 7.46% 6.22%
Lipper General Gov't. Average -3.01% 6.51% 5.37%
- ---------------------------------------------------------------------------------------------------------------------
For actual past expenses of Class Y shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
[graphic omitted] 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)
ALL FUNDS
CLASS Y
- ---------------------------------------------------------
Maximum sales charge (load) imposed
on purchases None
Maximum deferred sales charge (load) None
Redemption fees None*
* Generally, a transaction fee will be charged for expedited payment of
redemption proceeds such as by wire or overnight delivery.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, as a percentage of average daily
net assets)
Expense information in the table has been restated to reflect current fees and
expenses.
<TABLE>
<CAPTION>
SHORT TERM CORPORATE BOND HIGH
INCOME FUND* INCOME FUND INCOME FUND*
CLASS Y CLASS Y CLASS Y
-------------------- ----------- -------------
<S> <C> <C> <C>
Management fees 0.55% 0.41% 0.70%
Distribution and/or service (12b-1) fees 0.00% 0.00% 0.00%
Other expenses 0.37% 0.24% 0.29%
Total annual fund operating expenses 0.92% 0.65% 0.99%
Fee waiver and/or expense reimbursement 0.32%** 0.00% 0.00%
Net expenses 0.60% 0.65% 0.99%
<CAPTION>
STRATEGIC LIMITED TERM GOVERNMENT
INCOME FUND*** U.S. GOVERNMENT FUND SECURITIES FUND
CLASS Y CLASS Y CLASS Y
-------------- -------------------- ---------------
Management fees 0.63% 0.65% 0.65%
Distribution and/or service (12b-1) fees 0.00% 0.00% 0.00%
Other expenses 0.26% 0.26% 0.33%
Total annual fund operating expenses 0.89% 0.91% 0.98%
* Short Term Corporate Income Fund and High Income Fund may not currently offer Class Y shares. Expenses for Short Term Corporate
Income Fund and High Income Fund have been estimated and annualized.
** Nvest Management has given a binding undertaking to Short Term Corporate Income Fund to limit the amount of the Fund's total
fund operating expenses to 0.60% of its average daily net assets for Class Y shares. This undertaking is in effect until April
30, 2001 and will be reevaluated on an annual basis.
*** Expenses are annualized.
</TABLE>
<PAGE>
Fund Fees & Expenses [graphic omitted]
EXAMPLE
This example is intended to help you compare the cost of investing in each Fund
with the cost of investing in other mutual funds.
The example assumes that:
o You invest $10,000 in the Fund for the time periods indicated;
o Your investment has a 5% return each year; and
o The Fund's operating expenses remain the same.
Although your actual costs and returns may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
SHORT TERM CORPORATE BOND HIGH
INCOME FUND INCOME FUND INCOME FUND
CLASS Y CLASS Y CLASS Y
-------------------- ----------- -------------
<S> <C> <C> <C>
1 year $ 62 $ 67 $ 101
3 years $ 262 $ 209 $ 317
5 years $ 480 $ 363 $ 549
10 years $1,106 $ 812 $1,217
<CAPTION>
STRATEGIC LIMITED TERM GOVERNMENT
INCOME FUND U.S. GOVERNMENT FUND SECURITIES FUND
CLASS Y CLASS Y CLASS Y
----------- -------------------- ---------------
1 year $ 91 $ 93 $ 100
3 years $ 285 $ 291 $ 314
5 years $ 495 $ 506 $ 544
10 years $1,100 $1,123 $1,206
</TABLE>
<PAGE>
MORE ABOUT RISK
The Funds have principal investment strategies that come with inherent risks.
The following is a list of risks to which each Fund may be subject by investing
in various types of securities or engaging in various practices.
MARKET RISK (All Funds) The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably, based upon change in an issuer's
financial condition as well as overall market and economic conditions.
RISK OF SMALL CAPITALIZATION COMPANIES (Strategic Income Fund) These companies
carry special risks, including narrower markets, limited financial and
management resources, less liquidity and greater volatility than large company
stocks.
MANAGEMENT RISK (All Funds) The risk that a strategy used by a Fund's portfolio
management may fail to produce the intended result.
CREDIT RISK (All Funds) The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to honor a
financial obligation.
CURRENCY RISK (High Income, Strategic Income, Bond Income, Short Term Corporate
Income Funds) The risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment.
EMERGING MARKET RISK (Short Term Corporate Income, Bond Income, High Income,
Strategic Income Funds) The risk associated with securities markets of smaller
sizes or with short operating histories. Emerging markets involve risks in
addition to and greater than those generally associated with investing in
developed foreign markets. The extent of economic development, political
stability, market depth, infrastructure and capitalization and regulatory
oversight in emerging market economies is generally less than in more developed
markets.
RISKS OF OPTIONS, FUTURES AND SWAP CONTRACTS (Strategic Income, Short Term
Corporate Income, Limited Term U.S. Government, Government Securities Funds)
These transactions are subject to changes in the underlying security on which
such transactions are based. It is important to note that even a small
investment in these types of derivative securities can have a significant impact
on a Fund's exposure to stock market values, interest rates or the currency
exchange rate. These types of transactions will be used primarily for hedging
purposes.
LEVERAGE RISK (All Funds) The risk associated with securities or practices (e.g.
borrowing) that multiply small index or market movements into large changes in
value. When a derivative security (a security whose value is based on another
security or index) is used as a hedge against an offsetting position that the
Fund also holds, any loss generated by the derivative security should be
substantially offset by gains on the hedged instrument, and vice versa. To the
extent that a Fund uses a derivative security for purposes other than as a
hedge, that Fund is directly exposed to the risks of that derivative security
and any loss generated by the derivative security will not be offset by a gain.
INTEREST RATE RISK (All 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 value.
INFORMATION RISK (All Funds) The risk that key information about a security is
inaccurate or unavailable.
OPPORTUNITY RISK (All Funds) The risk of missing out on an investment
opportunity because the assets necessary to take advantage of it are tied up in
less advantageous investments.
LIQUIDITY RISK (All Funds) The risk that certain securities may be difficult or
impossible to sell at the time and at the price that the seller would like. This
may result in a loss or may be costly to a Fund.
CORRELATION RISK (High Income, Strategic Income, Bond Income, Short Term
Corporate Income Funds) The risk that changes in the value of a hedging
instrument will not match those of the asset being hedged.
EXTENSION RISK (Strategic Income, Bond Income, Short Term Corporate Income,
Limited Term U.S. Government, Government Securities Funds) The risk that an
unexpected rise in interest rates will extend the life of a mortgage-backed
security beyond the expected prepayment time, typically reducing the security's
value.
VALUATION RISK (All Funds) The risk that the Fund has valued certain securities
at a higher price than it can sell them for.
PREPAYMENT RISK (Strategic Income, Bond Income, Short Term Corporate Income,
Limited Term U.S. Government, Government Securities Funds) The risk that
unanticipated prepayments may occur, reducing the value of mortgage- or asset-
backed securities or Real Estate Investment Trusts (REITs).
POLITICAL RISK (All Funds) The risk of losses directly attributable to
government or political actions.
EURO CONVERSION (High Income, Strategic Income, Bond Income, Short Term
Corporate Income Funds) Many European countries have adopted a single European
currency, the "euro." The consequences of this conversion for foreign exchange
rates, interest rates and the value of European securities are presently
unclear. Such consequences may adversely affect the value and/or increase the
volatility of securities held by a Fund.
<PAGE>
Management Team [graphic omitted]
---------------
MEET THE FUNDS' INVESTMENT ADVISERS
AND SUBADVISERS
The Nvest Funds family includes 25 mutual funds with a total of over $8 billion
in assets under management as of December 31, 1999. Nvest Funds are distributed
through Nvest Funds Distributor, L.P. (the "Distributor"). This Prospectus
covers Class Y Shares of Nvest Bond Funds (the "Funds" or each a "Fund"), which
along with Nvest Stock Funds, Nvest Star Funds, Kobrick Funds and Nvest State
Tax-Free Funds, constitute the "Nvest Funds." Nvest Cash Management Trust Money
Market Series and Nvest Tax-Exempt Money Market Trust constitute the "Money
Market 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
Nvest Companies, L.P. ("Nvest Companies"), which is part of an affiliated group
including Nvest, L.P., a publicly-traded company listed on the New York Stock
Exchange (the "Exchange"). Nvest Companies' 18 principal subsidiary or
affiliated asset management firms, collectively, had more than $133 billion in
assets under management as of December 31, 1999. Nvest Management oversees,
evaluates and monitors the subadvisory services provided to each Fund. It also
provides general business management and administration to the Funds. The
subadvisers listed below make the Funds' investment decisions for their
respective Funds.
The combined advisory and subadvisory fees paid by the Funds in 1999 as a
percentage of each Fund's average daily net assets were 0.23% for Short Term
Corporate Income Fund (after waiver or reimbursement), 0.41 Bond Income Fund,
0.70% for High Income Fund, 0.63% for Strategic Income Fund, 0.65% for Limited
Term U.S. Government Fund and 0.65% for Government Securities Fund.
SUBADVISERS
BACK BAY ADVISORS, located at 399 Boylston Street, Boston, Massachusetts 02116,
serves as the subadviser to Short Term Corporate Income Fund, Bond Income Fund,
Limited Term U.S. Government Fund and Government Securities Fund. Back Bay
Advisors is a subsidiary of Nvest Companies. Back Bay Advisors, founded in 1986,
provides discretionary investment management services for approximately $5
billion of assets as of December 31, 1999 for mutual funds and various
institutional investors.
LOOMIS SAYLES, located at One Financial Center, Boston, Massachusetts 02111,
serves as subadviser to High Income Fund and Strategic Income Fund. Loomis
Sayles is a subsidiary of Nvest Companies. Founded in 1926, Loomis Sayles is one
of America's oldest investment advisory firms with over $67 billion in assets
under management as of December 31, 1999. Loomis Sayles is well known for its
professional research staff, which is one of the largest in the industry.
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 the 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 Nvest Companies,
Nvest Management, Back Bay Advisors or Loomis Sayles. In placing trades, Back
Bay Advisors or Loomis Sayles will seek to obtain the best combination of price
and execution, which involves a number of judgmental factors. Such portfolio
trades are subject to applicable regulatory restrictions and related procedures
adopted by the Fund's Board of Trustees.
<PAGE>
[graphic omitted] MANAGEMENT TEAM
---------------
MEET THE FUNDS' PORTFOLIO MANAGERS
J. SCOTT NICHOLSON
Scott Nicholson has been the lead portfolio manager of SHORT TERM CORPORATE
INCOME FUND since October 1991, including when it was known as Adjustable Rate
U.S. Government Fund. He has also served as co-manager of LIMITED TERM U.S.
GOVERNMENT FUND AND GOVERNMENT SECURITIES FUND since May 2000. Mr. Nicholson,
Senior Vice President of Back Bay Advisors, joined the company in 1986. He
received his B.S. from Davidson College and his M.B.A. from Babson College and
has over 22 years of investment experience.
RICHARD G. RACZKOWSKI
Richard Raczkowski has served as a portfolio manager of BOND INCOME FUND and
SHORT TERM CORPORATE INCOME FUND since May 1999. Mr. Raczkowski, Vice President
of Back Bay Advisors, joined the company in 1998. Previously, he was senior
consultant at Hagler Bailly Consulting. He received a B.A. from the University
of Massachusetts and an M.B.A. from Northeastern University and has 15 years of
investment experience.
PETER W. PALFREY
Peter Palfrey has served the BOND INCOME FUND as co-manager from May 1999
until September 1999 and as lead manager thereafter. Mr. Palfrey, Senior Vice
President of Back Bay Advisors, joined the company in 1993. He is also a
Chartered Financial Analyst. Mr Palfrey received his B.A. from Colgate
University and has over 17 years of investment experience.
GARY L. GOODENOUGH
Gary Goodenough has managed HIGH INCOME FUND since July 1996. Mr. Goodenough
is Vice President of Loomis Sayles and joined the company in 1993. He is a
graduate of Dartmouth College, received his M.B.A. from the Wharton School,
University of Pennsylvania and has 24 years of investment experience.
DANIEL J. FUSS
Daniel Fuss has managed STRATEGIC INCOME FUND since May 1995. Mr. Fuss is Vice
Chairman, Director and Managing Partner of Loomis Sayles. He began his
investment career in 1968 and has been at Loomis Sayles since 1976. Mr. Fuss is
also a Chartered Financial Analyst. He received a B.S. and an M.B.A. from
Marquette University and has 32 years of investment experience.
KATHLEEN C. GAFFNEY
Kathleen Gaffney has been assisting Daniel Fuss as a portfolio manager of
STRATEGIC INCOME FUND since April 1996. Ms. Gaffney, a Chartered Financial
Analyst, joined Loomis Sayles in 1984 and is now a Vice President of the
company. She holds a B.A. from the University of Massachusetts at Amherst and
has 15 years of investment experience.
JAMES S. WELCH
James Welch has served as lead manager of LIMITED TERM U.S. GOVERNMENT FUND
and GOVERNMENT SECURITIES FUND since May 2000. He has also managed NVEST
MUNICIPAL INCOME FUND since January 1998. Mr. Welch, Senior Vice President of
Back Bay Advisors, has been with the company since 1993. Mr. Welch is a
graduate of The Pennsylvania State University and has 10 years of investment
experience.
<PAGE>
Fund Services [graphic omitted]
IT'S EASY TO OPEN AN ACCOUNT
TO OPEN AN ACCOUNT WITH NVEST FUNDS:
1. Read this Prospectus carefully.
2. Read the following eligibility and minimum investment requirements to
determine if you may purchase Class Y shares.
Class Y shares of the Funds may be purchased by the following entities at the
following investment minimums.
A minimum initial investment is $1 million and $10,000 is the minimum
subsequent investment for:
o Other mutual funds, endowments, foundations, bank trust departments or
trust companies.
There is no initial or subsequent investment minimum for:
o RETIREMENT PLANS (401(a), 401(k), 457 or 403(b) plans) that have total
investment assets of at least $10 million. Plan sponsor accounts can be
aggregated to meet this minimum.
o INSURANCE COMPANY ACCOUNTS of New England Financial, Metropolitan Life
Insurance Company ("MetLife") or their affiliates.
o SEPARATE ACCOUNTS of New England Financial, MetLife, or their
affiliates.
o WRAP FEE PROGRAMS of certain broker-dealers not being paid by the
Funds, Nvest Management or the Distributor. Such wrap fee programs may be
subject to additional or different conditions, including a wrap account
fee. Each broker-dealer is responsible for transmitting to its customer a
schedule of fees and other information regarding any such conditions. If
the participant who purchased Class Y shares through a wrap fee program
should terminate the wrap fee arrangement with the broker-dealer, then
the Class Y shares will, at the discretion of the broker-dealer,
automatically be converted to a number of Class A shares of the same Fund
having the same dollar value of the shares converted, and the
broker-dealer may thereafter be entitled to receive from that Fund an
annual service fee of 0.25% of the value of Class A shares owned by that
shareholder.
o CERTAIN INDIVIDUAL RETIREMENT ACCOUNTS if the amounts invested represent
rollover distributions from investments by any of the Retirement Plans
set forth above.
o DEFERRED COMPENSATION PLAN ACCOUNTS of New England Life Insurance
Company ("NELICO"), MetLife or their affiliates ("Deferred
Compensation Accounts").
o SERVICE ACCOUNTS through an omnibus account by investment advisers,
financial planners, broker-dealers or other intermediaries who have
entered into a service agreement with a Fund. A fee may be charged to
shareholders purchasing through a service account if they effect
transactions through such parties and they should contact such parties
regarding information regarding such fees.
3. You should contact Nvest Funds at 800-225-5478 for an application or if you
have any questions about purchasing Fund shares.
4. Use the sections of this Prospectus that follow as your guide for purchasing
shares.
CERTIFICATES
You will not receive certificates representing Class Y shares.
NVEST FUNDS WEB SITE
You may have access to your account 24 hours a day by visiting us online at
www.nvestfunds.com.
<PAGE>
[graphic omitted] Fund Services
-------------
BUYING SHARES
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
THROUGH YOUR INVESTMENT DEALER
o Call your investment dealer for o Call your investment dealer for
information information
BY MAIL
[graphic omitted]
o Make out a check in U.S. dollars o Make out a check in U.S. dollars
for the investment amount, payable for the investment amount, payable
to "Nvest Funds." Third party and to "Nvest Funds." Third party and
"starter" checks will generally not "starter" checks will generally not
be accepted. be accepted.
o Mail the check with your completed o Fill out the detachable investment
application to Nvest Funds, P.O. slip from an account statement. If
Box 8551, Boston, MA 02266-8551. no slip is available, include with
the check a letter specifying the
Fund name, your class of shares,
your account number and the
registered account name(s). To make
investing even easier, you can
order more investment slips by
calling 800-225-5478.
BY EXCHANGE
[graphic omitted]
o Obtain a current prospectus for the o Call your investment dealer or
Fund into which you are exchanging Nvest Funds at 800-225-5478 or
by calling your investment dealer visit nvestfunds.com to request an
or Nvest Funds at 800-225-5478. exchange.
o Call your investment dealer or o See the section entitled
Nvest Funds to request an exchange. "Exchanging Shares" for more
details.
o See the section entitled
"Exchanging Shares" for more
details.
BY WIRE
[graphic omitted]
o Call Nvest Funds at 800-225-5478 to o Visit nvestfunds.com to add shares
obtain an account number and wire to your account by wire.
transfer instructions. Your bank
may charge you for such a transfer. o Instruct your bank to transfer
funds to State Street Bank & Trust
Company, ABA# 011000028, DDA#
99011538.
o Specify the Fund name, your account
number and the registered account
name(s). Your bank may charge you
for such a transfer.
THROUGH AUTOMATED CLEARING HOUSE (ACH)
[graphic omitted]
o Ask your bank or credit union o Call Nvest Funds at 800-225-5478 or
whether it is a member of the ACH visit nvestfunds.com to add shares
system. to your account through ACH.
o Complete the "Telephone Withdrawal o If you have not signed up for the
and Exchange" and "Bank ACH system, please call Nvest Funds
Information" sections on your for a Service Options Form. A
account application. signature guarantee may be required
to add this privilege.
o Mail your completed application to
Nvest Funds, P.O. Box 8551, Boston,
MA 02266-8551.
<PAGE>
Fund Services {graphic omitted]
-------------
SELLING SHARES
TO SELL SOME OR ALL OF YOUR SHARES
Certain restrictions may apply. See the section entitled "Restrictions on
Buying, Selling and Exchanging Shares."
THROUGH YOUR INVESTMENT DEALER
o Call your investment dealer for information.
BY MAIL
[graphic omitted]
o Write a letter to request a redemption specifying the name of the Fund, your
class of shares, your account number, the exact registered account name(s),
the number of shares or the dollar amount to be redeemed and the method by
which you wish to receive your proceeds. Additional materials may be required.
See the section entitled "Selling Shares in Writing."
o The request must be signed by all of the owners of the shares including the
capacity in which they are signing, if appropriate.
o Mail your request to Nvest Funds, P.O. Box 8551, Boston, MA 02266-8551.
o Your proceeds will be delivered by the method chosen in your letter. If you
choose to have your proceeds delivered by mail, they will generally be mailed
to you on the business day after the request is received. You may also choose
to redeem by wire or through ACH (see below).
BY EXCHANGE
[graphic omitted]
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
[graphic omitted]
o Fill out the "Telephone Withdrawal and Exchange" and "Bank Information"
sections on your account application.
o Call Nvest Funds at 800-225-5478; visit nvestfunds.com or indicate in your
redemption request letter (see above) that you wish to have your proceeds
wired to your bank.
o Proceeds will generally be wired on the next business day. A wire fee
(currently $5.00) will be deducted from the proceeds.
THROUGH AUTOMATED CLEARING HOUSE (ACH)
[graphic omitted]
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 or visit nvestfunds.com to request a redemption through this
system.
o Proceeds will generally arrive at your bank within three business days.
BY TELEPHONE
[graphic omitted]
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.
<PAGE>
[graphic omitted] 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 A notary public CANNOT provide a
against fraudulent orders and is signature guarantee. A signature
necessary if: guarantee can be obtained from one of
the following sources:
o your address of record has been
changed within the past 30 days; o a financial representative or
securities dealer;
o you are selling more than $100,000
worth of shares and you are o a federal savings bank, cooperative
requesting the proceeds by check; or other type of bank;
or
o a savings and loan or other thrift
o a proceeds check for any amount is institution;
mailed to an address other than the
address of record or not payable to o a credit union; or
the registered owner(s).
o a securities exchange or clearing
agency.
<PAGE>
Fund Services [graphic omitted]
-------------
EXCHANGING SHARES
You may exchange Class Y shares of your Fund for Class Y shares of any other
Nvest Fund which offers Class Y shares or for Class A shares of the Money Market
Funds. Agents, general agents, directors and senior officers of NELICO and its
insurance company subsidiaries may, at the discretion of NELICO, elect to
exchange Class Y shares of any Nvest Fund in a NELICO Deferred Compensation
Account for Class A shares of any other Nvest Fund which does not offer Class Y
shares. Class A shares of any Nvest Fund in a NELICO Deferred Compensation
Account may also be exchanged for Class Y shares of any Nvest Fund. All
exchanges are subject to the eligibility requirements of the Nvest Fund or Money
Market 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.
For federal income tax purposes, an exchange of Fund shares for shares of
another Nvest Fund or Money Market Fund is treated as a sale on which gain or
loss may be recognized. Please refer to the Statement of Additional Information
(the "SAI") for more detailed information on exchanging Fund shares.
RESTRICTIONS ON BUYING, SELLING AND EXCHANGING SHARES
PURCHASE AND EXCHANGE RESTRICTIONS
Although the Funds do not anticipate doing so, they reserve the right to suspend
or change the terms of purchasing or exchanging shares. Each Fund and the
Distributor reserve the right to refuse or limit any purchase or exchange order
by a particular purchaser (or group of related purchasers) if the transaction is
deemed harmful to the best interest of such Fund's other shareholders or would
disrupt the management of the Fund. The Funds and the Distributor reserve the
right to restrict purchases and exchanges for accounts of "market timers" by
limiting the transaction to a maximum dollar amount. An account will be deemed
to be one of a market timer if: (i) more than two exchange purchases of a given
Fund are made for the account in a calendar quarter or (ii) the account makes
one or more exchange purchases of a given Fund in a calendar quarter in an
aggregate amount in excess of 1% of the Fund's total net assets.
SELLING RESTRICTIONS
The table below describes restrictions placed on selling shares of any Fund
described in this Prospectus:
RESTRICTION SITUATION
The Fund may suspend the right of redemption or o When the New York Stock
postpone payment for more than 7 days: Exchange is closed
(other than a
weekend/holiday)
o During an emergency
o Any other period
permitted by the SEC
The Fund reserves the right to suspend account o With a notice of a
services or refuse transaction requests: dispute between
registered owners
o With suspicion/evidence
of a fraudulent act
The Fund may pay the redemption price in whole or o When it is detrimental
part by a distribution in kind of readily for a Fund to make cash
marketable securities in lieu of cash or may take payments as determined
up to 7 days to pay a redemption request in order in the sole discretion
to raise capital: of the adviser or
subadviser
The Fund may withhold redemption proceeds until o When redemptions are
the check or funds have cleared: made within 10 calendar
days of purchase by
check or ACH of the
shares being redeemed
Telephone redemptions are not accepted for
tax-qualified retirement plan accounts.
<PAGE>
[graphic omitted] Fund Services
-------------
HOW FUND SHARES ARE PRICED
"Net asset value" is the price of one share of a Fund without a sales charge,
and is calculated each business day using this formula:
NET ASSET VALUE = TOTAL MARKET VALUE OF SECURITIES + CASH AND
OTHER ASSETS - LIABILITIES
-------------------------------------------
NUMBER OF OUTSTANDING SHARES
The net asset value of Fund shares is determined according to this schedule:
o A share's net asset value is determined at the close of regular trading on the
Exchange on the days the Exchange is open for trading. This is normally 4:00
p.m. Eastern time.
o The price you pay for purchasing, redeeming or exchanging a share will be
based upon the net asset value next calculated after your order is received
"in good order" by State Street Bank and Trust Company, the Funds' custodian
(plus or minus applicable sales charges as described earlier in this
Prospectus).
o Requests received by the Distributor after the Exchange closes will be
processed based upon the net asset value determined at the close of regular
trading on the next day that the Exchange is open, with the exception that
those orders received by your investment dealer before the close of the
Exchange and received by the Distributor before 5:00 p.m. Eastern time* on the
same day will be based on the net asset value determined on that day.
o A Fund heavily invested in foreign securities may have net asset value changes
on days when you cannot buy or sell its shares.
* Under limited circumstances, the Distributor may enter into a contractual
agreement where it may accept orders after 5:00 p.m. and before 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."
Generally, Fund securities are valued as follows:
o EQUITY SECURITIES -- most recent sales or quoted bid price as provided by a
pricing service.
o DEBT SECURITIES (other than short-term obligations) -- based upon pricing
service valuations, which determines valuations for normal, institutional-size
trading units of such securities using market information, transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders.
o SHORT-TERM OBLIGATIONS (REMAINING MATURITY OF LESS THAN 60 DAYS) -- amortized
cost (which approximates market value).
o SECURITIES TRADED ON FOREIGN EXCHANGES -- most recent sale/bid price on the
non-U.S. exchange, unless an occurrence after the closing of the exchange will
materially affect its value. In that case, it is given fair value as
determined by or under the direction of the Fund's Board of Trustees at the
close of regular trading on the Exchange.
o OPTIONS -- last sale price or, if not available, last offering price.
o FUTURES -- unrealized gain or loss on the contract using current settlement
price. When a settlement price is not used, futures contracts will be valued
at their fair value as determined by or under the direction of the Funds'
Board of Trustees.
o ALL OTHER SECURITIES -- fair market value as determined by the adviser or
subadviser of the Fund under the direction of each Fund's Board of Trustees.
The effect of fair value pricing as described above under "Securities traded on
foreign exchanges" and "All other securities" is that securities may not be
priced on the basis of quotations from the primary market in which they are
traded but rather may be priced by another method that the Fund's Board of
Trustees believes accurately reflects fair value.
<PAGE>
Fund Services [graphic omitted]
-------------
DIVIDENDS AND DISTRIBUTIONS
The Funds generally distribute most or all of their net investment income (other
than 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. 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 Receive distributions from dividends and interest in cash while reinvesting
distributions from capital gains in additional shares of the same class of
the Fund or in Class Y shares of another Nvest Fund.
o Receive all distributions in cash.
Unless you select one of the above options, distributions will automatically be
reinvested in Class Y shares of the Fund. 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
Fund, you will receive a Form 1099 to help you report the prior calendar year's
distributions on your federal income tax return. Be sure to keep the Form 1099
as a permanent record. A fee may be charged for any duplicate information
requested.
TAX CONSEQUENCES
Each Fund intends to meet all requirements of the Internal Revenue Code
necessary to qualify as a "regulated investment company" and thus does not
expect to pay any federal income tax on income and capital gains distributed to
shareholders.
Fund distributions paid to you either in cash or reinvested in additional shares
are generally taxable to you either as ordinary income or as capital gains.
Distributions derived from short-term capital gains or investment income are
generally taxable at ordinary income rates. If you are a corporation investing
in a Fund, a portion of these dividends may qualify for the dividends-received
deduction provided that you meet certain holding period requirements.
Distributions of gains from investments that a Fund owned for more than one year
that are designated by the Fund as capital gain dividends will generally be
taxable to a shareholder receiving such distributions as long-term capital gain,
regardless of how long the shareholder has held Fund shares.
An exchange of shares for shares of another Nvest Fund or Money Market Fund is
treated as a sale, and any resulting gain or loss may be subject to federal
income tax. If you purchase shares of a Fund shortly before it declares a
capital gain distribution or a dividend, a portion of the purchase price may be
returned to you as a taxable distribution.
Dividends derived from interest on U.S. government securities may be exempt from
state and local income taxes. The Funds advise shareholders of the proportion of
each Fund's dividends that are derived from such interest. You should consult
your tax adviser about any federal, state and local taxes that may apply to the
distributions you receive. Shareholders of Funds investing in foreign securities
should also consult their tax advisers about consequences of their investments
under foreign laws.
COMPENSATION TO SECURITIES DEALERS
The Distributor may, at its expense, pay concessions to dealers which satisfy
certain criteria established from time to time by the Distributor relating to
increasing net sales of shares of the Nvest Funds over prior periods, and
certain other factors. See the SAI for more details.
<PAGE>
<TABLE>
[graphic omitted] Fund Performance
----------------
The financial highlights table is intended to help you understand each Fund's financial
performance for the past 5 years (or, if shorter, the 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, are incorporated by reference
in the Statement of Additional Information, which is available upon request.
NVEST SHORT TERM CORPORATE INCOME FUND
<CAPTION>
CLASS A
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 7.20 $ 7.37 $ 7.37 $ 7.39 $ 7.30
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.47 0.43 0.47(d) 0.38 0.41
Net Realized and Unrealized
Gain (Loss) on Investments 0.14 (0.01) (0.02) (0.09) (0.28)
------ ------ ------ ------ ------
Total From Investment Operations 0.61 0.42 0.45 0.29 0.13
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net
Investment Income (0.44) (0.42) (0.43) (0.38) (0.42)
------ ------ ------ ------ ------
Total Distributions (0.44) (0.42) (0.43) (0.38) (0.42)
------ ------ ------ ------ ------
Net Asset Value, End of Period $ 7.37 $ 7.37 $ 7.39 $ 7.30 $ 7.01
====== ====== ====== ====== ======
TOTAL RETURN (%) (c) 8.6 5.8 6.2 4.0 1.9
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) (b) 0.66 0.70 0.70 0.70 0.70
Ratio of Net Investment Income
to Average Net Assets (%) 6.29 6.39 6.27 5.93 5.88
Portfolio Turnover Rate (%) 73 54 49 105 139
Net Assets, End of Period (000) $331,112 $222,809 $196,928 $92,669 $72,680
(a) Commencement of operations.
(b) The ratio of operating expenses to average net assets without giving effect to an
expense limitation would have been (%):
0.89 0.94 0.98 1.05 1.22
(c) A sales charge for Class A shares and a contingent deferred sales charge for Class B
and C shares is not reflected in total return calculations.
(d) Per share net investment income does not reflect the period's reclassification of
permanent differences between book and tax basis net investment income.
(e) Computed on an annualized basis.
(f) The amount shown for a share outstanding does not correspond with the aggregate net
gain/loss on investments for the period ended December 31, 1998, due to the timing of
purchases and redemption of Fund shares in relation to fluctuating market values of
the investments of the Fund.
</TABLE>
<TABLE>
<CAPTION>
CLASS B
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 7.20 $ 7.37 $ 7.36 $ 7.38 $ 7.29
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.41 0.37 0.41(d) 0.33 0.36
Net Realized and Unrealized
Gain (Loss) on Investments 0.14 (0.02) (0.02) (0.09) (0.28)
------ ------ ------ ------ ------
Total From Investment Operations 0.55 0.35 0.39 0.24 0.08
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net
Investment Income (0.38) (0.36) (0.37) (0.33) (0.37)
------ ------ ------ ------ ------
Total Distributions (0.38) (0.36) (0.37) (0.33) (0.37)
------ ------ ------ ------ ------
Net Asset Value, End of Period $ 7.37 $ 7.36 $ 7.38 $ 7.29 $ 7.00
====== ====== ====== ====== ======
TOTAL RETURN (%) (c) 7.8 4.9 5.4 3.4 1.1
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) (b) 1.41 1.45 1.45 1.45 1.45
Ratio of Net Investment Income
to Average Net Assets (%) 5.54 5.64 5.52 5.18 5.13
Portfolio Turnover Rate (%) 73 54 49 105 139
Net Assets, End of Period (000) $2,368 $2,821 $2,961 $3,761 $3,796
(a) Commencement of operations.
(b) The ratio of operating expenses to average net assets without giving effect to an
expense limitation would have been (%):
1.65 1.69 1.73 1.80 1.97
(c) A sales charge for Class A shares and a contingent deferred sales charge for Class B
and C shares is not reflected in total return calculations.
(d) Per share net investment income does not reflect the period's reclassification of
permanent differences between book and tax basis net investment income.
(e) Computed on an annualized basis.
(f) The amount shown for a share outstanding does not correspond with the aggregate net
gain/loss on investments for the period ended December 31, 1998, due to the timing of
purchases and redemption of Fund shares in relation to fluctuating market values of
the investments of the Fund.
</TABLE>
<TABLE>
<CAPTION>
CLASS C
DECEMBER 7, 1998(A) YEAR ENDED
THROUGH DECEMBER 31,
DECEMBER 31, 1998 1999
Net Asset Value,
<S> <C> <C>
Beginning of Period $ 7.28 $ 7.29
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.01 0.36
Net Realized and Unrealized
Gain (Loss) on Investments 0.01(f) (0.28)
------ ------
Total From Investment Operations 0.02 0.08
------ ------
LESS DISTRIBUTIONS
Distributions From Net
Investment Income (0.01) (0.37)
------ ------
Total Distributions (0.01) (0.37)
------ ------
Net Asset Value, End of Period $ 7.29 $ 7.00
====== ======
TOTAL RETURN (%) (c) 0.3 1.2
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) (b) 1.45(e) 1.45
Ratio of Net Investment Income
to Average Net Assets (%) 5.18(e) 5.13
Portfolio Turnover Rate (%) 105 139
Net Assets, End of Period (000) $ 233 $ 489
(a) Commencement of operations.
(b) The ratio of operating expenses to average net assets without giving effect to an
expense limitation would have been (%):
1.80(e) 1.97
(c) A sales charge for Class A shares and a contingent deferred sales charge for Class B
and C shares is not reflected in total return calculations.
(d) Per share net investment income does not reflect the period's reclassification of
permanent differences between book and tax basis net investment income.
(e) Computed on an annualized basis.
(f) The amount shown for a share outstanding does not correspond with the aggregate net
gain/loss on investments for the period ended December 31, 1998, due to the timing of
purchases and redemption of Fund shares in relation to fluctuating market values of
the investments of the Fund.
</TABLE>
<PAGE>
<TABLE>
[graphic omitted] Fund Performance
----------------
NVEST BOND INCOME FUND
CLASS Y
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $10.95 $12.40 $12.06 $12.41 $12.38
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.80 0.87 0.86 0.84 0.85
Net Realized and Unrealized Gain (Loss) on Investments 1.44 (0.34) 0.46 0.15 (0.86)
------ ------ ------ ------ ------
Total From Investment Operations 2.24 0.53 1.32 0.99 (0.01)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends From Net Investment Income (0.79) (0.87) 0.84 (0.81) (0.82)
Distributions in Excess of Net Investment Income 0.00 0.00 (0.01) (0.03) 0.00
Distributions From Net Realized Capital Gains 0.00 0.00 (0.12) (0.17) (0.01)
Distributions in Excess of Net Realized Capital Gains 0.00 0.00 0.00 (0.01) 0.00(a)
------ ------ ------ ------ ------
Total Distributions (0.79) (0.87) (0.97) (1.02) (0.83)
------ ------ ------ ------ ------
Net Asset Value, End of the Year $12.40 $12.06 $12.41 $12.38 $11.54
====== ====== ====== ====== ======
TOTAL RETURN (%) 21.0 4.6 11.4 8.2 0.0(b)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) 0.89 0.80 0.80 0.76
0.72
Ratio of Net Investment Income to Average Net Assets (%) 7.06 7.25 6.98 6.69
7.12
Portfolio Turnover Rate (%) 81 104 54 65 63
Net Assets, End of the Year (000) $2,241 $1,844 $4,153 $9,289 $10,320
(a) Amount is less than $0.01.
(b) Amount is less than one-tenth of one percent.
</TABLE>
<PAGE>
<TABLE>
[graphic omitted] Fund Performance
----------------
NVEST HIGH INCOME FUND
<CAPTION>
CLASS A
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period $ 8.89 $ 8.98 $ 9.42 $ 9.94 $ 8.86
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.88 0.84 0.87 0.92 0.89
Net Realized and Unrealized
Gain (Loss) on Investments 0.13 0.44 0.52 (1.08) (0.54)
------ ------ ------ ------ ------
Total From Investment Operations 1.01 1.28 1.39 (0.16) 0.35
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net
Investment Income (0.88) (0.83) (0.87) (0.92) (0.90)
Distributions in Excess of
Net Investment Income (0.04) (0.01) 0.00 0.00 (0.01)
------ ------ ------ ------ ------
Total Distributions (0.92) (0.84) (0.87) (0.92) (0.91)
------ ------ ------ ------ ------
Net Asset Value, End of the Period $ 8.98 $ 9.42 $ 9.94 $ 8.86 $ 8.30
======== ======= =======
TOTAL RETURN (%) (c) 11.8 14.9 15.4 (1.8) 4.0
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%)(b) 1.60 1.53 1.36 1.32 1.28
Ratio of Net Investment Income
to Average Net Assets (%) 9.71 9.32 9.03 9.81 10.22
Portfolio Turnover Rate (%) 30 134 99 75 89
Net Assets, End of the Period (000) $39,148 $42,992 $62,739 $73,023 $74,589
(a) Commencement of operations.
(b) The ratio of operating expenses to average net assets without giving effect to an expense
limitation would have been (%):
1.72 1.69 -- -- --
(c) A sales charge for Class A shares and a contingent deferred sales charge for Class B and C
shares is not reflected in total return calculations. Periods of less than one year are not
annualized.
(d) Computed on an annualized basis. The subadviser to the Fund prior to July 1, 1996 was Back
Bay Advisers, L.P. Effective July 1, 1996, Loomis, Sayles & Company, L.P. became the
subadviser to the Fund.
</TABLE>
<TABLE>
<CAPTION>
CLASS B
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period $ 8.88 $ 8.98 $ 9.42 $ 9.93 $ 8.85
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.83 0.79 0.80 0.85 0.82
Net Realized and Unrealized
Gain (Loss) on Investments 0.13 0.42 0.51 (1.08) (0.53)
------ ------ ------ ------ ------
Total From Investment Operations 0.96 1.21 1.31 (0.23) 0.29
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net
Investment Income (0.81) (0.76) (0.80) (0.85) (0.83)
Distributions in Excess of
Net Investment Income (0.05) (0.01) 0.00 0.00 (0.01)
------ ------ ------ ------ ------
Total Distributions (0.86) (0.77) (0.80) (0.85) (0.84)
------ ------ ------ ------ ------
Net Asset Value, End of the Period $ 8.98 $ 9.42 $ 9.93 $ 8.85 $ 8.30
====== ====== ====== ====== ======
TOTAL RETURN (%) (c) 11.2 14.1 14.4 (2.5) 3.3
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%)(b) 2.25 2.19 2.11 2.07 2.03
Ratio of Net Investment Income
to Average Net Assets (%) 8.96 8.33 8.28 9.06 9.47
Portfolio Turnover Rate (%) 30 134 99 75 89
Net Assets, End of the Period (000) $10,625 $17,767 $42,401 $60,322 $70,218
(a) Commencement of operations.
(b) The ratio of operating expenses to average net assets without giving effect to an expense
limitation would have been (%):
2.37 2.35 -- -- --
(c) A sales charge for Class A shares and a contingent deferred sales charge for Class B and C
shares is not reflected in total return calculations. Periods of less than one year are not
annualized.
(d) Computed on an annualized basis. The subadviser to the Fund prior to July 1, 1996 was Back
Bay Advisers, L.P. Effective July 1, 1996, Loomis, Sayles & Company, L.P. became the
subadviser to the Fund.
</TABLE>
<TABLE>
<CAPTION>
CLASS C
MARCH 2, 1998(a) YEAR ENDED
THROUGH DECEMBER 31,
DECEMBER 31, 1998 1999
<S> <C> <C>
Net Asset Value,
Beginning of the Period $ 9.96 $ 8.85
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.69 0.82
Net Realized and Unrealized
Gain (Loss) on Investments (1.08) (0.53)
------ ------
Total From Investment Operations (0.39) 0.29
------ ------
LESS DISTRIBUTIONS
Distributions From Net
Investment Income (0.72) (0.83)
Distributions in Excess of
Net Investment Income 0.00 (0.01)
------ ------
Total Distributions (0.72) (0.84)
------ ------
Net Asset Value, End of the Period $ 8.85 $ 8.30
====== ======
TOTAL RETURN (%) (c) (4.1) 3.3
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%)(b) 2.07(d) 2.03
Ratio of Net Investment Income
to Average Net Assets (%) 9.06(d) 9.47
Portfolio Turnover Rate (%) 75 89
Net Assets, End of the Period (000) $7,732 $9,138
(a) Commencement of operations.
(b) The ratio of operating expenses to average net assets without giving effect to an expense
limitation would have been (%):
-- --
(c) A sales charge for Class A shares and a contingent deferred sales charge for Class B and C
shares is not reflected in total return calculations. Periods of less than one year are not
annualized.
(d) Computed on an annualized basis. The subadviser to the Fund prior to July 1, 1996 was Back
Bay Advisers, L.P. Effective July 1, 1996, Loomis, Sayles & Company, L.P. became the
subadviser to the Fund.
</TABLE>
<PAGE>
[graphic omitted] Fund Performance
----------------
NVEST STRATEGIC INCOME FUND
CLASS Y
DECEMBER 1,(a)
THROUGH
DECEMBER 31,
1999
Net Asset Value,
Beginning of the Period $11.45
------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.86
Net Realized and Unrealized Gain (Loss) on Investments (0.56)
------
Total From Investment Operations 0.30
------
LESS DISTRIBUTIONS
Dividends From Net Investment Income (0.10)
Distributions in Excess of Net Investment Income 0.00
Distributions From Net Realized Capital Gains 0.00
Distributions in Excess of Net Realized Capital Gains 0.00(b)
------
Total Distributions (0.10)
------
Net Asset Value, End of the Period $11.65
======
TOTAL RETURN (%) (c) 2.7
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) 0.96(c)
Ratio of Net Investment Income to Average Net Assets (%) 9.34(c)
Portfolio Turnover Rate (%) 19
Net Assets, End of the Period (000) $ 0.2
(a) Commencement of operations.
(b) Amount is less than $0.01.
(c) Computed on an annualized basis.
<PAGE>
<TABLE>
[graphic omitted] Fund Performance
----------------
NVEST LIMITED TERM U.S. GOVERNMENT FUND
<CAPTION>
CLASS Y
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $11.51 $12.13 $11.58 $11.66 $11.73
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.86 0.85 0.76 0.72 0.70
Net Realized and Unrealized Gain (Loss) on Investments 0.63 (0.54) 0.08 0.06 (0.74)
------ ------ ------ ------ ------
Total From Investment Operations 1.49 0.31 0.84 0.78 (0.04)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends From Net Investment Income (0.87) (0.86) (0.76) (0.71) (0.69)
------ ------ ------ ------ ------
Total Distributions (0.87) (0.86) (0.76) (0.71) (0.69)
------ ------ ------ ------ ------
Net Asset Value, End of Year $12.13 $11.58 $11.66 $11.73 $11.00
====== ====== ====== ====== ======
TOTAL RETURN (%) 13.3 2.8 7.5 6.9 (0.3)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) 0.87 0.90 0.93 0.96 0.98
Ratio of Net Investment Income to Average Net Assets (%) 7.53 7.48 6.75 6.16 6.26
Portfolio Turnover Rate (%) 247 327 533 1,351 400
Net Assets, End of Year (000) $5,723 $5,313 $5,262 $8,345 $7,086
</TABLE>
<PAGE>
<TABLE>
[graphic omitted] Fund Performance
----------------
NVEST GOVERNMENT SECURITIES FUND
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $10.44 $11.71 $11.07 $11.54 $11.88
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.80 0.74 0.65 0.72 0.70
Net Realized and Unrealized Gain (Loss) on Investments 1.26 (0.63) 0.47 0.32 (1.43)
------ ------ ------ ------ ------
Total From Investment Operations 2.06 0.11 1.12 1.04 (0.73)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends From Net Investment Income (0.79) (0.75) (0.65) (0.70) (0.71)
------ ------ ------ ------ ------
Total Distributions (0.79) (0.75) (0.65) (0.70) (0.71)
------ ------ ------ ------ ------
Net Asset Value, End of the Year $11.71 $11.07 $11.54 $11.88 10.44
====== ====== ====== ====== ======
TOTAL RETURN (%) 20.3 1.1 10.5 9.3 (6.3)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) 1.10 1.07 1.11 1.13
1.11
Ratio of Net Investment Income to Average Net Assets (%) 6.94 6.70 5.88 6.05 6.25
Portfolio Turnover Rate (%) 559 462 391 106 313
Net Assets, End of the Year (000) $7,364 $6,384 $6,658 $3,404 $2,754
</TABLE>
<PAGE>
GLOSSARY OF TERMS
BID PRICE -- The price a prospective buyer is ready to pay. This term is used by
traders who maintain firm bid and offer prices in a given security by standing
ready to buy or sell security units at publicly quoted prices.
BOTTOM-UP ANALYSIS -- The search for outstanding performance of individual
stocks before considering the impact of economic trends. Such companies may be
identified from research reports, stock screens or personal knowledge of the
products and services.
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
S&P, Moody's or Fitch Investor Services, Inc. ("Fitch"). Bonds with a credit
rating of BBB or higher by S&P, Baa or higher by Moody's or BBB by Fitch are
generally considered investment grade.
DERIVATIVE -- A financial instrument whose value and performance are based on
the value and performance of another security or financial instrument.
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 companies or
industries to reduce the risk if an individual company or one sector of the
market suffers losses.
DIVIDEND YIELD -- The current or estimated annual dividend divided by the market
price per share of a security.
DURATION -- A measure of how much a bond's price fluctuates with changes in
comparable interest rates.
EARNINGS GROWTH -- A pattern of increasing rate of growth in earnings per share
from one period to another, which usually causes a stock's price to rise.
FUNDAMENTAL ANALYSIS -- An analysis of the balance sheet and income statements
of a company in order to forecast its future stock price movements. Fundamental
analysis considers past records of assets, earnings, sales, products, management
and markets in predicting future trends in these indicators of a company's
success or failure. By appraising a company's prospects, analysts using such an
approach assess whether a particular stock or group of stocks is undervalued or
overvalued at its current market price.
GROWTH INVESTING -- An investment style that emphasizes companies with strong
earnings growth. Growth investing is generally considered more aggressive than
"value" investing.
INCOME DISTRIBUTIONS -- Payments to 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.
MARKET CAPITALIZATION -- Market price of a company's shares multiplied by the
number of shares outstanding. Large capitalization companies generally have over
$5 billion in market capitalization; medium cap companies between $1.5 billion
and $5 billion; and small cap companies less than $1.5 billion. These
capitalization figures may vary depending upon the index being used and/or the
guidelines used by the portfolio manager.
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.
PRICE-TO-BOOK VALUE RATIO -- Current market price of a stock divided by its book
value, or net asset value.
PRICE-TO-EARNINGS RATIO -- Current market price of a stock divided by its
earnings per share. Also known as the "multiple," the price-to-earnings ratio
gives investors an idea of how much they are paying for a company's earning
power and is a useful tool for evaluating the costs of different securities.
Some firms use the inverse ratio for this calculation
(i.e. earnings-to-price ratio).
QUALITATIVE ANALYSIS -- An analysis of the qualities possessed by a company,
including its management, products and competitive positions, to help determine
if the company can execute its strategy.
RETURN ON EQUITY -- The amount, expressed as a percentage, earned on a company's
common stock investment for a given period. It is calculated by dividing common
stock equity (net worth) at the beginning of the accounting period into net
income for the period after preferred stock dividends but before common stock
dividends. This tells common shareholders how effectively their money is being
employed.
RULE 144A SECURITIES -- Rule 144A securities are privately offered securities
that can be resold only to certain qualified institutional buyers. Rule 144A
securities are treated as illiquid, unless a manager has determined, under
guidelines established by a Fund's trustees, that a particular issue of Rule
144A securities is liquid.
TARGET PRICE -- Price that an investor is hoping a stock he or she has just
bought will rise to within a specified period of time. An investor may buy XYZ
at $20, with a target price of $40 in one year's time, for instance.
TECHNICAL ANALYSIS -- The research into the demand and supply for securities,
options, mutual funds and commodities based on trading volume and price studies.
Technical analysis uses charts or computer programs to identify and project
price trends in a market, security, mutual fund or futures contract.
TOP-DOWN APPROACH -- The method in which an investor first looks at trends in
the general economy, and next selects attractive industries and then companies
that should benefit from those trends.
TOTAL RETURN -- The change in value of an investment in a Fund over a specific
time period expressed as a percentage. Total returns assume all earnings are
reinvested in additional shares of a Fund.
VALUE INVESTING -- A relatively conservative investment approach that focuses on
companies that may be temporarily out of favor or whose earnings or assets are
not fully reflected in their stock prices. Value stocks will tend to have a
lower price-to-earnings ratio than growth stocks.
VOLATILITY -- The general variability of a portfolio's value resulting from
price fluctuations of its investments. In most cases, the more diversified a
portfolio is, the less volatile it will be.
YIELD -- The rate at which a fund earns income, expressed as a percentage.
Mutual fund yield calculations are standardized, based upon a formula developed
by the SEC.
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.
<PAGE>
NVEST FUNDS
BOND FUNDS
Class Y Shares of:
Nvest Short Term
Corporate Income Fund
Nvest Bond Income Fund
Nvest High Income Fund
Nvest Strategic Income Fund
Nvest Limited Term
U.S. Government Fund
Nvest Government Securities Fund
If you would like more information about the Funds,
the following documents are available free upon
request:
ANNUAL AND SEMIANNUAL REPORTS -- Provide additional
information about each Fund's investments. Each
report includes a discussion of the market
conditions and investment strategies that
significantly affected the Fund's performance
during its last fiscal year. 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 (SAI) --
Provides more detailed information about the
Funds, has been filed with the Securities and
Exchange Commission and is incorporated into this
Prospectus by reference.
TO ORDER A FREE COPY OF A FUND'S ANNUAL OR
SEMIANNUAL REPORT OR ITS SAI, CONTACT YOUR
FINANCIAL REPRESENTATIVE, OR THE FUNDS AT:
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 Funds' reports and SAIs at the
Public Reference Room of the Securities and
Exchange Commission 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. 811-4323)
(Investment Company Act File No. 811-242)
YB51-0500
<PAGE>
NVEST STAR SMALL CAP FUND
Supplement dated May 1, 2000
to Nvest Star Funds Prospectuses Classes A, B and C and Class Y
each dated May 1, 2000
Steven J. Reid, portfolio manager of the Harris Associates segment of Nvest Star
Small Cap Fund, is currently on a leave of absence from Harris Associates and
from his responsibilities for the Harris Associates segment (the "segment") of
the Fund. During this period, James P. Benson, the segment's co-portfolio
manager, will be primarily responsible for the portfolio management of the
segment.
<PAGE>
NVESTFUNDS(SM)
Where The Best Minds Meet(R)
- --------------------------------------------------------------------------------
Nvest
STAR FUNDS
[Graphic Omitted]
Large-Cap Equity
Nvest Star Value Fund
All-Cap Equity
Nvest Star Advisers Fund
Small-Cap Equity
Nvest Star Small Cap Fund
Global Equity
Nvest Star Worldwide Fund
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved any Fund's shares or
determined whether this Prospectus is accurate or complete. Anyone who tells you
otherwise is committing a crime.
For general information on the Funds or any of their services and for assistance
in opening an account, contact your financial representative or call Nvest
Funds.
PROSPECTUS
May 1, 2000
What's Inside
Goals, Strategies & Risks
[GRAPHIC OMITTED] Page 1
- --------------------------------------------------------------------------------
Fund Fees & Expenses
[GRAPHIC OMITTED] Page 17
- --------------------------------------------------------------------------------
Management Team
[GRAPHIC OMITTED] Page 20
- --------------------------------------------------------------------------------
Fund Services
[GRAPHIC OMITTED] Page 26
- --------------------------------------------------------------------------------
Fund Performance
[GRAPHIC OMITTED] Page 38
- --------------------------------------------------------------------------------
Nvest Funds
399 Boylston Street, Boston, Massachusetts 02116
800-225-5478
www.nvestfunds.com
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GOALS, STRATEGIES & RISKS
- --------------------------------------------------------------------------------
Nvest Star Value Fund .................................................... 1
Nvest Star Advisers Fund ................................................. 5
Nvest Star Small Cap Fund ................................................ 9
Nvest Star Worldwide Fund ................................................ 13
- --------------------------------------------------------------------------------
FUND FEES & EXPENSES
- --------------------------------------------------------------------------------
Fund Fees & Expenses ..................................................... 17
- --------------------------------------------------------------------------------
MORE ABOUT RISK
- --------------------------------------------------------------------------------
More About Risk .......................................................... 19
- --------------------------------------------------------------------------------
MANAGEMENT TEAM
- --------------------------------------------------------------------------------
Meet the Funds' Investment Adviser and Subadvisers ....................... 20
Meet the Funds' Portfolio Managers ....................................... 22
- --------------------------------------------------------------------------------
FUND SERVICES
- --------------------------------------------------------------------------------
Investing in the Funds ................................................... 26
How Sales Charges Are Calculated ......................................... 27
Ways to Reduce or Eliminate Sales Charges ................................ 28
It's Easy to Open an Account ............................................. 29
Buying Shares ............................................................ 30
Selling Shares ........................................................... 31
Selling Shares in Writing ................................................ 32
Exchanging Shares ........................................................ 33
Restrictions on Buying, Selling and Exchanging Shares .................... 33
How Fund Shares Are Priced ............................................... 34
Dividends and Distributions .............................................. 35
Tax Consequences ......................................................... 35
Compensation to Securities Dealers ....................................... 36
Additional Investor Services ............................................. 37
- --------------------------------------------------------------------------------
FUND PERFORMANCE
- --------------------------------------------------------------------------------
Nvest Star Value Fund .................................................... 38
Nvest Star Advisers Fund ................................................. 39
Nvest Star Small Cap Fund ................................................ 40
Nvest Star Worldwide Fund ................................................ 41
Glossary of Terms ........................................................ 42
If you have questions about any of the terms used in this Prospectus please
refer to the "Glossary of Terms."
Fund shares are not bank deposits and are not guaranteed, endorsed or insured by
the Federal Deposit Insurance Corporation or any other government agency, and
are subject to investment risks, including possible loss of the principal
invested.
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 Fund may engage. Please read this section carefully
before you invest.
<PAGE>
<TABLE>
<S> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- -----------------------
NVEST STAR VALUE FUND Stability Income Growth
(formerly Nvest Value Fund) High X
--------- ------ ------
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") Mod. X
SUBADVISERS: Harris Associates L.P. ("Harris Associates") --------- ------ ------
Loomis, Sayles & Company, L.P. ("Loomis Sayles") Low X
Vaughan, Nelson, Scarborough & McCullough, L.P.
("VNSM")
Westpeak Investment Advisors, L.P. ("Westpeak")
CATEGORY: Large-Cap Equity
TICKER SYMBOL: CLASS A CLASS B CLASS C
------- ------- -------
NEFVX NEVBX NECVX
</TABLE>
INVESTMENT GOAL
The Fund seeks a reasonable long-term investment return from a combination of
market appreciation and dividend income from equity securities.
PRINCIPAL INVESTMENT STRATEGIES
Nvest Management believes the Star Concept -- the Star Funds' multi-manager
approach to equity investing, which combines the varied styles of multiple
subadvisers in selecting securities for each Fund's four segments -- offers
uncommon diversification and a different investment opportunity than funds
managed by a single adviser using a single style. Nvest Management believes that
having several subadvisers with varying and successful management styles may
increase the likelihood that the Fund may produce better returns for its
shareholders, with less variability of return and less risk of persistent
underperformance than a fund managed by a single adviser.
Under normal market conditions, the Fund will invest substantially all of its
assets in equity securities. The Fund primarily invests in common stock of mid-
and large capitalization companies of various industries. The companies the Fund
invests in are value-oriented according to one of more of the following
measures: price-to-earnings ratio, return-on-equity, dividend yield,
price-to-book value ratio, or price-to-sales ratio.
Nvest Management allocates capital invested in the Fund equally among the four
subadvisers set forth above. Each subadviser manages its segment of the Fund's
assets in accordance with its distinct investment style and strategy. Although
the Fund primarily invests in mid-and large capitalization companies of various
industries, it may also:
o Hold securities of foreign issuers traded over the counter or on foreign
exchanges.
o Purchase U.S. government securities, certificates of deposit, commercial
paper, and/or high quality debt securities or hold cash for temporary
defensive purposes in response to adverse market, economic or political
conditions. These investments may prevent the Fund from achieving its goal.
For more detailed information on each subadviser's investment strategies,
please refer to the section entitled "Star Value Fund -- More on Investment
Strategies."
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in value or periods of
below-average performance in a given stock or in the stock market as a whole.
Value stocks present the risk that they may fall out of favor with investors
and underperform growth stocks during given periods.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Star Value Fund by showing changes in the Fund's performance from year
to year and by showing how the Fund's average annual returns for one-, five- and
ten-year (since-inception if shorter) periods compare with those of a broad
measure of market performance and those of indices of funds with similar
objectives. The Fund's past performance does not necessarily indicate how it
will perform in the future.The Fund assumed a multi-manager structure and its
current subadvisers assumed that function on February 28, 2000. This chart and
table reflect results achieved by the previous subadviser under a single-manager
structure for periods prior to February 28, 2000.
The bar chart shows the Fund's total returns for Class A shares for each of the
last ten calendar years. The returns for the other classes of shares offered by
this Prospectus differ from the Class A returns shown in the bar chart,
depending upon the respective expenses of each class. The chart does not reflect
any sales charge that you may be required to pay when you buy or redeem the
Fund's shares. A sales charge will reduce your return.
(total return)
1990 -13.63%
1991 27.11%
1992 16.62%
1993 16.99%
1994 -1.39%
1995 32.32%
1996 26.31%
1997 20.95%
1998 7.07%
1999 -6.92%
/\ Highest Quarterly Return: First Quarter 1991, up 19.49%
\/ Lowest Quarterly Return: Third Quarter 1990, down 21.29%
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' inception if shorter)
compared to those of the Russell 1000 Value Index, an unmanaged subset of stocks
from the larger Russell 3000 Index, selected for their greater value
orientation. They are also compared to the Morningstar Large-Cap Value and
Lipper Multi-Cap Value Averages, each an average of the total returns of all
mutual funds with an investment style similar to that of the Fund as calculated
by Morningstar, Inc. and Lipper, Inc. The Fund previously compared its returns
to the broad Lipper category in which the Fund was categorized. In 1999, Lipper
Inc. narrowed their existing categories and created additional categories and
the Fund falls within Lipper Multi-Cap Value Average, one of the newly created
categories. You may not invest directly in an index. The Fund's total returns
reflect its expenses and the maximum sales charges that you may pay when you buy
or redeem the Fund's shares. The Russell 1000 Value Index returns have not been
adjusted for ongoing management, distribution and operating expenses and sales
charges applicable to mutual fund investments. The Morningstar Large-Cap Value
Average and Lipper Multi-Cap Value Average returns have been adjusted for these
expenses but do not reflect any sales charges.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------- * Since
AVERAGE ANNUAL TOTAL RETURNS class
(for the periods ended December 31, 1999) inception
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
<S> <C> <C> <C>
Nvest Star Value Fund: Class A (inception 6/5/70) -12.27% 13.69% 10.86%
Russell 1000 Value Index 7.35% 23.07% 15.60%
Morningstar Large-Cap Value Average 6.59% 19.31% 13.95%
Lipper Multi-Cap Value Average 7.73% 18.47% 13.26%
Nvest Star Value Fund: Class B (inception 9/13/93) -11.41% 13.93% 11.82%*
Russell 1000 Value Index 7.35% 23.07% 17.64%*
Morningstar Large-Cap Value Average
(calculated from 9/30/93) 6.59% 19.31% 15.60%*
Lipper Multi-Cap Value Average
(calculated from 9/30/93) 7.73% 18.47% 14.91%*
Nvest Star Value Fund: Class C (inception 12/30/94) -8.36% 14.19% 14.18%*
Russell 1000 Value Index 7.35% 23.07% 23.07%*
Morningstar Large-Cap Value Average 6.59% 19.31% 19.42%*
Lipper Multi-Cap Value Average 7.73% 18.47% 18.48%*
- ----------------------------------------------------------------------------------------------------------
For actual past expenses of Class A, B and C shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
[graphic omitted] Goals, Strategies & Risks
-------------------------
STAR VALUE FUND --
MORE ON INVESTMENT STRATEGIES
The Fund's portfolio is divided among four different subadvisers set forth
below. These subadvisers pursue the Fund's overall goal by employing the
strategies and techniques described below.
HARRIS ASSOCIATES
The segment of the Fund managed by Harris Associates will primarily invest in
common stock of mid- and large capitalization companies which Harris Associates
believes are trading at a substantial discount to the company's "true business
value." Harris Associates' value-oriented investment philosophy is based upon
its belief that over time a stock's discounted market price and its true
business value will converge. Harris Associates believes that this philosophy
provides the best opportunity to achieve long-term capital growth while also
protecting from downside risk. It therefore uses this philosophy to locate
companies with the following characteristics, although not all of the companies
selected by Harris Associates will have these attributes:
x Positive free cash flow
x High level of insider ownership
x Favorable earnings growth potential
In making investment decisions for constructing a concentrated portfolio, Harris
Associates generally employs the following methods:
o It uses a fundamental bottom-up investment approach, which means that it
focuses on individual companies rather than macroeconomic factors or specific
industries. Each company is analyzed on a case-by-case basis to select those
which meet Harris Associates' standards of quality and value.
o Once Harris Associates determines that a stock sells at a significant discount
to its true business value and has other attractive qualities such as a
positive free cash flow, it will consider that stock for purchase by analyzing
the quality and motivation of the company's management as well as the
company's market position within its industry.
o Investments are continuously monitored by both analysts and portfolio
managers. A senior committee sets specific "buy" and "sell" targets for each
company. Harris Associates will generally buy a stock when it sells for a
price below 60% of its true business value, and will generally sell a stock
when it approaches 90% of its true business value.
LOOMIS SAYLES
Loomis Sayles uses fundamental research in a value-oriented selection process to
seek companies with the following characteristics, relative to the Russell 1000
Value Index, although not all of the companies selected will have these
attributes:
x Low price-to-earnings ratios based on earnings estimates
x Competitive return on equity
x Competitive current and estimated dividend yield
x Favorable earnings prospects
Inselecting investments for its Fund segment, Loomis Sayles employs the
following strategy:
o It starts with a universe of approximately 1,400 companies, primarily those
with a market capitalization in excess of $2 billion.
o Stocks are then ranked using the Loomis Sayles proprietary valuation model
based on low price-to-earnings ratios, earnings estimate revisions and
quality.
o Stocks are selected based on fundamental research focusing on those that are
ranked favorably in the valuation model.
o Its segment's portfolio is constructed by choosing approximately 60 to 70
stocks which Loomis Sayles believes offer the best combination of attractive
valuation characteristics and positive fundamentals.
o The portfolio construction process also attempts to minimize risk through
careful evaluation of diversification and other risk factors.
o Loomis Sayles will generally sell a stock when its price objective has been
attained, if its fundamentals deteriorate, or when a stock with greater
potential is identified.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
VAUGHAN, NELSON, SCARBOROUGH & MCCULLOUGH (VNSM)
In managing its segment of the Fund, VNSM will use rigorous fundamental research
and active management to analyze a broad selection of company or industry
sectors and to seek companies with the following characteristics, although not
all of the companies selected will have each of these attributes:
x Low price-to-sales relative to market
x Higher yield relative to market
x Low price-to-earnings relative to market
x Low price-to-book value relative to market
In selecting investments for its segment of the Fund, VNSM will employ the
following strategy:
o It uses a value-driven investment philosophy that selects stocks selling at a
relatively low value based primarily on the four criteria mentioned above. It
selects companies that VNSM believes are out-of-favor or misunderstood.
o VNSM starts with an investment universe of 5,000 securities. VNSM then uses
value-driven screens to create a research universe of 300 to 400 companies
with market capitalizations of at least $2 billion.
o VNSM will generally sell a stock when its relative valuation reverts to its
historical average, when the issuer shows a deteriorating financial condition,
or when it has repeated negative earnings surprises.
WESTPEAK
In managing its segment of the Fund, Westpeak will construct a portfolio of
recognizable, large and mid-capitalization stocks that exhibit good relative
value and reasonable growth potential. Westpeak believes risk and return can be
accurately measured and controlled through thoughtful portfolio construction.
Therefore its focus will be on the aggregate characteristics of the portfolio
and not just individual stocks. The portfolio emphasizes the characteristics
that Westpeak believes are most likely to be rewarded by the market in the
period ahead based upon current and historical probabilities. At times the
portfolio may be biased toward value; at other times toward growth as determined
by the characteristics Westpeak favors. The segment's industry weightings will
not vary significantly from the S&P 500. Using proprietary quantitative research
based on macroeconomic, market and company-specific information, Westpeak
analyzes each stock and ranks it based on characteristics such as:
x Earnings-to-price
x Earnings growth
x Potential earnings surprises
x Book-to-price
In selecting investments, Westpeak will employ the following process:
o It starts with an initial universe of approximately 2,100 stocks of mainly
large capitalization companies and eliminates stocks of companies below a $1.6
billion market capitalization threshold. This creates an overall universe of
about 1,000 stocks.
o Next, it screens these stocks using fundamental growth and value criteria and
calculates a "fundamental rank" for each stock. This rank reflects a
historical analysis of the company using approximately 70 growth, value and
industry-specific characteristics.
o All of the stocks are then screened using various Wall Street analysts'
historical and projected earning estimates for the company and each is
assigned an "expectations rank." This rank accounts for the company's recent
and historical earnings revisions and the potential for "positive earnings
surprises" (whether its business has the potential to improve in the near
future).
o The fundamental and expectations ranks for each stock are placed in a
valuation matrix to evaluate whether to buy, sell or hold a stock.
o The final step is the use of proprietary methodology to arrange the selected
stocks into an optimal portfolio using their respective fundamental and
expectation ranks and risk characteristics.
The desired result is a diversified portfolio of 75 to 150 stocks, with risk
characteristics that approximate that of the benchmark, the S&P 500 Index, which
Westpeak believes will produce the highest long -term returns consistent with
the portfolio's risk parameters.
<PAGE>
<TABLE>
<S> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- -----------------------
NVEST STAR ADVISERS FUND Stability Income Growth
High X
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") --------- ------ ------
SUBADVISERS: Harris Associates L.P. ("Harris Associates") Mod.
Janus Capital Corporation ("Janus") --------- ------ ------
Kobrick Funds LLC ("Kobrick") Low X X
Loomis, Sayles & Company, L.P. ("Loomis Sayles")
CATEGORY: All-Cap Equity
TICKER SYMBOL: CLASS A CLASS B CLASS C
------- ------- -------
NEFSX NESBX NECCX
</TABLE>
INVESTMENT GOAL
The Fund seeks long-term growth of capital.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Nvest Management believes the Star Concept -- the Star Funds' multi-manager
approach to equity investing, which combines the varied styles of multiple
subadvisers in selecting securities for each Fund's four segments -- offers
uncommon diversification and a different investment opportunity than funds
managed by a single adviser using a single style. Nvest Management believes that
having several subadvisers with varying and successful management styles may
increase the likelihood that the Fund may produce better returns for its
shareholders, with less variability of return and less risk of persistent
underperformance than a fund managed by a single adviser.
Under normal market conditions, the Fund will invest substantially all of its
assets in equity securities. Nvest Management allocates capital invested in the
Fund equally among the four subadvisers set forth above. Each subadviser manages
its segment of the Fund's assets in accordance with its distinct investment
style and strategy. Although the Fund primarily invests in equity securities, it
may also:
o Hold securities of foreign issuers traded over the counter or on foreign
exchanges, including securities in emerging markets and related currency
hedging transactions.
o Invest in fixed-income securities, including U.S. government bonds and
lower-quality corporate bonds.
o Invest in real estate investment trusts ("REITs").
o Engage in active and frequent trading of securities. Frequent trading may
produce higher transaction costs and higher levels of taxable capital gains,
which may lower your return.
o Purchase U.S. government securities, certificates of deposit, commercial
paper, and/or high quality debt securities or hold cash for temporary
defensive purposes in response to adverse market, economic or political
conditions. These investments may prevent the Fund from achieving its goal.
o Invest in convertible preferred stock and convertible debt securities.
o Enter into options, futures, swap contracts and currency hedging transactions.
o Invest in initial public offerings ("IPOs") and Rule 144A securities.
For more detailed information on each subadviser's investment strategies, please
refer to the section entitled "Star Advisers Fund -- More On Investment
Strategies."
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in a stock's value or periods of
below-average performance in a given stock or in the stock market as a whole.
Small capitalization and emerging growth companies may be subject to more
abrupt price movements, limited markets and less liquidity than larger, more
established companies, which may adversely affect the value of the portfolio.
With special situation companies, the primary risk is that they may not
achieve their expected value because events do not materialize as anticipated.
IPO securities tend to involve greater market risk than other equity
securities due, in part, to public perception and the lack of publicly
available information and trading history. This may impact the Fund's
performance and result in increased tax liability to shareholders. Rule 144A
securities may be more illiquid than other equity securities. Growth stocks
are generally more sensitive to market movements than other types of stocks,
primarily because their stock prices are based heavily on future expectations.
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise.
Lower-quality fixed-income securities may be subject to these risks to a
greater extent than other fixed-income securities.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency. Investments in emerging markets may
be subject to these risks to a greater extent than those in more developed
markets.
REITs: Subject to changes in underlying real estate values, rising interest
rates, limited diversification of holdings, higher costs and prepayment risk
associated with related mortgages.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Star Advisers Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual returns for one-year,
five-year and since-inception periods compare with those of a broad measure of
market performance and those of indices of funds with similar objectives. The
Fund's past performance does not necessarily indicate how it will perform in the
future.
The bar chart shows the Fund's total returns for Class A shares for each
calendar year since its first full year of operations. The returns for the other
classes of shares offered by this Prospectus differ from the Class A returns
shown in the bar chart, depending upon the respective expenses of each class.
The chart does not reflect any sales charge that you may be required to pay when
you buy or redeem the Fund's shares. A sales charge will reduce your return.
(total return)
1995 34.36%
1996 18.98%
1997 20.17%
1998 19.26%
1999 46.44%
/\ Highest Quarterly Return: Fourth Quarter 1999, up 30.94%
\/ Lowest Quarterly Return: Third Quarter 1998, down 13.19%
The table below shows the Fund's average annual total returns for the one-year,
five-year and since-inception periods compared to those of the Standard & Poor's
Midcap 400 Index ("S&P 400"), an unmanaged index representing the performance of
the mid-sized company segment of the U.S. market, and the Standard & Poor's
Composite Index of 500 Stocks ("S&P 500"), a market value-weighted, unmanaged
index of common stock prices for 500 selected stocks. The returns are also
compared to the Morningstar Large Blend and the Lipper Multi-Cap Growth
Averages, each an average of the total returns of all mutual funds with an
investment style similar to that of the Fund as calculated by Morningstar, Inc.
and Lipper, Inc. The Fund previously compared its returns to the broad category
in which the Fund was categorized. In 1999, Lipper Inc. narrowed their existing
categories and created additional categories and the Fund falls within Lipper
Multi-Cap Growth Average, one of the newly created categories. You may not
invest directly in an index. The Fund's total returns reflect its expenses and
the maximum sales charge that you may pay when you buy or redeem the Fund's
shares. The S&P 400 and S&P 500 returns have not been adjusted for ongoing
management, distribution and operating expenses and sales charges applicable to
mutual fund investments. The Morningstar Large Blend Average and Lipper
Multi-Cap Growth Average returns have been adjusted for these expenses but do
not reflect any sales charge.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------- * The inception date
AVERAGE ANNUAL TOTAL RETURNS of the Fund's Class
(for the periods ended December 31, 1999) A, B and C shares
PAST 1 PAST 5 SINCE CLASS is July 7, 1994.
YEAR YEARS INCEPTION*
<S> <C> <C> <C>
Nvest Star Advisers Fund: Class A 38.03% 25.89% 24.76%
Nvest Star Advisers Fund: Class B 40.36% 26.30% 25.12%
Nvest Star Advisers Fund: Class C 44.31% 26.45% 25.19%
S&P 400 14.72% 23.05% 21.22%
S&P 500 21.04% 28.56% 26.63%
Morningstar Large Blend Average
(calculated from 7/31/94) 19.27% 24.04% 26.20%
Lipper Multi-Cap Growth Average
(calculated from 7/31/94) 52.30% 28.56% 26.84%
- -----------------------------------------------------------------------------------------------------------
For the actual past expenses of Class A, B, and C shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
[graphic omitted] Goals, Strategies & Risks
-------------------------
STAR ADVISERS FUND --
MORE ON INVESTMENT STRATEGIES
The Fund's portfolio is divided among four different subadvisers set forth
below. These subadvisers pursue the Fund's overall goal by employing the
strategies and techniques described below.
HARRIS ASSOCIATES
The segment of the Star Advisers Fund managed by Harris Associates will invest
primarily in common stock of large and mid-capitalization companies which Harris
Associates believes are trading at a substantial discount to the company's "true
business value." Harris Associates' value-oriented investment philosophy is
based upon its belief that over time a stock's discounted market price and its
true business value will converge. Harris Associates believes that this
philosophy provides the best opportunity to achieve long-term capital growth
while also protecting from downside risk. It therefore uses this philosophy to
locate companies with the following characteristics, although not all of the
companies selected by Harris Associates will have these attributes:
x Positive free cash flow
x High level of insider ownership
x Favorable earnings growth potential
In making investment decisions, Harris Associates generally employs the
following methods:
o It uses a fundamental bottom-up investment approach, which means that it
focuses on individual companies rather than macroeconomic factors or specific
industries. Each company is analyzed on a case-by-case basis to select those
which meet Harris Associates' standards of quality and value.
o Once Harris Associates determines that a stock sells at a significant discount
to its true business value and has other attractive qualities such as a
positive free cash flow, it will consider that stock for purchase by analyzing
the quality and motivation of the company's management as well as the
company's market position within its industry.
o Investments are continuously monitored by both analysts and portfolio
managers. A senior committee sets specific "buy" and "sell" targets for each
company. Harris Associates will generally buy a stock when it sells for a
price below 60% of its true business value, and will generally sell a stock
when it approaches 90% of its true business value.
JANUS
The segment of the Star Advisers Fund managed by Janus will invest substantially
all of its assets in common stocks of companies in the U.S. and foreign
(including emerging) markets. Janus takes a bottom-up approach in managing its
segment of the Fund which means that it seeks to identify individual companies
with good earnings growth potential that may not be recognized by the market at
large. Although themes may emerge, securities are generally selected without
regard to any defined industry sector or other similarly defined selection
procedure. Realization of income is not a significant investment consideration
for this segment of the Fund. Generally, Janus seeks companies which, in Janus'
opinion, possess the following attributes:
x Strong competitive position in a particular industry
x Secure current and expected financial position
x Proven and capable management teams
x Attractive valuations relative to growth prospects and peer group
x High return on equity
x Special situation or catalyst
In making investment decisions, Janus employs the following methods:
o Janus' analysis and selection process focuses on stocks that, in its opinion,
possess earnings growth potential that may not be recognized by the market.
o Janus does not focus on particular market capitalization. The companies it
selects to include in its segment may be of any size, including large,
well-established companies as well as medium and smaller emerging growth
companies.
o During its selection process, Janus may also look for "special situation"
companies. A special situation may include a new product or process, a
technological breakthrough, a management change or other extraordinary
corporate event, or differences in market supply of and demand for the
security.
o Investments are continuously monitored by analysts and portfolio managers. The
analysts and portfolio managers will evaluate the companies to determine
whether they continue to possess the same fundamental characteristics for
growth which made them candidates for purchase originally.
o Janus will generally sell a position when earnings growth falls below the
market average, the fundamental outlook is deteriorating or when other more
appealing investment opportunities arise.
<PAGE>
[graphic omitted] Goals, Strategies & Risks
-------------------------
KOBRICK
The segment of the Star Advisers Fund managed by Kobrick will, under normal
conditions, invest substantially in equity securities of companies with small,
medium and large capitalizations, including those that Kobrick believes are
undervalued special situations and emerging growth companies. This approach
provides Kobrick with flexibility to emphasize in the Fund companies with
different capitalizations as market conditions change. Kobrick considers
emerging growth companies to be those companies which are less mature and have
the potential to grow substantially faster than the economy. Kobrick's bottom-up
approach utilizes fundamental and qualitative analysis to select individual
companies, not sectors, with the greatest potential for growth. In selecting
investments for the Fund, Kobrick generally seeks companies in a wide variety of
industries and considers a variety of factors, including any one or more of the
following:
x The strength of a company's management team
x Expected growth in earnings
x Relative financial condition
x Competitive position and business strategy
x Entrepreneurial character
x New or innovative products, services or processes
In making investment decisions, Kobrick employs the following four-part
investment approach:
o Screening: Kobrick analyzes thousands of companies in order to find a select
group that has the potential to meet its buy disciplines described below. Many
of the companies within this group are special situation companies which,
because of unique circumstances, such as an ability to fill a particular
niche, are attractive investments.
o Portfolio Construction: Kobrick applies buy disciplines which emphasize strong
management, compelling valuations and high earnings growth. At the core of
this approach is regular contact with a company's management team to assess
its ability to execute the company's strategy. Kobrick considers potential
risk in selecting securities to construct a diversified portfolio that limits
volatility.
o Portfolio Supervision: Kobrick closely monitors each holding in the Fund's
portfolio to determine whether it continues to possess the factors identified
when the original investment was made. This process includes continuous review
of absolute and relative valuations, evaluation of management's execution of
the company's strategy and assessment of the company's prospects relative to
the overall economic, political and financial environment.
o Portfolio Realignment: Kobrick will generally sell a position when its target
price, which is continuously evaluated, is reached, when there is a change in
a company's management or strategy, or when a company fails to execute its
strategy.
LOOMIS SAYLES
The segment of the Star Advisers Fund managed by Loomis Sayles will invest
primarily in common stocks with a market capitalization, at the time of the
investment, within the range of the market capitalization of those companies
constituting the Russell 2500 Index. Loomis Sayles may also invest up to 35% of
its segment's assets in companies with larger capitalization levels. Loomis
Sayles seeks to achieve the objective of the Fund by emphasizing companies
undervalued by the market in relation to earnings, dividends, assets, and growth
prospects. This segment of the Fund is value-oriented with emphasis on security
selection rather than sector rotation and market timing. The securities selected
by Loomis Sayles for the segment typically have the following characteristics
relative to those companies constituting the Russell 2500 Index:
x Strong fundamental prospects
x Low price-to-earnings ratio
x Higher than average cash flows
x Strong balance sheets
Loomis Sayles will build a core portfolio of companies which in its opinion
possess the attributes set forth above. It will also invest a smaller portion of
its segment's assets in companies which it believes are undergoing a "special
situation" or turnaround. These types of companies may have experienced
significant business problems but, in the opinion of Loomis Sayles, have
favorable prospects for recovery.
In making investment decisions, Loomis Sayles generally employs the following
methods:
o It begins with a universe of approximately 3,000 companies, identified through
the intensive research of Loomis Sayles analysts. This research consists of
broad, in-depth coverage, including regular contact with company management,
near- and long-term projections of company fundamentals and evaluations of
potential earnings growth. The market capitalization of these companies will
generally be within the range of the Russell 2500 Index.
o Next, the portfolio managers with the assistance and guidance of the Loomis
Sayles analysts put the companies through several screens to determine which
companies provide the best earnings growth potential while at the same time
appear to be the most undervalued by the market relative to the Russell 2500
Index.
o Out of the remaining candidates, Loomis Sayles builds a diversified portfolio
across many economic sectors so that the portfolio is protected against the
inherent volatility of small capitalization companies.
o Investments are continuously monitored by analysts and portfolio managers. The
analysts and portfolio managers will evaluate the companies as to whether they
continue to possess the same fundamental characteristics for growth which made
them candidates for investment originally.
o Loomis Sayles will sell a position when it reaches its target valuation, the
fundamental outlook is deteriorating or when other more favorable
opportunities arise.
<PAGE>
<TABLE>
<S> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- -----------------------
NVEST STAR SMALL CAP FUND Stability Income Growth
High X
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") --------- ------ ------
SUBADVISERS: Harris Associates L.P. ("Harris Associates") Mod.
Loomis, Sayles & Company, L.P. ("Loomis Sayles") --------- ------ ------
Montgomery Asset Management, LLC ("Montgomery") Low X X
RS Investment Management, L.P.
("RS Investment Management")
CATEGORY: Small-Cap Equity
TICKER SYMBOL: CLASS A CLASS B CLASS C
------- ------- -------
NEFJX NEJBX NEJCX
</TABLE>
INVESTMENT GOAL
The Fund seeks capital appreciation.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Nvest Management believes the Star Concept -- the Star Funds' multi-manager
approach to equity investing, which combines the varied styles of multiple
subadvisers in selecting securities for each Fund's four segments -- offers
uncommon diversification and a different investment opportunity than funds
managed by a single adviser using a single style. Nvest Management believes that
having several subadvisers with varying and successful management styles may
increase the likelihood that the Fund may produce better returns for its
shareholders, with less variability of return and less risk of persistent
underperformance than a fund managed by a single adviser.
The Fund seeks to attain its goal by investing primarily in equity securities of
small capitalization companies. The Fund's potential investment universe
includes companies whose total market capitalization, at the time of purchase,
falls within the range of the Russell 2000 Index. The Fund may, however, invest
in companies with larger capitalizations.
Nvest Management allocates capital invested in the Fund equally among the four
subadvisers set forth above. Each subadviser manages its segment of the Fund's
assets in accordance with its distinct investment style and strategy. Although
the Fund primarily invests in equity securities, it may also:
o Invest up to 35% of its assets in fixed-income securities, including U.S.
government bonds as well as lower quality debt securities.
o Invest in convertible preferred stock and convertible debt securities.
o Purchase U.S. government securities, certificates of deposit, commercial
paper, and/or high quality fixed-income securities or hold cash for temporary
defensive purposes in response to adverse market, economic or political
conditions. Such positions may prevent the Fund from achieving its goal.
o Invest in foreign securities, including emerging market securities.
o Engage in active and frequent trading of securities. Frequent trading may
produce higher transaction costs and higher levels of taxable capital gains,
which may lower your return.
o Invest in real estate investment trusts ("REITs").
For more detailed information on each subadviser's investment strategies please
refer to the section entitled "Star Small Cap Fund -- More On Investment
Strategies."
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in a stock's value or periods of
below-average performance in a given stock or in the stock market as a whole.
Small capitalization companies may be subject to more abrupt price movements,
limited markets and less liquidity than larger, more established companies,
which may adversely affect the value of the portfolio. Growth stocks are
generally more sensitive to market movements than other types of stocks,
primarily because their stock prices are based heavily on future expectations.
Value stocks present the risk that they may fall out of favor with investors
and underperform growth stocks during given periods.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility and limited liquidity. Political, economic and information risks
are also associated with foreign securities. These investments may also be
affected by the conversion of the currency of several European countries to
the "euro" currency. Investments in emerging markets may be subject to these
risks to a greater extent than those in more developed markets.
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise.
Lower-quality fixed-income securities may be subject to these risks to a
greater extent than other fixed-income securities.
REITs: Subject to changes in underlying real estate values, rising interest
rates, limited diversification of holdings, higher costs and prepayment risk
associated with related mortgages.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Star Small Cap Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual returns for one-year
and since-inception periods compare with those of a broad measure of market
performance and those of indices of funds with similar objectives. The Fund's
past performance does not necessarily indicate how it will perform in the
future.
The bar chart shows the Fund's total returns for Class A shares for each
calendar year since its first full year of operations. The returns for the other
classes of shares offered by this Prospectus differ from the Class A returns
shown in the bar chart, depending upon the respective expenses of each class.
The chart does not reflect any sales charge that you may be required to pay when
you buy or redeem the Fund's shares. A sales charge will reduce your return.
(total return)
1997 26.97%
1998 2.05%
1999 65.38%
/\ Highest Quarterly Return: Fourth Quarter 1999, up 42.28%
\/ Lowest Quarterly Return: Third Quarter 1998, down 22.85%
The table below shows the Fund's average annual total returns for the one-year
and since-inception periods compared to those of the Russell 2000 Index, a
market value-weighted, unmanaged index of small company common stocks. The
returns are also compared to the Morningstar Small-Cap Growth and Lipper
Small-Cap Growth Averages, each an average of the total returns of all mutual
funds with an investment style similar to that of the Fund, as calculated by
Morningstar, Inc. and Lipper, Inc. The Fund previously compared its returns to
the broad Lipper category in which the Fund was categorized. In 1999, Lipper
Inc. narrowed their existing categories and created additional categories and
the Fund falls within Lipper Small-Cap Growth Average, one of the newly created
categories. You may not invest directly in an index. The Fund's total returns
reflect its expenses and the maximum sales charge that you may pay when you buy
or redeem the Fund's shares. The Russell 2000 Index returns have not been
adjusted for ongoing management, distribution and operating expenses and sales
charges applicable to mutual fund investments. Morningstar Small-Cap Growth
Average and Lipper Small-Cap Growth Average returns have been adjusted for these
expenses but do not reflect any sales charges.
- ---------------------------------------------------------------- * The inception
AVERAGE ANNUAL TOTAL RETURNS date of the
(for the periods ended December 31, 1999) Fund's Class
SINCE CLASS A, B and C
PAST 1 YEAR INCEPTION* shares is
Nvest Star Small Cap Fund: Class A 55.82% 26.41% December 31,
Nvest Star Small Cap Fund: Class B 59.14% 27.37% 1996.
Nvest Star Small Cap Fund: Class C 63.14% 27.98%
Russell 2000 Index 21.26% 13.08%
Morningstar Small-Cap Growth Average 65.85% 26.18%
Lipper Small-Cap Growth Average 62.33% 24.53%
For actual past expenses of Class A, B and C shares, see the section entitled
"Fund Fees & Expenses."
<PAGE>
[graphic omitted] Goals, Strategies & Risks
-------------------------
STAR SMALL CAP FUND --
MORE ON INVESTMENT STRATEGIES
The Fund's portfolio is divided among four different subadvisers set forth
below. These subadvisers pursue the Fund's overall goal by employing the
strategies and techniques described below.
HARRIS ASSOCIATES
The segment of the Fund managed by Harris Associates will primarily invest in
the common stocks of "small cap companies" in the U.S. Harris considers a small
cap company to have a market capitalization no larger than the largest market
capitalization of the companies included in the S&P Small Cap 600 Index ($4.156
billion as of December 31, 1999). Harris Associates' value-oriented investment
philosophy is based upon its belief that over time a stock's discounted market
price and its true business value will converge. Harris Associates believes that
this philosophy provides the best opportunity to achieve long-term capital
growth while also protecting from downside risk. It therefore it uses this
philosophy to identify companies with the following characteristics, although
not all of the companies selected by Harris Associates will have these
attributes:
x Positive free cash flow
x High level of insider ownership
x Favorable earnings growth potential
In making investment decisions for its segment of the Fund, Harris Associates
generally employs the following methods:
o It uses a fundamental bottom-up investment approach, which means that it
focuses on individual companies rather than macroeconomic factors or specific
industries. Each company is analyzed on a case-by-case basis to select those
which meet Harris Associates' standards of quality and value.
o Once Harris Associates determines that a stock sells at a significant discount
to its true business value and has other attractive qualities such as positive
free cash flow, it will consider that stock for purchase by analyzing the
quality and motivation of the company's management as well as the company's
market position within its industry.
o Investments are continuously monitored by both analysts and portfolio
managers. A senior committee sets specific "buy" and "sell" targets for each
company. Harris Associates will generally buy a stock when it sells for a
price below 60% of its true business value, and will generally sell a stock
when it approaches 90% of its true business value.
LOOMIS SAYLES
Under normal market conditions, Loomis Sayles will invest at least 65% of its
segment's total assets in equity securities of companies with market
capitalizations that, at the time of purchase, fall within the capitalization
range of those companies constituting the Russell 2000 Index. Loomis Sayles may
also invest up to 35% of its segment's assets in companies with larger
capitalization levels.
This segment of the Star Small Cap Fund focuses on rapidly growing companies
which Loomis Sayles believes have the potential for strong revenue growth,
rising profit margins and accelerating earnings growth. The stock selection
process uses a bottom-up approach that Loomis Sayles believes emphasizes
companies that possess the best growth prospects. Loomis Sayles uses this
approach to identify companies with the following characteristics, although not
all of the companies selected will have these attributes:
x New and/or distinctive products, technologies or services
x Expected growth of at least 20% per year driven by
strong sales and improving profitability
x Strong, experienced management with the vision and the
capability to grow a large, profitable organization
In making investment decisions, Loomis Sayles generally employs the following
methods:
o It begins with a universe of approximately 3,000 companies that generally fall
within the market capitalization range of those companies constituting the
Russell 2000 Index.
o Next, the portfolio managers with the assistance and guidance of the Loomis
Sayles' analysts evaluate this universe through screening techniques to
determine which companies appear to offer the best earnings growth prospects.
o Once Loomis Sayles determines that a company may have the potential for
earnings growth and rising profitability, it considers that company's stock
for purchase. This process includes analysis of the company's income
statements and balance sheets, an assessment of the quality of its management
team as well as the company's competitive position.
o Out of the remaining candidates, Loomis Sayles builds a diversified portfolio
of small cap growth securities. The portfolio's holdings are generally equally
weighted, although under certain circumstances such as low liquidity or lack
of near term earnings prospects, positions will be reduced. Under normal
market conditions, the portfolio remains fully invested with less than 5% of
its assets held as cash.
o Investments are continuously monitored by the Loomis Sayles small cap growth
team. Any erosion in the fundamental characteristics of portfolio holdings may
result in the sale of that security. Additionally, securities are sold when
their market capitalization exceeds the capitalization range of the Russell
2000 Index. Finally, stocks may be sold if a better opportunity is identified
by the portfolio managers.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
MONTGOMERY
Montgomery seeks capital appreciation by investing in growth-oriented U.S. small
capitalization companies whose stock price appears to be undervalued relative to
their growth potential. Potential investments are rigorously analyzed and
subjected to the following three steps of its investment process:
x Quantitative screen identifying growth-oriented companies with improving
business fundamentals
x Fundamental analysis to determine the long-term sustainability of the
company's growth characteristics
x Valuation to ensure that the company's growth prospects have not yet been
fully recognized by the market
In making investment decisions, Montgomery generally employs the following
methods:
o Montgomery uses a quantitative screen to identify growth oriented companies.
This screening process provides the means for narrowing a very large universe
of companies to a smaller universe of companies which display the
characteristics that Montgomery desires. Montgomery begins with a database of
over 2,000 companies which is continuously updated with the most current
financial information on such companies. After identifying those companies
with the market capitalizations desired (generally less than $1.5 billion),
Montgomery's proprietary interface allows it to quickly visualize changes in
revenue and earnings growth and generate a research pipeline of companies that
appear to have improving business fundamentals.
o Once those companies displaying desirable quantitative characteristics are
identified, Montgomery performs fundamental analysis to validate the nature
and sustainability of the observed trends in revenues and earnings.
o Montgomery uses several valuation measures for those companies that pass both
the quantitative screen and the qualitative analysis. Montgomery compares each
company's price-to-earnings ratio to its earnings-per-share growth rate. It
invests in companies selling at substantial discounts to their earnings growth
rates and sells its investments in companies trading at a premium to their
earnings growth rates. Montgomery also compares each company's
price-to-earnings, price-to-sales and price-to-cash flow ratios to its
industry group. Each investment selected by Montgomery is typically
inexpensive versus its internal growth rate on an absolute basis and relative
to its peer group.
o Investments are continuously monitored by analysts and portfolio managers. The
analysts along with portfolio managers will evaluate the companies to
determine whether they continue to possess the fundamental characteristics for
growth which made them a candidate for purchase originally.
o Montgomery will sell a stock when its return objective has been achieved and
the stock is no longer attractive on a valuation basis. Earnings
disappointments, fundamental outlook deterioration and more appealing
investment opportunities also trigger sell decisions.
RS INVESTMENT MANAGEMENT
RS Investment Management pursues the Fund's objective by selecting securities
for its segment based on a flexible, research-driven, bottom-up approach to
value recognition and trend analysis. Stock selection focuses on growth that is
expected to drive earnings and valuations higher over the one to three year time
horizon. The catalysts that spur growth in these small companies may consist of:
x A new product launch
x A new management team
x Expansion into new markets
x Realization of undervalued assets
In making investment decisions, RS Investment Management generally employs the
following methods:.
o RS Investment Management begins with a broad universe of companies which it
believes possess the prospect for superior long-term growth.
o It identifies this initial universe of potential investments by conducting
proprietary, fundamental research, focusing on a company's level of available
cash, its existing cash flow rate, its price-to-earnings ratio and the
company's expected return on capital.
o Next, RS Investment Management evaluates the company's management teams to
identify how they allocate the company's capital as well as to discern the
sources, and management's intended use, of cash.
o RS Investment Management will then consider the current stock price relative
to its future price projections. Only after this thorough analysis has been
made will RS Investment Management make a decision to buy a particular stock.
o RS Investment Management considers selling or initiating the sell process
when:
- A stock has reached the price objective set by RS Investment Management.
- A stock declines 15% from the original purchase price. If this occurs, RS
Investment Management will generally sell a portion of the position and
reevaluate the company to ensure that a growth catalyst remains.
- Negative fundamental changes occur relating to management, product
definition or economic environment.
- More attractive opportunities are identified.
<PAGE>
<TABLE>
<S> <C>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- -----------------------
NVEST STAR WORLDWIDE FUND Stability Income Growth
High X
ADVISER: Nvest Funds Management, L.P. ("Nvest Management") --------- ------ ------
SUBADVISERS: Harris Associates L.P. ("Harris Associates") Mod.
Loomis, Sayles & Company, L.P. ("Loomis Sayles") --------- ------ ------
Montgomery Asset Management LLC ("Montgomery") Low X X
CATEGORY: Global Equity
TICKER SYMBOL: CLASS A CLASS B CLASS C
------- ------- -------
NEFDX NEDBX NEDCX
</TABLE>
INVESTMENT GOAL
The Fund seeks long-term growth of capital.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Nvest Management believes the Star Concept -- the Star Funds' multi-manager
approach to equity investing, which combines the varied styles of multiple
subadvisers in selecting securities for each Fund's four segments -- offers
uncommon diversification and a different investment opportunity than funds
managed by a single adviser using a single style. Nvest Management believes that
having several subadvisers with varying and successful management styles may
increase the likelihood that the Fund may produce better returns for its
shareholders, with less variability of return and less risk of persistent
underperformance than a fund managed by a single adviser.
The Fund seeks to attain its goal by investing substantially all of its assets
in equity securities. The Fund is a global mutual fund, which means that it will
seek to invest in equity securities traded on foreign stock markets as well as
the markets of the United States. Foreign markets represent two-thirds of the
value of all stocks traded in the world and offer opportunities for investment
in addition to those found in the United States. Foreign markets may be located
in large, developed countries such as Great Britain or in smaller, developing
markets like Singapore.
Nvest Management allocates capital invested in the Fund equally among its four
segments which are managed by the three subadvisers listed above. Each
subadviser manages its segment of the Fund's assets in accordance with its
distinct investment style and strategy.
Aside from investing primarily in equity securities of foreign and domestic
companies, the Fund may:
o Invest up to 35% of its assets in fixed-income securities, including
government bonds and lower-quality debt securities.
o Invest in convertible preferred stock and convertible debt securities.
o Purchase U.S. government securities, certificates of deposit, commercial
paper, and/or high quality debt securities or hold cash for temporary
defensive purposes in response to adverse market, economic or political
conditions. Such positions may prevent the Fund from achieving its goal.
o Invest in real estate investment trusts ("REITs").
For more detailed information on each subadviser's investment strategies please
refer to the section entitled "Star Worldwide Fund -- More On Investment
Strategies."
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in a stock's value or periods of
below-average performance in a given stock or in the stock market as a whole.
Small capitalization companies may be subject to more abrupt price movements,
limited markets and less liquidity than larger, more established companies,
which may adversely affect the value of the portfolio. Growth stocks are
generally more sensitive to market movements than other types of stocks,
primarily because their stock prices are based heavily on future expectations.
Value stocks present the risk that they may fall out of favor with investors
and underperform growth stocks during any given periods.
FOREIGN SECURITIES: May be affected by foreign currency
fluctuations, higher volatility than U.S securities and limited liquidity.
Political, economic and information risks are also associated with foreign
securities. These investments may also be affected by the conversion of the
currency of several European countries to the "euro" currency. Investments in
emerging markets may be subject to these risks to a greater extent than those
in more developed markets.
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise.
Lower-quality fixed-income securities may be subject to these risks to a
greater extent than other fixed-income securities.
REITs: Subject to changes in underlying real estate values, rising interest
rates, limited diversification of holdings, higher costs and prepayment risk
associated with related mortgages.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Star Worldwide Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual returns for one-year
and since-inception periods compare with those of a broad measure of market
performance and those of indices of funds with similar objectives. The Fund's
past performance does not necessarily indicate how it will perform in the
future.
The bar chart shows the Fund's total returns for Class A shares for each
calendar year since its first full year of operations. The returns for the other
classes of shares offered by this Prospectus differ from the Class A returns
shown in the bar chart, depending upon the respective expenses of each class.
The chart does not reflect any sales charge that you may be required to pay when
you buy or redeem the Fund's shares. A sales charge will reduce your return.
(total return)
1996 16.67%
1997 12.68%
1998 4.01%
1999 37.63%
/\ Highest Quarterly Return: Fourth Quarter 1999, up 24.05%
\/ Lowest Quarterly Return: Third Quarter 1998, down 16.88%
The table below shows the Fund's average annual total returns for the one-year
and since-inception periods compared to those of the Morgan Stanley Capital
International World Index ("MSCI World Index"), an unmanaged index of stocks
throughout the world. The returns are also compared to the Morningstar World
Stock and Lipper Global Averages, each an average of the total returns of all
mutual funds with an investment style similar to that of the Fund as calculated
by Morningstar, Inc. and Lipper, Inc. You may not invest directly in an index.
The Fund's total returns reflect the maximum sales charge that you may pay when
you buy or redeem the Fund's shares. The MSCI World Index returns have not been
adjusted for ongoing management, distribution and operating expenses and sales
charges applicable to mutual fund investments. The Morningstar World Stock
Average and Lipper Global Average returns have been adjusted for these fees but
do not reflect sales charges.
- ---------------------------------------------------------------- * The inception
AVERAGE ANNUAL TOTAL RETURNS date of the
(for the periods ended December 31, 1999) Fund's Class
SINCE CLASS A, B and C
PAST 1 YEAR INCEPTION* shares is
Nvest Star Worldwide Fund: Class A 29.72% 15.39% December 29,
Nvest Star Worldwide Fund: Class B 31.62% 15.94% 1995.
Nvest Star Worldwide Fund: Class C 35.50% 16.28%
MSCI World Index 24.93% 19.52%
Morningstar World Stock Average 37.76% 18.62%
Lipper Global Average 36.08% 20.13%
- --------------------------------------------------------------------------------
For actual past expenses of Class A, B and C shares, see the section entitled
"Fund Fees & Expenses."
<PAGE>
[graphic omitted] Goals, Strategies & Risks
-------------------------
STAR WORLDWIDE FUND --
MORE ON INVESTMENT STRATEGIES
The Fund's portfolio is divided among three different subadvisers set forth
below. These subadvisers pursue the Fund's overall goal by employing the
strategies and techniques described below.
HARRIS ASSOCIATES -- U.S. SEGMENT
The U.S. segment of the Fund is subadvised by Harris Associates and will
primarily invest in common stock of large and mid-capitalization companies which
Harris Associates believes are trading at a substantial discount to the
company's "true business value." Harris Associates' value-oriented investment
philosophy is based on its belief that over time a stock's discounted market
price and its true business value will converge. Harris Associates believes that
this philosophy provides the best opportunity to achieve long-term capital
growth while also protecting from downside risk. It therefore uses this
philosophy to locate companies with the following characteristics, although not
all of the companies selected by Harris Associates will have these attributes:
x Positive free cash flow
x High level of insider ownership
x Favorable earnings growth potential
In making investment decisions, Harris Associates generally employs the
following methods:
o It uses a fundamental bottom-up investment approach, which means that it
focuses on individual companies rather than macroeconomic factors or specific
industries. Each company is analyzed on a case-by-case basis to select those
which meet Harris Associates' standards of quality and value.
o Once Harris Associates determines that a stock sells at a significant discount
to its true business value and has other attractive qualities such as a
positive free cash flow, it will consider that stock for purchase by analyzing
the quality and motivation of the company's management as well as the
company's market position within its industry.
o Investments are continuously monitored by both analysts and portfolio
managers. A senior committee sets specific "buy" and "sell" targets for each
company. Harris Associates will generally buy a stock when it sells for a
price below 60% of its true business value, and will generally sell a stock
when it approaches 90% of its true business value.
HARRIS ASSOCIATES -- INTERNATIONAL SEGMENT
In managing its international segment of the Fund, Harris Associates generally
employs the same screening techniques that it uses for its U.S. segment;
however, due to the inherent risks associated with investing in foreign
securities, Harris Associates further evaluates:
x The relative political and economic stability of the issuer's home country
x The ownership structure of the company
x The company's accounting practices
This segment of the Fund may invest in securities traded in both developed and
emerging markets. There are no limits to this segment's geographic asset
distribution, but to provide adequate diversification, this segment of the Fund
will generally be invested in at least five countries outside the United States.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
LOOMIS SAYLES
The segment of the Star Worldwide Fund managed by Loomis Sayles will invest
primarily in equity securities of companies organized or headquartered outside
of the United States. The segment will hold securities from at least 3 different
countries including those within emerging markets. The segment will focus on
securities with large market capitalization but may invest in securities with
any size capitalization. The securities selected by Loomis Sayles for the
segment typically have the following characteristics:
x Strong, competitive position as an industry leader
x Strong pricing power
x Strong distribution channels
x Improving business or financial fundamentals
In making investment decisions, Loomis Sayles employs the following methods:
o Loomis Sayles uses a bottom-up, fundamental research process to build the
segment's portfolio.
o It looks for growth-oriented stocks of well-managed companies that typically
have the characteristics listed above.
o In addition to its bottom-up approach to security selection, an overlay of
country and industry macro-economic data is used to provide guidelines for
portfolio weighting with a view towards minimizing portfolio risk.
o The strong Loomis Sayles research team is combined with a global network of
research contacts to provide a steady stream of information and ideas.
o Loomis Sayles will sell a position when the fundamental outlook is
deteriorating or when other more favorable opportunities arise.
o Loomis Sayles uses a "No-Walls Decision MakingSM" investment process, in which
the managers all meet in person to exchange ideas and make portfolio
decisions; each buy and sell decision is subject to intense scrutiny by the
entire team; and the skill and unique perspective of each manager on the team
is leveraged.
MONTGOMERY
Montgomery will invest at least 65% of its segment's assets in equity securities
of companies of any size located throughout the world. The segment invests in at
least three different countries, one of which may be the United States. Its
global equities investment strategy employs a bottom-up selection process
complemented by proprietary sector and country research. Montgomery's process is
distinguished by extensive use of primary (original) research as opposed to
secondary (broker) research and global sector specialization. The end result is
a global equity portfolio diversified across industries and countries, designed
to deliver consistent returns versus a designated benchmark. The securities
selected by Montgomery for the segment typically have the following
characteristics:
x Strong management with increased sales and earnings potential
x Under or reasonably valued relative to their long-term prospects
x Competitive advantage, innovative products or services or the
beneficiary from deregulation and privatization trends.
In making investment decisions, Montgomery employs the following methods:
o Primary (original) research is the foundation of Montgomery's investment
process and should be distinguished from secondary (broker) research. Its team
of global equity analysts' primary responsibilities are allocated on a global
sector basis. Sector analysis is bottom-up in nature and supports Montgomery's
specific security research.
o Montgomery's investment process begins with its original ideas. New ideas are
generated from both primary research and strategic universe screening with the
assistance of Montgomery's advanced information technology. Montgomery's goal
is to identify companies that are attractive on the basis of long-term
projected earnings growth, near-term earnings/business momentum, and
valuation.
o A formal process to evaluate the new ideas generated from sector-level
analysis and strategic universe screening results in a short list of potential
investments warranting further research. All potential investments are
subjected to rigorous fundamental analysis before a recommendation to buy is
made.
o At Montgomery, security selection is a result of a peer review process
conducted by sector specialists and senior portfolio management. The peer
review process encourages thorough research, accountability and articulation
of analysis. Value is added through earnings estimates that are different from
the analysts' consensus and analysts' insight to companies' ratings within
their peer groups.
o Investments are monitored continuously and are compared against Montgomery's
price objective and their respective peer groups, to identify potential
deterioration in any of the fundamental reasons for purchase.
o Specific factors that bring about a decision to sell in Montgomery's process
include but are not limited to: premium valuation, negative business momentum,
lack of management credibility, and accessibility and competitive force-out.
<PAGE>
[graphic omitted] 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)
ALL FUNDS
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Maximum sales charge (load) imposed
on purchases (as a percentage of
offering price)(1)(2) 5.75% None None
Maximum deferred sales charge (load)
(as a percentage of original purchase
price or redemption proceeds, as
applicable)(2) (3) 5.00% 1.00%
Redemption fees None* None* None*
(1) A reduced sales charge on Class A shares applies in some cases. See "Ways to
Reduce or Eliminate Sales Charges" within the section entitled "Fund
Services."
(2) Does not apply to reinvested distributions.
(3) A 1.00% contingent deferred sales charge applies with respect to certain
purchases of Class A shares greater than $1,000,000 redeemed within 1 year
after purchase, but not to any other purchases or redemptions of Class A
shares. See "How Sales Charges are Calculated" within the section entitled
"Fund Services."
* Generally, a transaction fee will be charged for expedited payment of
redemption proceeds such as by wire or overnight delivery.
<TABLE>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, as a percentage of averagec daily net assets)
<CAPTION>
STAR VALUE FUND STAR ADVISERS FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C>
Management fees 0.73% 0.73% 0.73% 1.04% 1.04% 1.04%
Distribution and/or service (12b-1) fees 0.25% 1.00%* 1.00%* 0.25% 1.00%* 1.00%*
Other expenses 0.35% 0.35% 0.35% 0.33% 0.33% 0.33%
Total annual fund operating expenses 1.33% 2.08% 2.08% 1.62% 2.37% 2.37%
STAR SMALL CAP FUND STAR WORLDWIDE FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
Management fees 1.05% 1.05% 1.05% 1.05% 1.05% 1.05%
Distribution and/or service (12b-1) fees 0.25% 1.00%* 1.00%* 0.25% 1.00% 1.00%*
Other expenses 0.76% 0.76% 0.76% 0.76% 0.76% 0.76%
Total annual fund operating expenses 2.06% 2.81% 2.81% 2.06% 2.81% 2.81%
* Because of the higher 12b-1 fees, long-term shareholders may pay more than the economic equivalent of
the maximum front-end sales charge permitted by rules of the National Association of Securities
Dealers, Inc.
</TABLE>
<PAGE>
FUND FEES & EXPENSES [graphic omitted]
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
o The Fund's operating expenses remain the same
Although your actual costs and returns may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
STAR VALUE FUND STAR ADVISERS FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
(1) (2) (1) (2) (1) (2) (1) (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 703 $ 713 $ 213 $ 313 $ 213 $ 732 $ 743 $ 243 $ 343 $ 243
3 years $ 975 $ 958 $ 658 $ 658 $ 658 $1,060 $1,048 $ 748 $ 748 $ 748
5 years $1,266 $1,329 $1,129 $1,129 $1,129 $1,412 $1,479 $1,279 $1,279 $1,279
10 years* $2,092 $2,235 $2,235 $2,429 $2,429 $2,397 $2,541 $2,541 $2,730 $2,730
<CAPTION>
STAR SMALL CAP FUND STAR WORLDWIDE FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
(1) (2) (1) (2) (1) (2) (1) (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 774 $ 788 $ 288 $ 388 $ 288 $ 774 $ 788 $ 288 $ 388 $ 288
3 years $1,189 $1,183 $ 883 $ 883 $ 883 $1,189 $1,183 $ 883 $ 883 $ 883
5 years $1,629 $1,702 $1,502 $1,502 $1,502 $1,629 $1,702 $1,502 $1,502 $1,502
10 years* $2,845 $2,989 $2,989 $3,171 $3,171 $2,845 $2,989 $2,989 $3,171 $3,171
(1) Assumes redemption of end of period.
(2) Assumes no redemption at end of period.
* Class B shares automatically convert to Class A shares after 8 years; therefore, Class B amounts are calculated using Class A
expenses in years 9 and 10.
</TABLE>
<PAGE>
MORE ABOUT RISK
The Funds have principal investment strategies that come with inherent risks.
The following is a list of risks to which the Funds may be subject by investing
in various types of securities or engaging in various practices.
MARKET RISK (All Funds) The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably, based upon change in a company's
financial condition as well as overall market and economic conditions IPO
securities tend to involve greater market risk than other equity securities due,
in part, to public perception and the lack of public information and trading
history.
RISK OF SMALL CAPITALIZATION COMPANIES (Star Advisers, Star Small Cap and Star
Worldwide Funds) These companies carry special risks, including narrower
markets, limited financial and management resources, less liquidity and greater
volatility than large company stocks.
MANAGEMENT RISK (All Funds) The risk that a strategy used by a Fund's portfolio
management may fail to produce the intended result.
CREDIT RISK (All Funds) The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to honor a
financial obligation which will be affected by changes to the financial
condition of a company as well as by changes to overall market and economic
conditions.
CURRENCY RISK (All Funds) The risk that fluctuations in the exchange rates
between the U.S. dollar and foreign currencies may negatively affect an
investment.
EMERGING MARKET RISK (Star Advisers, Star Small Cap and Star Worldwide Funds)
The risk associated with securities markets of smaller sizes or with short
operating histories. Emerging markets involve risks in addition to and greater
than those generally associated with investing in developed foreign markets. The
extent of economic development, political stability, market depth,
infrastructure and capitalization, and regulatory oversight in emerging market
economies is generally less than in more developed markets.
RISKS OF OPTIONS, FUTURES AND SWAP CONTRACTS (All Funds) These transactions are
subject to changes in the underlying securities on which such transactions are
based. It is important to note that even a small investment in these types of
derivative securities can have a significant impact on a Fund's exposure to the
stock market values, interest rates or currency exchange rate. These types of
transaction will be used primarily for hedging purposes.
LEVERAGE RISK (All Funds) The risk associated with securities or practices (e.g.
borrowing) that multiply small index or market movements into larger changes in
value. When a derivative security (a security whose value is based on another
security or index) is used as a hedge against an offsetting position that a Fund
also holds, any loss generated by the derivative security should be
substantially offset by gains on the hedged instrument, and vice versa. To the
extent that a Fund uses a derivative security for purposes other than as a
hedge, that Fund is directly exposed to the risks of that derivative security
and any loss generated by the derivative security will not be offset by a gain.
INTEREST RATE RISK (All 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 value.
INFORMATION RISK (All Funds) The risk that key information about a security is
inaccurate or unavailable. IPO securities involve greater information risk than
other equity securities due to the lack of public information.
OPPORTUNITY RISK (All Funds) The risk of missing out on an investment
opportunity because the assets necessary to take advantage of it are tied up in
less advantageous investments.
LIQUIDITY RISK (All Funds) The risk that certain securities may be difficult or
impossible to sell at the time and at the price that the seller would like. This
may result in a loss or may be costly to a Fund. These types of risks may apply
to restricted securities, Section 4(2) Commercial Paper, or Rule 144A
Securities.
CORRELATION RISK (All Funds) The risk that changes in the value of a hedging
instrument will not match those of the asset being hedged.
EXTENSION RISK (Star Advisers, Star Small Cap and Star Worldwide Funds) The risk
that an unexpected rise in interest rates will extend the life of the
mortgage-backed security beyond the expected prepayment time, typically reducing
the security's value.
VALUATION RISK (All Funds) The risk that a Fund has valued certain securities at
a higher price than it can sell them for.
PREPAYMENT RISK (Star Advisers, Star Small Cap and Star Worldwide Funds) The
risk that unanticipated prepayments may occur, reducing the value of mortgage-
or asset-backed securities, or real estate investment trusts.
POLITICAL RISK (All Funds) The risk of losses directly attributable to
government or political actions.
EURO CONVERSION (All Funds) Many European countries have adopted a single
European currency, the "euro." The consequences of this conversion for foreign
exchange rates, interest rates and the value of European securities are
presently unclear. Such consequences may adversely affect the value and/or
increase the volatility of securities held by a Fund.
<PAGE>
Management Team [graphic omitted]
---------------
MEET THE FUNDS' INVESTMENT ADVISER AND
SUBADVISERS
The Nvest Funds family includes 25 mutual funds with a total of over $8 billion
in assets under management as of December 31, 1999. The Nvest Funds are
distributed through Nvest Funds Distributor, L.P. (the "Distributor"). This
Prospectus covers Nvest Star Funds (the "Funds" or each a "Fund"), which along
with Nvest Stock Funds, Nvest Bond Funds, Kobrick Funds and Nvest State Tax-Free
Funds constitute the "Nvest Funds." Nvest Cash Management Trust Money Market
Series and Nvest Tax Exempt Money Market Trust constitute the "Money Market
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
Nvest Companies, L.P. ("Nvest Companies"), which is part of an affiliated group
including Nvest, L.P., a publicly-traded company listed on the New York Stock
Exchange (the "Exchange"). Nvest Companies' 18 principal subsidiary or
affiliated asset management firms, collectively, had $133 billion in assets
under management as of December 31, 1999. Nvest Management oversees, evaluates
and monitors the performance of each Fund and furnishes general business
management and administration to each Fund. Nvest Management, however, does not
determine what investments will be purchased by the Funds. The subadvisers
listed below make the investment decisions for their respective segment or
segments of the Funds.
The combined advisory and subadvisory fees paid by Star Small Cap, Star Advisers
and Star Worldwide and Star Value Funds in 1999, as a percentage of each Fund's
average daily net assets was 1.05%, 1.04%, 1.05% and 0.73%.
SUBADVISERS
HARRIS ASSOCIATES, located at Two North LaSalle Street, Chicago, Illinois 60602,
serves as subadviser to segments of the Star Advisers, Star Worldwide, Star
Small Cap and Star Value Funds. Harris Associates, a subsidiary of Nvest
Companies, manages over $12.6 billion in assets as of December 31, 1999, and,
together with its predecessor, has managed mutual funds since 1970. It also
manages investments for other mutual funds as well as assets of individuals,
trusts, retirement plans, endowments, foundations, and several private
partnerships.
JANUS, located at 100 Fillmore Street, Denver, Colorado 80206, serves as a
subadviser to a segment of the Star Advisers Fund. Janus has managed mutual
funds since 1970 and also advises individual, corporate, charitable and
retirement accounts. Kansas City Southern Industries Inc., ("KCSI") a publicly
traded holding company, owns approximately 82% of the outstanding voting stock
of Janus, indirectly through its wholly owned subsidiary, Stilwell Financial
Inc. Thomas H. Baily, President and Chairman of the Board of Janus, owns
approximately 12% of its voting stock and, by agreement with KCSI, selects a
majority of Janus' Board. KCSI has announced its intention to spin off its
financial services subsidiaries, which it expects to complete in the first half
of 2000.
KOBRICK, located at 101 Federal Street, Boston, Massachusetts 02110, serves as
subadviser to the Star Advisers Fund. Kobrick is a subsidiary of Nvest
Companies. Kobrick, the predecessor to which was formed in 1997, focuses
primarily on managing growth-oriented equity funds, including three mutual
funds.
LOOMIS SAYLES, located at One Financial Center, Boston, Massachusetts, 02111,
serves as subadviser to segments of the Star Advisers, Star Worldwide, Star
Small Cap, and Star Value Funds. Founded in 1926, Loomis Sayles is one of
America's oldest investment advisory firms with over $67 billion in assets under
management as of December 31, 1999. Loomis Sayles, a subsidiary of Nvest
Companies, is well known for its professional research staff, which is one of
the largest in the industry.
MONTGOMERY, located at 101 California Street, San Francisco, California 94111,
serves as subadviser to the Star Small Cap and Star Worldwide Funds. Montgomery
was formed in 1990 and advises institutional separate accounts as well as a
family of no-load mutual funds. Montgomery is a subsidiary of Commerzbank AG, a
German commercial bank.
RS INVESTMENT MANAGEMENT, located at 388 Market Street, San Francisco,
California 94111 (formerly, Robertson, Stephens & Company Investment Management,
L.P.), serves as subadviser to a segment of the Star Small Cap Fund. RS
Investment Management was formed in 1993 and provides investment advisory
services to both private and public investment funds. On February 26, 1999,
Robertson Stephens Investment Management Co. LLC purchased Robertson Stephens
Investment Management Co. Inc. and its subsidiary, RS Investment Management,
from BankAmerica Corporation. The Fund's Board of Trustees approved the
continuation of the Fund's arrangement with RS Investment Management following
consummation of the transaction.
<PAGE>
[graphic omitted] Management Team
---------------
MEET THE FUNDS' INVESTMENT ADVISER AND
SUBADVISERS
VAUGHAN, NELSON, SCARBOROUGH & MCCULLOUGH (VNSM), located at 6300 Chase Tower,
Houston, Texas 77002, serves as subadviser to a segment of the Star Value Fund.
VNSM is a subsidiary of Nvest Companies. Originally incorporated in 1970, VNSM
focuses primarily on managing equity and fixed-income funds for clients who
consist of foundations, university endowments and corporate retirement and
family/individual core funds. As of December 31, 1999, VNSM has approximately
$4.4 billion in assets under management.
WESTPEAK, located at 1011 Walnut Street, Boulder, Colorado 80302, serves as
subadviser to the Star Value Fund. Westpeak is a subsidiary of Nvest Companies.
Founded in 1991, Westpeak has approximately $10 billion in assets under
management as of December 31, 1999.
SUBADVISORY AGREEMENTS
Each Fund has received an exemptive order from the Securities and Exchange
Commission (the "SEC"), which 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, without shareholder
approval. The exemption also permits Nvest Management to amend or continue
existing subadvisory agreements when approved by the Fund's Board of Trustees.
Shareholders will be notified of any Subadviser changes.
PORTFOLIO TRADES
In placing portfolio trades, a Fund's subadviser may use brokerage firms that
market the Fund's shares or are affiliated with Nvest Companies, Nvest
Management or any of the subadvisers. In placing such trades the subadvisers
will seek to obtain the best combination of price and execution, which involves
a number of judgmental factors. Such portfolio trades are subject to applicable
regulatory restrictions and related procedures adopted by the Fund's Board of
Trustees.
<PAGE>
Management Team [graphic omitted]
---------------
MEET THE FUNDS' PORTFOLIO MANAGERS
STAR VALUE FUND
ROBERT M. LEVY
Robert Levy has co-managed the Harris Associates segment of Star Value Fund
since February 2000. Mr. Levy is Partner, President and Chief Executive
Officer of Harris Associates and he joined the company in 1985. Mr. Levy, a
Chartered Financial Analyst, received a B.A. from Vanderbilt University and
an M.B.A. from the Wharton School of Business, University of Pennsylvania and
has 23 years of investment experience.
FLOYD J. BELLMAN
Floyd Bellman has assisted in managing the Harris Associates segment of Star
Value Fund since February 2000. Mr. Bellman is a Portfolio Manager and Vice
President in charge of Harris Associates Investment Advisory Department. Mr.
Bellman, a Chartered Financial Analyst, received a B.B.A. from the University
of Wisconsin and has 19 years of investment experience. Mr. Bellman joined
Harris Associates in 1995.
JEFFREY W. WARDLOW
Jeffrey W. Wardlow has co-managed Star Value Fund since August 1998 and
managed the Loomis Sayles segment of Star Value Fund since May 2000. He also
manages the equity portion of Nvest Balanced Fund. Mr. Wardlow, Vice
President of Loomis Sayles, joined the company over 10 years ago. Mr. Wardlow
received both his B.B.A. and his M.B.A. from Michigan State University and
has over 17 years of investment experience.
MARGARET M. BUESCHER
Margaret M. Buescher has co-managed the VNSM segment of Star Value Fund since
February 2000. She also co-manages Nvest Equity Income Fund. Ms. Buescher,
Principal of VNSM, joined the company in 1994. From 1980 to 1994, she was a
Managing Director and Senior Portfolio Manager for the Texas Commerce
Investment Management Company. Ms. Buescher, a Chartered Financial Analyst,
received a B.A. from Vanderbilt University and has over 25 years of
investment experience.
JEAN MALO
Jean Malo has co-managed the VNSM segment of Star Value Fund since February
2000. He also co-manages Nvest Equity Income Fund. Mr. Malo is Partner,
Principal and Chief Investment Officer of VNSM. Previously, he was a Senior
Vice-President at Daniel Breen & Co., which was bought by VNSM in 1997. Mr.
Malo joined Daniel Breen & Co. in 1989. He is also a Chartered Financial
Analyst. Mr. Malo received his M.B.A. from ESSEC in Paris, France and has
over 22 years of investment experience.
GERALD H. SCRIVER
Gerald H. Scriver has managed the Westpeak segment of Star Value Fund since
February 2000. He also manages Nvest Growth and Income Fund and Nvest Capital
Growth Fund. Mr. Scriver is the founder, President and Chief Executive
Officer of Westpeak Investment Advisors. Mr. Scriver is a graduate of the
State University of N.Y. at Buffalo and has over 34 years of investment
experience.
STAR ADVISORS FUND
ROBERT J. SANBORN
Robert J. Sanborn has managed the Harris Associates segment of the Star
Advisers Fund since June 1997 and Harris Associates domestic segment of the
Star Worldwide Fund since its inception in December 1995. He also managed the
Oakmark Fund since its inception in August 1991 to March 2000. Mr. Sanborn,
Vice President of Harris Associates, joined the firm in 1988. He is also a
Chartered Financial Analyst. He received an M.B.A. from the University of
Chicago, his B.A. from Dartmouth College, and has 16 years of investment
experience.
<PAGE>
[graphic omitted] Management Team
WARREN B. LAMMERT
Warren B. Lammert has served as portfolio manager for the Janus segment of
the Star Advisers Fund since its inception. Mr. Lammert, Vice President of
Janus, joined the firm in 1987. He has earned the right to use the Chartered
Financial Analyst designation. He also is portfolio manager of Janus Mercury
Fund. He holds his B.A. from Yale University and his M.S. from the London
School of Economics and has 13 years of investment experience.
FREDERICK R. KOBRICK
Frederick R. Kobrick has managed the Kobrick segment of the Star Advisers Fund
since August 23, 1999. Mr. Kobrick also manages Kobrick Capital Fund (since its
inception on December 31, 1997) and Kobrick Emerging Growth Fund (from its
inception on December 31, 1997 until February 1, 1999 and returned as manager on
April 9, 1999). For the 12-year period immediately prior to becoming President
of the predecessor to Kobrick Funds LLC in 1997, he was an equity portfolio
manager at State Street Research & Management Company, where he had served as
Senior Vice President since 1989 and as a member of the firm's Equity Investment
Committee since 1985. Mr. Kobrick, a Chartered Financial Analyst, received an
M.B.A. from Harvard Business School, a B.A. from Boston University and has over
29 years of investment experience.
JOSEPH R. GATZ
Joseph R. Gatz has served as lead portfolio manager of the Loomis Sayles
segment of Star Advisers Fund since January 2000. Mr. Gatz, Vice President of
Loomis Sayles, joined the firm in 1999. He is also co-portfolio manager of
Loomis Sayles Mid-Cap Value Fund and lead portfolio manager of Loomis Sayles
Small Cap Value Fund. Prior to joining Loomis Sayles, Mr. Gatz was a
portfolio manager at Banc One Investment Advisers Corporation and certain of
its corporate predecessors since 1993. Mr. Gatz, a Chartered Financial
Analyst, received a M.B.A. from Indiana University, a B.A. from Michigan
State University and has 15 years of investment experience.
DAWN ALSTON PAIGE
Dawn Alston Paige has served as co-portfolio manager of the Loomis Sayles
segment of Star Advisers Fund since January 2000. Ms. Alston Paige, Vice
President of Loomis Sayles, joined the firm in 1992. She is also co-portfolio
manager of Loomis Sayles Mid-Cap Value Fund and co-portfolio manager of
Loomis Sayles Small Cap Value Fund. Ms. Alston Paige, a Chartered Financial
Analyst, received a M.B.A. from University of Michigan, a B.S. from Virginia
Commonwealth University and has eight years of investment experience.
DANIEL G. THELEN
Daniel G. Thelen has served as co-portfolio manager of the Loomis Sayles
segment of Star Advisers Fund since April 2000. Mr. Thelen, Vice President of
Loomis Sayles, joined the firm in 1996. He is also co-portfolio manager of
Loomis Sayles Small Cap Value Fund. Prior to joining Loomis Sayles, Mr.
Thelen was a manager at PricewaterhouseCoopers LLC. Mr. Thelen, a Chartered
Financial Analyst, received a M.B.A. and B.A. from Michigan State University,
and has 10 years of investment experience.
STAR SMALL CAP FUND
JAMES P. BENSON
James P. Benson has served as co-manager of the Harris Associates segment of the
Star Small Cap Fund since November 23, 1999. Mr Benson joined Harris Associates
in 1997 as an investment analyst. Prior to joining Harris, he served as an
executive vice president and director of equity research for Ryan Beck & Co. Mr
Benson holds an M.M. in Finance from Northwestern University and a B.A. in
economics and Computer Sciences from Westminster College. He is a Chartered
Financial Analyst with 19 years of investment experience.
STEVEN J. REID
Steven J. Reid has served as portfolio manager of the Harris Associates
segment of the Star Small Cap Fund since its inception. Mr. Reid has also
managed the Oakmark Small Cap Fund since its inception in November 1995. Mr.
Reid, Vice President of Harris Associates, joined the firm in 1980. Mr. Reid
is a Chartered Financial Analyst. He holds a B.A. from Roosevelt University.
He has 13 years of investment experience.
CHRISTOPHER R. ELY
Christopher R. Ely has co-managed the Loomis Sayles segment of the Star Small
Cap Fund since its inception in December 1996. Mr. Ely, Vice President of
Loomis Sayles, joined the firm in 1996. He also co-manages the Loomis Sayles
Small Cap Growth Fund. Prior to joining Loomis Sayles, Mr. Ely was Senior
Vice President and Portfolio Manager at Keystone Investment Management
Company, Inc. He holds a B.A. from Brown University and an M.B.A. from Babson
College. He has 21 years of investment management experience.
<PAGE>
Management Team [graphic omitted]
PHILIP C. FINE
Dr. Philip C. Fine has co-managed the Loomis Sayles segment of the Star Small
Cap Fund since its inception. Dr. Fine, Vice President of Loomis Sayles,
joined the firm in 1996. He also co-manages the Loomis Sayles Small Cap
Growth Fund. Prior to joining Loomis Sayles, Dr. Fine was a Vice President
and Portfolio Manager at Keystone Investment Management Company, Inc. He
received an A.B. and a Ph.D. from Harvard University. He has 12 years of
investment management experience.
DAVID L. SMITH
David L. Smith has co-managed the Loomis Sayles segment of the Star Small Cap
Fund since its inception. Mr. Smith, Vice President of Loomis Sayles, joined
the firm in 1996. He also co-manages the Loomis Sayles Small Cap Growth Fund.
Prior to joining Loomis Sayles, Mr. Smith was a Vice President and Portfolio
Manager at Keystone Investment Management Company, Inc. He holds an M.B.A.
from Cornell University and a B.A. from the University of Massachusetts at
Amherst. He has 14 years of investment management experience.
KATHRYN PETERS
Kathryn Peters has served as portfolio manager of Montgomery's segment of the
Star Small Cap Fund since March 1999. Ms. Peters, Portfolio Manager and
Principal of Montgomery, joined the firm in January 1995. She also manages
the Montgomery U.S. Emerging Growth Fund. Prior to joining Montgomery she was
an associate in the investment banking division of Donaldson, Lufkin &
Jenrette. Ms. Peters holds a B.A. from Boston College and an M.B.A. from
Harvard University. She has 13 years of investment management experience.
JOHN L. WALLACE
John L. Wallace has served the RS Investment Management segment of the Star
Small Cap Fund as portfolio manager from that Fund's inception until October
1997 and as co-portfolio manager thereafter. He also serves as portfolio manager
to the RS MidCap Opportunities Fund as well as the RS Diversified Growth Fund.
Mr. Wallace, Vice President of RS Investment Management, joined the firm in
1995. Prior to joining RS Investment Management, Mr. Wallace managed over $4
billion in assets at Oppenheimer as portfolio manager of Main Street Income &
Growth Fund and Total Return Fund. He holds a B.A. from the University of Idaho
and an M.B.A. from Pace University. He has 19 years of investment experience.
JOHN H. SEABERN
John H. Seabern has served as co-portfolio manager for the RS Investment
Management segment of the Star Small Cap Fund since October 1997. Mr.
Seabern, Vice President of RS Investment Management, joined the firm in 1993.
He is also co-manager of the RS Diversified Growth Fund. Prior to joining RS
Investment Management, he served as a performance analyst at Duncan-Hurst
Capital Management. Mr. Seabern holds a B.S. degree in finance from the
University of Colorado and has 9 years of investment management experience.
STAR WORLDWIDE FUND
ROBERT J. SANBORN
Robert J. Sanborn has managed the Harris Associates U.S. segment of the Star
Worldwide Fund since its inception in December 1995 and Harris Associates
segment of the Star Advisers Fund since June 1997. He also managed the
Oakmark Fund since its inception in August 1991 to March 2000. Mr. Sanborn, a
Vice President of Harris Associates, joined the firm in 1988. He is also a
Chartered Financial Analyst. He received an M.B.A. from the University of
Chicago and a B.A. from Dartmouth College, and has 16 years of investment
experience.
DAVID G. HERRO
David G. Herro has co-managed the Harris Associates international segment of
the Star Worldwide Fund since the Fund's inception. He also co-manages the
Oakmark International Fund. Mr. Herro, Portfolio Manager at Harris
Associates, joined the firm in 1992. He is a Chartered Financial Analyst and
holds an M.A. and a B.S. from the University of Wisconsin. He has 14 years of
investment experience.
MICHAEL J. WELSH
Michael J. Welsh has co-managed the Harris Associates international segment
of the Star Worldwide Fund since the Fund's inception. He also co-manages the
Oakmark International Fund. Mr. Welsh, Vice President of Harris Associates,
joined the firm in 1992. He is a Chartered Financial Analyst and a Certified
Public Accountant. He holds an M.M. from Northwestern University and a B.S.
from the University of Kansas, and has 15 years of investment management
experience.
<PAGE>
[graphic omitted] Management Team
ALEXANDER MUROMCEW
Alexander Muromcew serves as co-portfolio manager for the Loomis Sayles segment
of the Star Worldwide Fund (concentrating on Asian markets), Nvest International
Equity Fund, the International Equities sector of Loomis Sayles Worldwide Fund,
the Loomis Sayles International Equity Fund and the Loomis Sayles Emerging
Markets Fund. Prior to joining Loomis Sayles in 1999, Mr. Muromcew was a
portfolio manager at Nicholas Applegate Capital Management since 1996. Prior to
1996, Mr. Muromcew held positions with Jardine Fleming Securities in Japan,
Emerging Markets Investors Corporation and Teton Partners L.P. He received an
M.B.A. from Stanford University, a B.A. from Dartmouth College and has over 10
years of investment experience.
JOHN TRIBOLET
John Tribolet serves as co-portfolio manager for the Loomis Sayles segment of
Star Worldwide Fund (concentrating on European markets), Nvest International
Equity Fund, the International Equities sector of Loomis Sayles Worldwide Fund,
the Loomis Sayles International Equity Fund and the Loomis Sayles Emerging
Markets Fund. Prior to joining Loomis Sayles in 1999, Mr. Tribolet was a
portfolio manager for European Equities at Nicholas Applegate Capital Management
since 1997. From 1995 to 1997 he was a full time MBA student at the University
of Chicago. Prior to 1995, he spent three years in the investment banking
industry, most recently at Paine Webber Inc. He received his B.S. from Columbia
University and has over 8 years of investment experience.
ESWAR MENON
Eswar Menon serves as co-portfolio manager for the Loomis Sayles segment of the
Star Worldwide Fund (concentrating on Emerging markets), Nvest International
Equity Fund, the International Equities sector of Loomis Sayles Worldwide Fund,
the Loomis Sayles International Equity Fund and the Loomis Sayles Emerging
Markets Fund. Prior to joining Loomis Sayles in 1999, Mr. Menon was the
Portfolio Manager for Emerging Countries at Nicholas Applegate Capital
Management since 1995. Prior to his position at Nicholas Applegate Capital
Management, he spent five years with Koeneman Capital Management and Integrated
Device Technology. Mr. Menon received an M.B.A. from the University of Chicago,
an M.S. from the University of California, a B.S. from Indian Institute of
Technology, Madras, India and has over 10 years of investment experience.
OSCAR CASTRO
Oscar Castro has co-managed the Montgomery segment of the Star Worldwide Fund
since August 1998. Mr. Castro, Senior Portfolio Manager of Montgomery, has
been employed by the firm since 1993. He also co-manages the Montgomery
Global Opportunities Fund. He is a graduate of Simon Bolivar University and
holds an M.B.A. from Drexel University and has 17 years of investment
experience.
JOHN BOICH
John Boich has co-managed the Montgomery segment of the Star Worldwide Fund
since August 1998. Mr. Boich, Senior Portfolio Manager of Montgomery, joined
the firm in 1993. He also co-manages the Montgomery Global Opportunities
Fund. He is a graduate of the University of Colorado and has 15 years of
investment experience.
<PAGE>
Fund Services [graphic omitted]
-------------
INVESTING IN THE FUNDS
CHOOSING A SHARE CLASS
Each Fund offers Class A, Class B and Class C shares to the public. Each class
has different costs associated with buying, selling and holding Fund shares,
which allow you to choose the class that best meets your needs. Which class you
choose will depend upon the size of your investment and how long you intend to
hold your shares. Class B shares, Class C shares and certain shareholder
features may not be available to you if you hold your shares in a street name
account. Your financial representative can help you decide which class of shares
is most appropriate for you.
CLASS A SHARES
o You pay a sales charge when you buy Fund shares. There are several ways to
reduce this charge. See the section entitled "Ways to Reduce or Eliminate
Sales Charges."
o You pay lower annual expenses than Class B and Class C shares, giving you the
potential for higher returns per share.
o You do not pay a sales charge on orders of $1 million or more, but you may pay
a charge on redemption if you redeem these shares within 1 year of purchase.
CLASS B SHARES
o You do not pay a sales charge when you buy Fund shares. All of your money goes
to work for you right away.
o You pay higher annual expenses than Class A shares.
o You will pay a charge on redemptions if you sell your shares within 6 years of
purchase, as described in the section "How Sales Charges are Calculated."
o Your Class B shares will automatically convert into Class A shares after 8
years, which reduces your annual expenses.
o We will not accept an order for $1 million or more of Class B shares. You may,
however, purchase $1 million or more of Class A shares, which will have no
sales charge as well as lower annual expenses. You may pay a charge on
redemption if you redeem these shares within 1 year of purchase.
CLASS C SHARES
o You do not pay a sales charge when you buy Fund shares. All of your money goes
to work for you right away.
o You pay higher annual expenses than Class A shares.
o You will pay a charge on redemptions if you sell your shares within 1 year of
purchase.
o Your Class C shares will not automatically convert into Class A shares. If you
hold your shares for longer than 8 years, you'll pay higher expenses than
other classes.
o We will not accept an order for $1 million or more of Class C shares. You may,
however, purchase $1 million or more of Class A shares, which will have no
sales charge as well as lower annual expenses. You may pay a charge on
redemption if you redeem these shares within 1 year of purchase.
For actual past expenses of Class A, B and C shares, see the section entitled
"Fund Fees & Expenses" in this prospectus.
CERTIFICATES
Certificates will not be automatically issued for any class of shares. Upon
written request, you may receive certificates for Class A shares only.
<PAGE>
[graphic omitted] Fund Services
-------------
HOW SALES CHARGES ARE CALCULATED
CLASS A SHARES
The price that you pay when you buy Class A shares (the "offering price") is
their net asset value plus a sales charge (sometimes called a "front-end sales
charge") which varies depending upon the size of your purchase.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------- * For purchases of Class A shares of the
CLASS A SALES CHARGES Funds of $1 million or more or purchases by
ALL FUNDS the Retirement Plans (Plans under Sections
YOUR INVESTMENT AS A % OF OFFERING PRICE AS A % OF YOUR INVESTMENT 401(a) or 401(k) of the Internal Revenue
Less than $50,000 5.75% 6.10% Code with investments of $1 million or more
$50,000 - $99,999 4.50% 4.71% or that have 100 or more eligible
$100,000 - $249,999 3.50% 3.63% employees), there is no front-end sales
$250,000 - $499,999 2.50% 2.56% charge, but a contingent deferred sales
$500,000 - $999,999 2.00% 2.04% charge of 1.00% may apply to redemptions of
$1,000,000 or more* 0.00% 0.00% your shares within one year of the purchase
- ------------------------------------------------------------------------------- date. See "Ways to Reduce or Eliminate
Sales Charges."
</TABLE>
CLASS B SHARES
The offering price of Class B shares is their net asset value, without a
front-end sales charge. However, there is a contingent deferred sales charge
("CDSC") on shares that you sell within 6 years of buying them. The amount of
the CDSC, if any, declines each year that you own your shares. The holding
period for purposes of timing the conversion to Class A shares and determining
the CDSC will continue to run after an exchange into Class B shares of another
Nvest Fund. The CDSC equals the following percentages of the dollar amounts
subject to the charge:
- --------------------------------------------------------------------------------
CLASS B CONTINGENT DEFERRED SALES CHARGES
YEAR SINCE PURCHASE CDSC ON SHARES BEING SOLD
1st 5.00%
2nd 4.00%
3rd 3.00%
4th 3.00%
5th 2.00%
6th 1.00%
thereafter 0.00%
- --------------------------------------------------------------------------------
CLASS C SHARES
The offering price of Class C shares is their net asset value, without a
front-end sales charge. However, Class C shares are subject to a CDSC of 1.00%
on redemptions made within one year of the date of purchase. The holding period
for determining the CDSC will continue to run after an exchange to Class C
shares of another Nvest Fund.
- ------------------------------------------------------------------------------
CLASS C CONTINGENT DEFERRED SALES CHARGES
YEAR SINCE PURCHASE CDSC ON SHARES BEING SOLD
1st 1.00%
thereafter 0.00%
- ------------------------------------------------------------------------------
HOW THE CDSC IS APPLIED TO YOUR SHARES
The CDSC is a sales charge you pay when you redeem certain Fund shares. The
CDSC:
o is calculated based on the number of shares you are selling;
o is based on either your original purchase price or the then-current net asset
value of the shares being sold, whichever is lower;
o is deducted from the proceeds of the redemption, not from the amount remaining
in your account; and
o for year one applies to redemptions through the day one year after the date on
which your purchase was accepted, and so on for subsequent years.
A CDSC WILL NOT BE CHARGED ON:
o increases in net asset value above the purchase price; or
o shares you acquired by reinvesting your dividends or capital gains
distributions.
To keep your CDSC as low as possible, each time that you place a request to sell
shares we will first sell any shares in your account that carry no CDSC. If
there are not enough of these shares available to meet your request, we will
sell the shares with the lowest CDSC.
EXCHANGES INTO SHARES OF A MONEY MARKET FUND
If you exchange shares of a Fund into shares of the Money Market Funds, the
holding period for purposes of determining the CDSC and conversion 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.
<PAGE>
Fund Services [graphic omitted]
-------------
WAYS TO REDUCE OR ELIMINATE SALES CHARGES
CLASS A SHARES
REDUCING SALES CHARGES
There are several ways you can lower your sales charge utilizing the chart on
the previous page, including:
o LETTER OF INTENT -- allows you to purchase Class A shares of any Nvest Fund
over a 13-month period but pay sales charges as if you had purchased all
shares at once. This program can save you money if you plan to invest $50,000
or more over 13 months. Purchases in Class B and Class C shares may be used
toward meeting the letter of intent.
o COMBINING ACCOUNTS -- allows you to combine shares of multiple Nvest Funds and
classes for purposes of calculating your sales charge. You may combine your
purchases with those of qualified accounts of a spouse, parents, children,
siblings, grandparents, grandchildren, in-laws, individual fiduciary accounts,
sole proprietorships, single trust estates and any other group of individuals
acceptable to the Distributor.
These privileges do not apply to the Money Market Funds unless shares are
purchased through an exchange from another Nvest Fund.
ELIMINATING SALES CHARGES AND CDSC
Class A shares may be offered without front-end sales charges or a CDSC to the
following individuals and institutions:
o Any government entity that is prohibited from paying a sales charge or
commission to purchase mutual fund shares;
o Selling brokers, sales representatives or other intermediaries;
o Fund trustees and other individuals who are affiliated with any Nvest Fund or
the Money Market Fund (this also applies to any spouse, parents, children,
siblings, grandparents, grandchildren and in-laws of those mentioned);
o Participants in certain Retirement Plans with at least 100 eligible employees
(one-year CDSC may apply);
o Non-discretionary and non-retirement accounts of bank trust departments or
trust companies only if they principally engage in banking or trust
activities; and
o Investments of $25,000 or more in the Nvest Funds or Money Market Funds by
clients of an adviser or subadviser to any Nvest Fund or Money Market Fund.
REPURCHASING FUND SHARES
You may apply proceeds from redeeming Class A shares of any Nvest Fund WITHOUT
PAYING A SALES CHARGE to repurchase Class A shares of the same or any other
Nvest Fund. To qualify, you must reinvest some or all of the proceeds within 120
days after your redemption and notify Nvest Funds or your financial
representative at the time of reinvestment that you are taking advantage of this
privilege. You may reinvest your proceeds either by returning the redemption
check or by sending a new check for some or all of the redemption amount. Please
note: For federal income tax purposes, A REDEMPTION IS A SALE THAT INVOLVES TAX
CONSEQUENCES, EVEN IF THE PROCEEDS ARE LATER REINVESTED. Please consult your tax
adviser for how a redemption would affect you.
If you repurchase Class A shares of $1 million or more within 30 days after you
redeem such shares, the Distributor will rebate the amount of the CDSC charged
on the redemption.
CLASS A, B OR C SHARES
ELIMINATING THE CDSC
As long as we are notified at the time you sell, the CDSC for any share class
may generally be eliminated in the following cases:
o to make distributions from a retirement plan (a plan termination or total plan
redemption may incur a CDSC);
o to make payments through a systematic withdrawal plan; or
o due to shareholder death or disability.
If you think you may be eligible for a sales charge elimination or reduction,
contact your financial representative or Nvest Funds. Check the Statement of
Additional Information for details.
<PAGE>
[graphic omitted] Fund Services
-------------
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 Act $2,500 $100 $100
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
- --------------------------------------------------------------------------------
* 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.
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.
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.
By using these customer service options, you may:
o purchase, exchange or redeem shares in your existing accounts
(certain restrictions may apply);
o review your account balance, recent transactions, Fund prices and
recent performance;
o order duplicate account statements; and
o obtain tax information.
Please see the following pages for other ways to buy, exchange or sell your
shares.
<PAGE>
Fund Services [graphic omitted]
-------------
BUYING SHARES
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
THROUGH YOUR INVESTMENT DEALER
o Call your investment dealer for o Call your investment dealer for
information. information.
BY MAIL
[graphic omitted]
o Make out a check in U.S. dollars for o Make out a check in U.S. dollars for
the investment amount, payable to the investment amount, payable to
"Nvest Funds." Third party and "Nvest Funds." Third party and
"starter" checks will generally "starter" checks will generally
not be accepted. not be accepted.
o Mail the check with your completed o Fill out the detachable investment
application to Nvest Funds, P.O. Box slip from an account statement. If
8551, Boston, MA 02266-8551. no slip is available, include with
the check a letter specifying the
Fund name, your class of shares,
your account number and the
registered account name(s). To make
investing even easier, you can order
more investment slips by calling
800-225-5478.
BY EXCHANGE
[graphic omitted]
o The exchange must be for a minimum o The exchange must be for a minimum
of $1,000 or for all of your shares. of $1,000 or for all of your shares.
o Obtain a current prospectus for the o Call your investment dealer or Nvest
Fund into which you are exchanging Funds at 800-225-5478 or visit
by calling your investment dealer or nvestfunds.com to request an exchange.
Nvest Funds at 800-225-5478.
o See the section entitled "Exchanging
o Call your investment dealer or Nvest Shares" for more details.
Funds to request an exchange.
o See the section entitled "Exchanging
Shares" for more details.
BY WIRE
[graphic omitted]
o Call Nvest Funds at 800-225-5478 to o Visit nvestfunds.com to add shares
obtain an account number and wire to your account by wire.
transfer instructions. Your bank may
charge you for such a transfer. o Instruct your bank to transfer funds
to State Street Bank & Trust
Company, ABA# 011000028, DDA#
99011538.
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
[graphic omitted]
o Indicate on your application that o Please call Nvest Funds at
you would like to begin an automatic 800-225-5478 for a Service Options
investment plan through Investment Form. A signature guarantee may be
Builder and the amount of the required to add this privilege.
monthly investment ($100 minimum).
o See the section entitled "Additional
o Send a check marked "Void" or a Investor Services."
deposit slip from your bank account
along with your application.
THROUGH AUTOMATED CLEARING HOUSE (ACH)
[graphic omitted]
o Ask your bank or credit union o Call Nvest Funds at 800-225-5478 or
whether it is a member of the ACH visit nvestfunds.com to add shares
system. to your account through ACH.
o Complete the "Telephone Withdrawal o If you have not signed up for the
and Exchange" and "Bank Information" ACH system, please call Nvest Funds
sections on your account for a Service Options Form. A
application. signature guarantee may be required
to add this privilege.
o Mail your completed application to
Nvest Funds, P.O. Box 8551, Boston,
MA 02266-8551.
<PAGE>
[graphic omitted] 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
[graphic omitted]
o Write a letter to request a redemption specifying the name of the Fund, the
class of shares, your account number, the exact registered account name(s),
the number of shares or the dollar amount to be redeemed and the method by
which you wish to receive your proceeds. Additional materials may be required.
See the section entitled "Selling Shares in Writing."
o The request must be signed by all of the owners of the shares including the
capacity in which they are signing, if appropriate.
o Mail your request to Nvest Funds, P.O. Box 8551, Boston, MA 02266-8551.
o Your proceeds (less any applicable CDSC) will be delivered by the method
chosen in your letter. If you choose to have your proceeds delivered by mail,
they will generally be mailed to you on the business day after the request is
received. You may also choose to redeem by wire or through ACH (see below).
BY EXCHANGE
[graphic omitted]
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
[graphic omitted]
o Fill out the "Telephone Withdrawal and Exchange" and "Bank Information"
sections on your account application.
o Call Nvest Funds at 800-225-5478; visit nvestfunds.com 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")
[graphic omitted]
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 or visit nvestfunds.com 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
[graphic omitted]
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
[graphic omitted]
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.
<PAGE>
Fund Services [graphic omitted]
-------------
SELLING SHARES IN WRITING
If you wish to redeem your shares in writing, all owners of the shares must sign
the redemption request in the exact names in which the shares are registered and
indicate any special capacity in which they are signing. In certain situations,
you will be required to make your request to sell shares in writing. In these
instances, a letter of instruction signed by the authorized owner is necessary.
In certain situations we also may require a signature guarantee or additional
documentation.
A signature guarantee protects you against fraudulent orders and is necessary
if:
o your address of record has been changed within the past 30 days;
o you are selling more than $100,000 worth of shares and you are requesting the
proceeds by check; or
o a proceeds check for any amount is mailed to an address other than the address
of record or not payable to the registered owner(s).
A notary public CANNOT provide a signature guarantee. A signature guarantee can
be obtained from one of the following sources:
o a financial representative or securities dealer;
o a federal savings bank, cooperative or other type of bank;
o a savings and loan or other thrift institution;
o a credit union; or
o a securities exchange or clearing agency.
The following table 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 signatures on the letter must include all
PROPRIETORSHIP, UGMA/UTMA persons authorized to sign, including title, if
(MINOR ACCOUNTS) applicable.
o Signature guarantee, if applicable (see above).
CORPORATE OR ASSOCIATION o The signatures on the letter must include all
ACCOUNTS persons authorized to sign, including title.
OWNERS OR TRUSTEES OF TRUST o The signature on the letter must include all
ACCOUNTS trustees authorized to sign, including title.
o If the names of the trustees are not
registered on the account, please provide a
copy of the trust document certified within
the past 60 days.
o Signature guarantee, if applicable (see above).
JOINT TENANCY WHOSE o The signatures on the letter must include all
CO-TENANTS ARE DECEASED surviving tenants of the account.
o Copy of the death certificate.
o Signature guarantee if proceeds check is
issued to other than the surviving tenants.
POWER OF ATTORNEY (POA) o The signatures on the letter must include the
attorney-in-fact, indicating such title.
o A signature guarantee.
o Certified copy of the POA document stating it
is still in full force and effect, specifying
the exact Fund and account number, and
certified within 30 days of receipt of
instructions.*
QUALIFIED RETIREMENT BENEFIT o The signature on the letter must include all
PLANS (EXCEPT NVEST FUNDS signatures of those authorized to sign,
PROTOTYPE DOCUMENTS) including title.
o Signature guarantee, if applicable (see
above).
EXECUTORS OF ESTATES, o The signature on the letter must include those
ADMINISTRATORS, GUARDIANS, authorized to sign, including capacity.
CONSERVATORS
o A signature guarantee.
o Certified copy of court document where signer
derives authority, e.g.: Letters of
Administration, Conservatorship, Letters
Testamentary.*
INDIVIDUAL RETIREMENT o Additional documentation and distribution
ACCOUNTS (IRAS) forms are required.
* Certification may be made on court documents by the court, usually certified
by the clerk of the court. POA certification may be made by a commercial bank,
broker/member of a domestic stock exchange or a practicing attorney.
<PAGE>
[graphic omitted] Fund Services
-------------
EXCHANGING SHARES
In general, you may exchange shares of your Fund for shares of the same class of
another Nvest Fund without paying a sales charge or a CDSC (see the sections
entitled "Buying Shares" and "Selling Shares"). 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 Nvest Fund or Money Market 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. For federal income tax purposes
an exchange of Fund shares for shares of another Nvest Fund or Money Market Fund
is treated as a sale on which a gain or loss may be recognized. Please refer to
the Statement of Additional Information (the "SAI") for more detailed
information on exchanging Fund shares.
RESTRICTIONS ON BUYING, SELLING AND EXCHANGING SHARES
PURCHASE AND EXCHANGE RESTRICTIONS
Although the Funds do not anticipate doing so, they reserve the right to suspend
or change the terms of purchasing or exchanging shares. The Funds and the
Distributor reserve the right to refuse or limit any purchase or exchange order
by a particular purchaser (or group of related purchasers) if the transaction is
deemed harmful to the best interest of the Fund's other shareholders or would
disrupt the management of the Fund. The Funds and the Distributor reserve the
right to restrict purchases and exchanges for the accounts of "market timers" by
limiting the transaction to a maximum dollar amount. An account will be deemed
to be one of a market timer if: (i) more than two exchange purchases of a given
Fund are made for the account in a calendar quarter or (ii) the account makes
one or more exchange purchases of a given Fund in a calendar quarter in an
aggregate amount in excess of 1% of the Fund's total net assets.
RESTRICTION SITUATION
The Fund may suspend the right of redemption or o When the New York Stock
postpone payment for more than 7 days: Exchange is closed (other
than a weekend/holiday)
o During an emergency
o Any other period permitted
by the SEC
The Fund reserves the right to suspend account o With a notice of a dispute
services or refuse transaction requests: between registered owners
o With suspicion/evidence of
a fraudulent act
The Fund may pay the redemption price in whole o When it is detrimental for
or part by a distribution in kind of readily a Fund to make cash
marketable securities in lieu of cash or may payments as determined in
take up to 7 days to pay a redemption request in the sole discretion of the
order to raise capital: adviser or subadviser
The Fund may close your account and send you the o When the Fund account
proceeds. You will have 60 days after being falls below a set minimum
notified of the Fund's intention to close your (currently $1,000 as set
account to increase the account to the set by the Fund's Board of
minimum. This does not apply to certain qualified Trustees)
retirement plans, automatic investment plans or
accounts that have fallen below the minimum
solely because of fluctuations in a Fund's net
asset value per share:
The Fund may withhold redemption proceeds until o When redemptions are made
the check or funds have cleared: within 10 calendar days of
purchase by check or ACH
of the shares being
redeemed
Telephone redemptions are not accepted for tax-qualified retirement accounts.
If you hold certificates representing your shares, they must be sent with your
request for it to be honored.
The Funds recommend that certificates be sent by registered mail.
<PAGE>
Fund Services [graphic omitted]
-------------
HOW FUND SHARES ARE PRICED
"Net asset value" is the price of one share of a Fund without a sales charge,
and is calculated each business day using this formula:
TOTAL MARKET VALUE OF SECURITIES + CASH AND
NET ASSET VALUE = OTHER ASSETS - LIABILITES
-------------------------------------------
NUMBER OF OUTSTANDING SHARES
The net asset value is determined according to this schedule:
o A share's net asset value of Fund shares 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.
o The price you pay for purchasing, redeeming or exchanging a share will be
based upon the net asset value next calculated after your order is received
"in good order" by State Street Bank and Trust Company, the Fund's custodian
(plus or minus applicable sales charges as described earlier in this
Prospectus).
o Requests received by the Distributor after the Exchange closes will be
processed based upon the net asset value determined at the close of regular
trading on the next day that the Exchange is open, with the exception that
those orders received by your investment dealer before the close of the
Exchange and received by the Distributor before 5:00 p.m. Eastern time* on the
same day will be based on the net asset value determined on that day.
o A Fund heavily invested in foreign securities may have net asset value changes
on days when you cannot buy or sell its shares.
* Under limited circumstances, the Distributor may enter into a contractual
agreement where it may accept orders after 5:00 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."
Generally, Fund securities are valued as follows:
o EQUITY SECURITIES -- most recent sales or quoted bid price as provided by a
pricing service.
o DEBT SECURITIES (OTHER THAN SHORT-TERM OBLIGATIONS) -- based upon pricing
service valuations.
o SHORT-TERM OBLIGATIONS (REMAINING MATURITY OF LESS THAN 60 DAYS) -- amortized
cost (which approximates market value).
o SECURITIES TRADED ON FOREIGN EXCHANGES -- most recent sale/bid price as
provided by a pricing service, unless an occurrence after the close of the
exchange will materially affect its value. In that case, it is given fair
value as determined by or under the direction of the Funds' Board of Trustees
at the close of regular trading on the Exchange.
o OPTIONS -- last sale price, or if not available, last offering price.
o FUTURES -- unrealized gain or loss on the contract using current settlement
price. When a settlement price is not used, futures contracts will be valued
at their fair value as determined by or under the direction of the Funds'
Board of Trustees.
o ALL OTHER SECURITIES -- fair market value as determined by the adviser or
subadviser of a Fund under the direction of the Funds' Board of Trustees.
The effect of fair value pricing as described above for "Securities traded on
foreign exchanges" and "All other securities" is that securities may not be
priced on the basis of quotations from the primary market in which they are
traded but rather, may be priced by another method that the Funds' Board of
Trustees believes accurately reflects fair value.
<PAGE>
[graphic omitted] Fund Services
-------------
DIVIDENDS AND DISTRIBUTIONS
The Funds generally distribute most or all of their net investment income (other
than capital gains) in the form of dividends. Each Fund expects to distribute
dividends on an annual basis. Each Fund distributes all net realized long- and
short-term capital gains annually, after applying any available capital loss
carryovers. 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 in shares of the same class of another Nvest Fund registered in your
name. Certain investment minimums and restrictions may apply. For more
information about this program, see the section entitled "Additional
Investor Services."
o Receive distributions from dividends and interest in cash while
reinvesting distributions from capital gains in additional shares of the
same class of the Fund or in the same class of another 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
Fund, you will receive a Form 1099 to help you report the prior calendar year's
distributions on your federal income tax return. Be sure to keep the 1099 as a
permanent record. A fee may be charged for any duplicate information requested.
TAX CONSEQUENCES
Each Fund intends to meet all requirements of the Internal Revenue Code
necessary to qualify as a "regulated investment company" and thus does not
expect to pay any federal income tax on income and capital gains distributed to
shareholders.
Fund distributions paid to you either in cash or reinvested in additional shares
are generally taxable to you either as ordinary income or as capital gains.
Distributions derived from short-term capital gains or investment income are
generally taxable at ordinary income rates. If you are a corporation investing
in a Fund, a portion of these dividends may qualify for the dividends-received
deduction provided that you meet certain holding period requirements.
Distributions of gains from investments that a Fund owned for more than one year
that are designated by a Fund as capital gain dividends will generally be
taxable to a shareholder receiving such distributions as long-term capital gain,
regardless of how long the shareholder has held Fund shares.
An exchange of shares for shares of another Nvest Fund or Money Market Fund is
treated as a sale, and any resulting gain or loss may be subject to federal
income tax. If you purchase shares of a Fund shortly before it declares a
capital gain distribution or a dividend, a portion of the purchase price may be
returned to you as a taxable distribution.
You should consult your tax adviser about any federal, state and local taxes
that may apply to the distributions you receive. Shareholders of Funds investing
in foreign securities should also consult their tax advisers about consequences
of their investments under foreign laws.
<PAGE>
Fund Services [graphic omitted]
-------------
COMPENSATION TO SECURITIES DEALERS
As part of their business strategies, the Funds pay securities dealers that sell
a Fund's shares. This compensation originates from two sources: sales charges
(front-end or deferred) and 12b-1 fees (comprising the annual service and/or
distribution fees of a plan adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940). The sales charges are detailed in the section entitled
"How Sales Charges Are Calculated." Each class of Fund shares pays an annual
service fee of 0.25% of its average daily net assets. In addition to this
service fee, Class B shares pay an annual distribution fee of 0.75% of their
average daily net assets for 8 years (at which time they automatically convert
into Class A shares). Class C shares are subject to a distribution fee of 0.75%
of their average daily net assets. Generally, the 12b-1 fees are paid to
securities dealers on a quarterly basis. The Distributor retains the first year
of such fees for Class C shares. Because these distribution fees are paid out of
the Fund's assets on an ongoing basis, over time these fees for Class B and
Class C shares will increase the cost of your investment and may cost you more
than paying the front-end sales charge on Class A shares.
The Distributor may, at its expense, pay concessions in addition to the payments
described above to dealers which satisfy certain criteria established from time
to time by the Distributor relating to increasing net sales of shares of Nvest
Funds over prior periods, and certain other factors.
See the SAI for more details.
<PAGE>
[graphic omitted] Fund Services
-------------
ADDITIONAL INVESTOR SERVICES
RETIREMENT PLANS
Nvest Funds offer 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 the
Money Market Funds, subject to the eligibility requirements of that other Fund
and to state securities law requirements. Shares will be purchased at the
selected Fund's net asset value without a sales charge or CDSC on the dividend
record date. Before establishing a Dividend Diversification Program into any
other Nvest Fund or 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
other Nvest Funds or Money Market Funds. There is no fee for exchanges made
under this plan, but there may be a sales charge in certain circumstances.
Please refer to the SAI for more information on the Automatic Exchange Plan.
SYSTEMATIC WITHDRAWAL PLAN
This plan allows you to redeem shares and receive payments from your Fund on a
regular schedule. Redemption of shares that are part of the Systematic
Withdrawal Plan are not subject to a CDSC. However, the amount or percentage
that you specify in the plan may not exceed, on an annualized basis, 10% of the
value of your Fund account based upon the value of your Fund account on the day
you establish your plan. To establish a Systematic Withdrawal Plan, please refer
to the section entitled "Selling Shares."
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 your current account balance, 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 on line to
purchase, exchange or redeem shares in any of 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.
<PAGE>
[graphic omitted] Fund Performance
The financial highlights tables are intended to help you understand each Fund's
financial performance since they began operations. Certain information reflects
financial results for a single Fund share. The total returns in the tables
represent the rate that an investor would have earned (or lost) on an investment
in the Funds (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, are
incorporated by reference in the SAI, which is available upon request.
<TABLE>
<CAPTION>
NVEST STAR VALUE FUND
CLASS A CLASS B
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Year $ 7.27 $ 8.78 $ 9.60 $ 10.14 $ 9.68 $ 7.23 $ 8.70 $ 9.47 $ 9.91 $ 9.38
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment Income
(Loss) 0.10 0.06 0.03 0.03(b) 0.03 0.05 0.01 (0.05) (0.05)(b) (0.04)
Net Realized and
Unrealized Gain
(Loss) on
Investments 2.21 2.12 1.96 0.59 (0.71) 2.18 2.07 1.92 0.58 (0.68)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations 2.31 2.18 1.99 0.62 (0.68) 2.23 2.08 1.87 0.53 (0.72)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From
Net Investment
Income (0.09) (0.06) (0.02) (0.02) (0.02) (0.05) (0.01) 0.00 0.00 0.00
Distributions From
Net Realized
Capital Gains (0.71) (1.30) (1.43) (1.06) (1.38) (0.71) (1.30) (1.43) (1.06) (1.38)
Distributions in
Excess of Net
Realized Gains 0.00 0.00 0.00 0.00 (0.15) 0.00 0.00 0.00 0.00 (0.15)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions (0.80) (1.36) (1.45) (1.08) (1.55) (0.76) (1.31) (1.43) (1.06) (1.53)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value,
End of the Year $ 8.78 $ 9.60 $ 10.14 $ 9.68 $ 7.45 $ 8.70 $ 9.47 $ 9.91 $ 9.38 $ 7.13
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN (%)(a) 32.3 26.3 21.0 7.1 (6.9) 31.3 25.4 20.0 6.3 (7.6)
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to Average
Net Assets (%) 1.37 1.31 1.25 1.26 1.33 2.12 2.06 2.00 2.01 2.08
Ratio of Net
Investment
Income to Average
Net Assets (%) 1.22 0.78 0.28 0.29 0.32 0.47 0.03 (0.47) (0.46) (0.43)
Portfolio Turnover
Rate (%) 52 64 55 75 70 52 64 55 75 70
Net Assets, End of
the Year (000) $241,038 $297,581 $348,988 $317,902 $216,740 $ 27,941 $ 48,210 $ 80,008 $ 86,243 $ 59,497
<CAPTION>
CLASS C
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $ 7.23 $ 8.70 $ 9.46 $ 9.92 $ 9.39
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.05 0.01 (0.05)(b) (0.05)(b) (0.04)
Net Realized and Unrealized Gain (Loss) on Investments 2.18 2.06 1.94 0.58 (0.68)
-------- -------- -------- -------- --------
Total From Investment Operations 2.23 2.07 1.89 0.53 (0.72)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.05) (0.01) 0.00 0.00 0.00
Distributions From Net Realized Capital Gains (0.71) (1.30) (1.43) (1.06) (1.38)
Distributions in Excess of Net Realized Gains 0.00 0.00 0.00 0.00 (0.15)
-------- -------- -------- -------- --------
Total Distributions (0.76) (1.31) (1.43) (1.06) (1.53)
-------- -------- -------- -------- --------
Net Asset Value, End of the Year $ 8.70 $ 9.46 $ 9.92 $ 9.39 $ 7.14
======== ======== ======== ======== ========
TOTAL RETURN (%)(a) 31.3 25.2 20.2 6.3 (7.6)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) 2.12 2.06 2.00 2.01 2.08
Ratio of Net Investment Income to Average Net Assets (%) 0.47 0.03 (0.47) (0.46) (0.43)
Portfolio Turnover Rate (%) 52 64 55 75 70
Net Assets, End of the Year (000) $ 1,224 $ 3,735 $ 6,527 $ 6,445 $ 3,398
(a) A sales charge for Class A shares or a CDSC for Class B and C shares is not reflected in total return calculations.
(b) Per share net investment income (loss) has been calculated using the average shares outstanding during the year.
</TABLE>
<PAGE>
<TABLE>
[graphic omitted] Fund Performance
----------------
NVEST STAR ADVISERS FUND
<CAPTION>
CLASS A CLASS B
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Year $ 13.25 $ 16.78 $ 18.18 $ 18.17 $ 20.02 $ 13.23 $ 16.63 $ 17.86 $ 17.63 $ 19.23
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income (Loss) 0.00 (0.06)(b) (0.02)(b) (0.05)(b) (0.12)(b) 0.00 (0.20)(b) (0.17)(b) (0.18)(b) (0.27)(b)
Net Realized and
Unrealized Gain on
Investments 4.52 3.17 3.62 3.28 8.91 4.39 3.14 3.55 3.16 8.49
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from Investment
Operations 4.52 3.11 3.60 3.23 8.79 4.39 2.94 3.38 2.98 8.22
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions from
Net Investment Incom 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from
Net Realized
Capital Gains (0.99) (1.71) (3.61) (1.38) (4.31) (0.99) (1.71) (3.61) (1.38) (4.31)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions (0.99) (1.71) (3.61) (1.38) (4.31) (0.99) (1.71) (3.61) (1.38) (4.31)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value,
End of Year $ 16.78 $ 18.18 $ 18.17 $ 20.02 $ 24.50 $ 16.63 $ 17.86 $ 17.63 $ 19.23 $ 23.14
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN (%)(a) 34.4 19.0 20.2 19.3 46.4 33.4 18.1 19.3 18.4 45.4
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to Average
Net Assets (%) 1.82 1.68 1.66 1.62 1.62 2.57 2.43 2.41 2.37 2.37
Ratio of Net
Investment Income
to Average Net
Assets (%) (0.33) (0.36) (0.14) (0.24) (0.54) (1.08) (1.11) (0.89) (0.99) (1.29)
Portfolio Turnover
Rate (%) 142 127 168 101 186 142 127 168 101 186
Net Assets, End of
Year (000) $223,596 $348,573 $416,938 $443,165 $619,184 $220,017 $366,314 $462,034 $508,937 $742,908
<CAPTION>
CLASS C
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $ 13.24 $ 16.65 $ 17.87 $ 17.64 $ 19.25
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.00 (0.20)(b) (0.17)(b) (0.18)(b) (0.27)(b)
Net Realized and Unrealized Gain on Investments 3.16 8.49 4.40 3.13 3.55 3.17 8.49
-------- -------- -------- -------- --------
Total from Investment Operations 4.40 2.93 3.38 2.99 8.22
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Distributions from Net Investment Income 0.00 0.00 0.00 0.00 0.00
Distributions from Net Realized Capital Gains (0.99) (1.71) (3.61) (1.38) (4.31)
-------- -------- -------- -------- --------
Total Distributions (0.99) (1.71) (3.61) (1.38) (4.31)
-------- -------- -------- -------- --------
Net Asset Value, End of Year $ 16.65 $ 17.87 $ 17.64 $ 19.25 $ 23.16
======== ======== ======== ======== ========
TOTAL RETURN (%)(a) 33.4 18.0 19.3 18.5 45.3
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) 2.57 2.43 2.41 2.37 2.37
Ratio of Net Investment Income to Average Net Assets (%) (1.08) (1.11) (0.89) (0.99) (1.29)
Portfolio Turnover Rate (%) 142 127 168 101 186
Net Assets, End of Year (000) $ 45,672 $ 80,312 $ 94,412 $ 97,849 $139,710
(a) A sales charge for Class A shares or a CDSC for Class B and C shares is not reflected in total return calculations. Periods of
less than one year are not annualized.
(b) Per share net investment loss has been calculated using the average shares outstanding during the year.
</TABLE>
<PAGE>
<TABLE>
[graphic omitted] Fund Performance
----------------
NVEST STAR SMALL CAP FUND
<CAPTION>
CLASS A CLASS B CLASS C
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1998 1999 1997 1998 1999 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Year (a) $ 12.50 $ 15.37 $ 15.66 $ 12.50 $ 15.26 $ 15.43 $ 12.50 $ 15.26 $ 15.43
------- ------- ------- ------- ------- -------- ------- ------- -------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS
Net Investment Income (Loss) (b) (0.20) (0.23) (0.27) (0.30) (0.33) (0.39) (0.30) (0.33) (0.39)
Net Realized and Unrealized Gain on
Investments 3.55 0.54 10.22 3.54 0.52 10.00 3.54 0.52 10.00
------- ------- ------- ------- ------- -------- ------- ------- -------
Total from Investment Operations 3.35 0.31 9.95 3.24 0.19 9.61 3.24 0.19 9.61
------- ------- ------- ------- ------- -------- ------- ------- -------
LESS DISTRIBUTIONS
Distributions from Net Realized
Capital Gains (0.48) (0.02) (2.19) (0.48) (0.02) (2.19) (0.48) (0.02) (2.19)
------- ------- ------- ------- ------- -------- ------- ------- -------
Total Distributions (0.48) (0.02) (2.19) (0.48) (0.02) (2.19) (0.48) (0.02) (2.19)
------- ------- ------- ------- ------- -------- ------- ------- -------
Net Asset Value, End of Year $ 15.37 $ 15.66 $ 23.42 $ 15.26 $ 15.43 $ 22.85 $ 15.26 $ 15.43 $ 22.85
======= ======= ======= ======= ======= ======== ======= ======= =======
TOTAL RETURN (%)(c) 27.0 2.1 65.4 26.1 1.3 64.1 26.1 1.3 64.1
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 2.20 2.07 2.06 2.95 2.82 2.81 2.95 2.82 2.81
Ratio of Net Investment Income
(Loss) to Average Net Assets (%) (1.44) (1.52) (1.54) (2.19) (2.27) (2.29) (2.19) (2.27) (2.29)
Portfolio Turnover Rate (%) 140 182 263 140 182 263 140 182 263
Net Assets, End of Year (000) $52,066 $56,161 $84,725 $52,616 $61,409 $102,029 $13,970 $15,412 $26,027
(a) Commencement of operations December 31, 1996.
(b) Per share net investment loss has been calculated using the average shares outstanding during the year.
(c) A sales charge for Class A shares or a CDSC for Class B and C shares is not reflected in total return calculations.
</TABLE>
<PAGE>
<TABLE>
[graphic omitted] Fund Performance
----------------
NVEST STAR WORLDWIDE FUND
<CAPTION>
CLASS A CLASS B
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1996 1997 1998 1999 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year (a) $ 12.50 $ 14.40 $ 15.46 $ 16.08 $ 12.50 $ 14.30 $ 15.23 $ 15.73
------- -------- -------- -------- -------- -------- -------- --------
Income from Investment Operations
Net Investment Income (Loss) (b) (0.03) (0.02) 0.01 (0.07) (0.12) (0.14) (0.11) (0.20)
Net Realized and Unrealized Gain
(Loss) on Investments 2.11 1.88 0.61 5.98 2.10 1.87 0.61 5.82
------- -------- -------- -------- -------- -------- -------- --------
Total from Investment Operations 2.08 1.86 0.62 5.91 1.98 1.73 0.50 5.62
------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
Distributions from Net Realized
Capital Gains (0.18) (0.76) 0.00 (2.09) (0.18) (0.76) 0.00 (2.09)
Distributions from Paid-in Capital 0.00 (0.04) 0.00 0.00 0.00 (0.04) 0.00 0.00
-------- -------- -------- -------- -------- -------- --------
Total Distributions (0.18) (0.80) 0.00 (2.09) (0.18) (0.80) 0.00 (2.09)
-------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of Year $ 14.40 $ 15.46 $ 16.08 $ 19.90 $ 14.30 $ 15.23 $ 15.73 $ 19.26
======= ======== ======== ======== ======== ======== ======== ========
Total Return (%)(c) 16.7 12.7 4.0 37.6 15.9 11.9 3.3 36.6
Ratios/Supplemental Data
Ratio of Operating Expenses
to Average Net Assets (%) 2.58 2.07 2.09 2.06 3.33 2.82 2.84 2.81
Ratio of Net Investment Income
(Loss) to Average Net Assets (%) (0.21) (0.12) 0.03 (0.42) (0.96) (0.87) (0.72) (1.17)
Portfolio Turnover Rate (%) 57 80 84 91 57 80 84 91
Net Assets, End of Year (000) $68,509 $118,381 $106,763 $126,415 $ 65,367 $123,467 $116,305 $141,338
<CAPTION>
CLASS C
YEAR ENDED DECEMBER 31,
1996 1997 1998 1999
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year (a) $ 12.50 $ 14.31 $ 15.24 $ 15.75
-------- ------- ------- -------
Income from Investment Operations
Net Investment Income (Loss) (b) (0.12) (0.13) (0.11) (0.21)
Net Realized and Unrealized Gain (Loss) on Investments 2.11 1.86 0.62 5.82
-------- ------- ------- -------
Total from Investment Operations 1.99 1.73 0.51 5.61
-------- ------- ------- -------
Less Distributions
Distributions from Net Realized Capital Gains (0.18) (0.76) 0.00 (2.09)
Distributions from Paid-in Capital 0.00 (0.04) 0.00 0.00
-------- ------- ------- -------
Total Distributions (0.18) (0.80) 0.00 (2.09)
-------- ------- ------- -------
Net Asset Value, End of Year $ 14.31 $ 15.24 $ 15.75 $ 19.27
======== ======= ======= =======
Total Return (%)(c) 15.9 11.8 3.3 36.5
Ratios/Supplemental Data
Ratio of Operating Expenses to Average Net Assets (%) 3.33 2.82 2.84 2.81
Ratio of Net Investment Income (Loss) to Average Net
Assets (%) (0.96) (0.87) (0.72) (1.17)
Portfolio Turnover Rate (%) 57 80 84 91
Net Assets, End of Year (000) $ 17,980 $26,137 $23,016 $28,703
(a) The Fund commenced operations on December 29, 1995.
(b) Per Share net investment income (loss) has been calculated using the average shares outstanding during the year.
(c) A sales charge for Class A shares or a CDSC for Class B and C shares is not reflected in total return calculations.
</TABLE>
<PAGE>
GLOSSARY OF TERMS
BID PRICE -- The price a prospective buyer is ready to pay. This term is used by
traders who maintain firm bid and offer prices in a given security by standing
ready to buy or sell security units at publicly quoted prices.
BOTTOM-UP ANALYSIS -- The search for outstanding performance of individual
stocks before considering the impact of economic trends. Such companies may be
identified from research reports, stock screens or personal knowledge of the
products and services.
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
S&P, Moody's or Fitch Investor Services, Inc. ("Fitch"). Bonds with a credit
rating of BBB or higher by S&P, Baa or higher by Moody's or BBB by Fitch are
generally considered investment grade.
DERIVATIVE -- A financial instrument whose value and performance are based on
the value and performance of another security or financial instrument.
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 companies or
industries to reduce the risk if an individual company or one sector of the
market suffers losses.
DIVIDEND YIELD -- The current or estimated annual dividend divided by the market
price per share of a security.
DURATION -- A measure of how much a bond's price fluctuates with changes in
comparable interest rates.
EARNINGS GROWTH -- A pattern of increasing rate of growth in earnings per share
from one period to another, which usually causes a stock's price to rise.
FUNDAMENTAL ANALYSIS -- An analysis of the balance sheet and income statements
of a company in order to forecast its future stock price movements. Fundamental
analysis considers past records of assets, earnings, sales, products, management
and markets in predicting future trends in these indicators of a company's
success or failure. By appraising a company's prospects, analysts using such an
approach assess whether a particular stock or group of stocks is undervalued or
overvalued at its current market price.
GROWTH INVESTING -- An investment style that emphasizes companies with strong
earnings growth. Growth investing is generally considered more aggressive than
"value" investing.
INCOME DISTRIBUTIONS -- Payments to 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.
MARKET CAPITALIZATION -- Market price multiplied by number of shares
outstanding. Large capitalization companies generally have over $5 billion in
market capitalization; medium cap companies between $1.5 billion and $5 billion;
and small cap companies less than $1.5 billion. These capitalizations figures
may vary depending upon the index being used and/or the guidelines used by the
portfolio manager.
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.
PRICE-TO-BOOK VALUE RATIO -- Current market price of a stock divided by its book
value, or net asset value.
PRICE-TO-EARNINGS RATIO -- Current market price of a stock divided by its
earnings per share. Also known as the "multiple," the price-to-earnings ratio
gives investors an idea of how much they are paying for a company's earning
power and is a useful tool for evaluating the costs of different securities.
Some firms use the inverse ratio for this calculation (i.e. earnings-to-price
ratio).
QUALITATIVE ANALYSIS -- An analysis of the qualities possessed by a company,
including its management, products and competitive positions, to help determine
if the company can execute its strategy.
RETURN ON EQUITY -- The amount, expressed as a percentage, earned on a company's
common stock investment for a given period. It is calculated by dividing common
stock equity (net worth) at the beginning of the accounting period into net
income for the period after preferred stock dividends but before common stock
dividends. This tells common shareholders how effectively their money is being
employed.
RULE 144A SECURITIES -- Rule 144A securities are privately offered securities
that can be resold only to a certain qualified institutional buyers. Rule 144A
securities are treated as illiquid, unless a manager has determined, under
guidelines established by a Fund's trustees, that a particular issue of Rule
144A securities is liquid.
TARGET PRICE -- Price that an investor is hoping a stock he or she has just
bought will rise to within a specified period of time. An investor may buy XYZ
at $20, with a target price of $40 in one year's time, for instance.
TECHNICAL ANALYSIS -- The research into the demand and supply for securities,
options, mutual funds and commodities based on trading volume and price studies.
Technical analysis uses charts or computer programs to identify and project
price trends in a market, security, mutual fund or futures contract.
TOP-DOWN APPROACH -- The method in which an investor first looks at trends in
the general economy, and next selects attractive industries and then companies
that should benefit from those trends.
TOTAL RETURN -- The change in value of an investment in a Fund over a specific
time period expressed as a percentage. Total returns assume all earnings are
reinvested in additional shares of a Fund.
VALUE INVESTING -- A relatively conservative investment approach that focuses on
companies that may be temporarily out of favor or whose earnings or assets are
not fully reflected in their stock prices. Value stocks will tend to have a
lower price-to-earnings ratio than growth stocks.
VOLATILITY -- The general variability of a portfolio's value resulting from
price fluctuations of its investments. In most cases, the more diversified a
portfolio is, the less volatile it will be.
YIELD -- The rate at which a Fund earns income, expressed as a percentage.
Mutual fund yield calculations are standardized, based upon a formula developed
by the SEC.
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.
<PAGE>
NOTES --
<PAGE>
NVEST FUNDS
STAR FUNDS
Nvest Star Value Fund
Nvest Star Advisers Fund
Nvest Star Small Cap Fund
Nvest Star Worldwide Fund
If you would like more information about the
Funds, the following documents are available free
upon request:
ANNUAL AND SEMIANNUAL REPORTS -- Provide
additional information about each Fund's
investments. Each report includes a discussion of
the market conditions and investment strategies
that significantly affected the Fund's performance
during its last fiscal year. 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 (SAI) --
Provides more detailed information about the
Funds, has been filed with the Securities and
Exchange Commission and is incorporated into this
Prospectus by reference.
TO ORDER A FREE COPY OF A FUND'S ANNUAL OR
SEMIANNUAL REPORT OR ITS SAI, CONTACT YOUR
FINANCIAL REPRESENTATIVE, OR THE FUNDS AT:
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 Funds' reports and SAIs at the
Public Reference Room of the Securities and
Exchange Commission 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. 811-4323)
XR51-0500
<PAGE>
NVESTFUNDS(SM)
Where The Best Minds Meet (R)
- --------------------------------------------------------------------------------
Nvest
STAR FUNDS -- CLASS Y SHARES
[graphic omitted]
- --------------------------------------------------------------------------------
LARGE-CAP EQUITY
Nvest Star Value Fund
ALL-CAP EQUITY
Nvest Star Advisers Fund
SMALL-CAP EQUITY
Nvest Star Small Cap Fund
GLOBAL EQUITY
Nvest Star Worldwide Fund
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved any Fund's shares or
determined whether this Prospectus is accurate or complete. Anyone who tells you
otherwise is committing a crime.
For general information on the Funds or any of their services and for assistance
in opening an account, contact your financial representative or call Nvest
Funds.
PROSPECTUS
May 1, 2000
WHAT'S INSIDE
Goals, Strategies & Risks
[graphic omitted] Page 1
- --------------------------------------------------------------------------------
Fund Fees & Expenses
[graphic omitted] Page 17
- --------------------------------------------------------------------------------
Management Team
[graphic omitted] Page 20
- --------------------------------------------------------------------------------
Fund Services
[graphic omitted] Page 26
- --------------------------------------------------------------------------------
Fund Performance
[graphic omitted] Page 34
- --------------------------------------------------------------------------------
Nvest Funds
399 Boylston Street, Boston, Massachusetts 02116
800-225-5478
www.nvestfunds.com
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GOALS, STRATEGIES & RISKS
- --------------------------------------------------------------------------------
Nvest Star Value Fund ............................................... 1
Nvest Star Advisers Fund ............................................ 5
Nvest Star Small Cap Fund ........................................... 9
Nvest Star Worldwide Fund ........................................... 13
- --------------------------------------------------------------------------------
FUND FEES & EXPENSES
- --------------------------------------------------------------------------------
Fund Fees & Expenses ................................................ 17
- --------------------------------------------------------------------------------
MORE ABOUT RISK
- --------------------------------------------------------------------------------
More About Risk ..................................................... 19
- --------------------------------------------------------------------------------
MANAGEMENT TEAM
- --------------------------------------------------------------------------------
Meet the Funds' Investment Advisers and Subadvisers ................. 20
Meet the Funds' Portfolio Managers .................................. 22
- --------------------------------------------------------------------------------
FUND SERVICES
- --------------------------------------------------------------------------------
It's Easy to Open an Account ........................................ 26
Buying Shares ....................................................... 27
Selling Shares ...................................................... 28
Selling Shares in Writing ........................................... 29
Exchanging Shares ................................................... 30
Restrictions on Buying, Selling and Exchanging Shares.................30
How Fund Shares Are Priced .......................................... 31
Dividends and Distributions ......................................... 32
Tax Consequences .................................................... 32
Compensation to Securities Dealers .................................. 33
- --------------------------------------------------------------------------------
FUND PERFORMANCE
- --------------------------------------------------------------------------------
Nvest Star Value Fund ............................................... 34
Nvest Star Advisers Fund ............................................ 35
Nvest Star Small Cap Fund .......................................... 36
Nvest Star Worldwide Fund ........................................... 37
Glossary of Terms ................................................... 38
If you have any questions about any of the terms used in this Prospectus, please
refer to the "Glossary of Terms."
To learn more about the possible risks of investing in a Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Funds may engage. Please read this section carefully
before you invest.
Fund shares are not bank deposits and are not guaranteed, endorsed or insured by
the Federal Deposit Insurance Corporation or any other government agency, and
are subject to investment risks, including possible loss of the principal
invested.
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- ----------------------------
NVEST STAR VALUE FUND Stability Income Growth
(formerly Nvest Value Fund) High X
--------- ------ ------
ADVISER: Nvest Funds Management, L.P. Mod. X
("Nvest Management") --------- ------ ------
SUBADVISER: Harris Associates L.P. Low X
("Harris Associates")
Loomis, Sayles & Company, L.P. TICKER SYMBOL: CLASS Y
("Loomis Sayles") -------
Vaughan, Nelson, Scarborough NEVYX
& McCullough, L.P. ("VNSM")
Westpeak Investment
Advisors, L.P. ("Westpeak")
CATEGORY: Large-Cap Equity
INVESTMENT GOAL
The Fund seeks a reasonable long_term investment return from a combination of
market appreciation and dividend income from equity securities.
PRINCIPAL INVESTMENT STRATEGIES
Nvest Management believes the Star Concept -- the Star Funds' multi_manager
approach to equity investing, which combines the varied styles of multiple
subadvisers in selecting securities for each Fund's four segments -- offers
uncommon diversification and a different investment opportunity than funds
managed by a single adviser using a single style. Nvest Management believes that
having several subadvisers with varying and successful management styles may
increase the likelihood that the Fund may produce better returns for its
shareholders, with less variability of return and less risk of persistent
underperformance than a fund managed by a single adviser.
Under normal market conditions, the Fund will invest substantially all of its
assets in equity securities. The Fund primarily invests in common stock of mid-
and large capitalization companies of various industries. The companies the Fund
invests in are value-oriented according to one of more of the following
measures: price-to-earnings ratio, return on equity, dividend yield,
price-to-book value ratio, or price-to-sales ratio.
Nvest Management allocates capital invested in the Fund equally among the four
subadvisers set forth above. Each subadviser manages its segment of the Fund's
assets in accordance with its distinct investment style and strategy. Although
the Fund primarily invests in mid-and large capitalization companies of various
industries, it may also:
o Hold securities of foreign issuers traded over the counter or on foreign
exchanges,
o Purchase U.S. government securities, certificates of deposit, commercial
paper, and/or high quality debt securities or hold cash for temporary
defensive purposes in response to adverse market, economic or political
conditions. These investments may prevent the Fund from achieving its goal.
o For more detailed information on each subadviser's investment strategies,
please refer to the section entitled "Star Value Fund -- More On Investment
Strategies."
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in value or periods of
below-average performance in a given stock or in the stock market as a whole.
Value stocks present the risk that they may fall out of favor with investors
and underperform growth stocks during given periods.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic
and information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Star Value Fund by showing changes in the Fund's performance from year
to year and by showing how the Fund's average annual returns for one-year, five-
year and since-inception periods compare with those of a broad measure of market
performance and those of indices of funds with similar objectives. The Fund's
past performance does not necessarily indicate how it will perform in the
future. The Fund assumed a multi-manager structure and its current subadvisers
assumed that function on February 28, 2000. This chart and table reflect results
achieved by the previous subadviser under a single-manager structure for periods
prior to February 28, 2000.
The bar chart shows the Fund's total returns for Class Y shares for each
calendar year since it first offered Class Y shares. The Class Y returns may be
generally higher than the returns for the Class A, B and C shares because of the
sales charges and higher expenses of those classes.
1995 32.75%
1996 26.43%
1997 21.34%
1998 7.39%
1999 -6.72%
/\ Highest Quarterly Return: Fourth Quarter 1998, up 17.62%
\/ Lowest Quarterly Return: Third Quarter 1998, down 15.09%
The table below shows the Fund's average annual total returns for the one-year,
five-year and since-inception periods compared to those of the Russell 1000
Value Index, an unmanaged subset of stocks from the larger Russell 3000 Index,
selected for their greater value orientation. The returns are also compared to
the Morningstar Large-Cap Value and Lipper Multi-Cap Value Averages, each an
average of the total returns of all mutual funds with an investment style
similar to that of the Fund as calculated by Morningstar, Inc. and Lipper, Inc.
The Fund previously compared its returns to the broad Lipper category in which
the Fund was categorized. In 1999, Lipper Inc. narrowed their existing
categories and additional categories and the Fund falls within Lipper Multi-Cap
Value Average, one of the newly created categories. You may not invest directly
in an index. The Fund's total returns reflect the expenses of the Fund's Class Y
shares. The Russell 1000 Value Index returns have not been adjusted for ongoing
management, distribution and operating expenses applicable to mutual fund
investments. The Morningstar Large-Cap Value Average and the Lipper Multi-Cap
Value Average returns have been adjusted for these expenses.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999) SINCE CLASS
PAST 1 YEAR PAST 5 YEARS INCEPTION
<S> <C> <C> <C>
Nvest Star Value Fund: Class Y (inception 3/31/94) -6.72% 15.32% 13.66%
Russell 1000 Value Index 7.35% 23.07% 20.11%
Morningstar Large-Cap Value Average 6.59% 19.31% 17.26%
Lipper Multi-Cap Value Average 7.73% 18.47% 16.41%
- -------------------------------------------------------------------------------------------------------
For actual past expenses of Class Y shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
[graphic omitted] Goals, Strategies & Risks
-------------------------
STAR VALUE FUND --
MORE ON INVESTMENT STRATEGIES
The Fund's portfolio is divided among three different subadvisers set forth
below. These subadvisers pursue the Fund's overall goal by employing the
strategies and techniques described below.
HARRIS ASSOCIATES
The segment of the Fund managed by Harris Associates will primarily invest in
common stock of mid- and large capitalization companies which Harris Associates
believes are trading at a substantial discount to the company's "true business
value." Harris Associates' value-oriented investment philosophy is based upon
its belief that over time a stock's discounted market price and its true
business value will converge. Harris Associates believes that this philosophy
provides the best opportunity to achieve long-term capital growth while also
protecting from downside risk. It therefore uses this philosophy to locate
companies with the following characteristics, although not all of the companies
selected by Harris Associates will have these attributes:
o Positive free cash flow
o High level of insider ownership
o Favorable earnings growth potential
In making investment decisions for constructing a concentrated portfolio, Harris
Associates generally employs the following methods:
o It uses a fundamental bottom-up investment approach, which means that it
focuses on individual companies rather than macroeconomic factors or specific
industries. Each company is analyzed on a case-by-case basis to select those
which meet Harris Associates' standards of quality and value.
o Once Harris Associates determines that a stock sells at a significant
discount to its true business value and has other attractive qualities such
as a positive free cash flow, it will consider that stock for purchase by
analyzing the quality and motivation of the company's management as well as
the company's market position within its industry.
o Investments are continuously monitored by both analysts and portfolio
managers. A senior committee sets specific "buy" and "sell" targets for each
company. Harris Associates will generally buy a stock when it sells for a
price below 60% of its true business value, and will generally sell a stock
when it approaches 90% of its true business value.
LOOMIS SAYLES
Loomis Sayles uses fundamental research in a value-oriented selection process to
seek companies with the following characteristics, relative to the Russell 1000
Value Index, although not all of the companies selected will have these
attributes:
o Low price-to-earnings ratios based on earnings estimates
o Competitive return on equity
o Competitive current and estimated dividend yield
o Favorable earnings prospects
In selecting investments for its Fund segment, Loomis Sayles employs the
following strategy:
o It starts with a universe of approximately 1,400 companies, primarily those
with a market capitalization in excess of $2 billion.
o Stocks are then ranked using the Loomis Sayles proprietary valuation model
based on low price-to-earnings ratios, earnings estimate revisions and
quality.
o Stocks are selected based on fundamental research focusing on those that are
valued favorably in the valuation model.
o Its segment's portfolio is constructed by choosing approximately 60 to 70
stocks which Loomis Sayles believes offer the best combination of attractive
valuation characteristics and positive fundamentals.
o The portfolio construction process also attempts to minimize risk through
careful evaluation of diversification and other risk factors.
o Loomis Sayles will generally sell a stock when its price objective has been
attained, if its fundamentals deteriorate, or when a stock with greater
potential is identified.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
VAUGHAN, NELSON, SCARBOROUGH & MCCULLOUGH (VNSM)
In managing its segment of the Fund, VNSM will use rigorous fundamental research
and active management to analyze a broad selection of company or industry
sectors and to seek companies with the following characteristics, although not
all of the companies selected will have each of these attributes:
o Low price-to-sales relative to market
o Higher yield relative to market
o Low price-to-earnings relative to market
o Low price-to-book value relative to market
In selecting investments for its segment of the Fund, VNSM will employ the
following strategy:
o It uses a value-driven investment philosophy that selects stocks selling at a
relatively low value based primarily on the four criteria mentioned above. It
selects companies that VNSM believes are out-of-favor or misunderstood.
o VNSM starts with an investment universe of 5,000 securities. VNSM then uses
value-driven screens to create a research universe of 300 to 400 companies
with market capitalizations of at least $2 billion.
o VNSM will generally sell a stock when its relative valuation reverts to its
historical average, when the issuer shows a deteriorating financial
condition, or when it has repeated negative earnings surprises.
WESTPEAK
In managing its segment of the Fund, Westpeak will construct a portfolio of
recognizable, large and mid-capitalization stocks that exhibit good relative
value and reasonable growth potential. Westpeak believes risk and return can be
accurately measured and controlled through thoughtful portfolio construction.
Therefore its their focus will be on the aggregate characteristics of the
portfolio and not just individual stocks. The portfolio emphasizes the
characteristics that Westpeak believes are most likely to be rewarded by the
market in the period ahead based upon current and historical probabilities. At
times the portfolio may be biased toward value; at other times toward growth as
determined by the characteristics Westpeak favors. The segment's industry
weightings will not vary significantly from the S&P 500. Using proprietary
quantitative research based on macroeconomic, market and company-specific
information, Westpeak analyzes each stock and ranks it based on characteristics
such as:
o Earning-to-price o Earnings growth
o Potential earnings surprises
o Book-to-price
In selecting investments, Westpeak will employ the following process:
o It starts with an initial universe of approximately 2,100 stocks of mainly
large capitalization companies and eliminates stocks of companies below a
$1.6 billion market capitalization threshold. This creates an overall
universe of about 1,000 stocks.
o Next, it screens these stocks using fundamental growth and value criteria and
calculates a "fundamental rank" for each stock. This rank reflects a
historical analysis of the company using approximately 70 growth, value and
industry-specific characteristics.
o All of the stocks are then screened using various Wall Street analysts'
historical and projected earning estimates for the company and each is
assigned an "expectations rank." This rank accounts for the company's recent
and historical earnings revisions and the potential for "positive earnings
surprises" (whether its business has the potential to improve in the near
future).
o The fundamental and expectations ranks for each stock are placed in a
valuation matrix to evaluate whether to buy, sell or hold a stock.
o The final step is the use of proprietary methodology to arrange the selected
stocks into an optimal portfolio using their respective fundamental and
expectation ranks and risk characteristics.
The desired result is a diversified portfolio of 75 to 150 stocks, with risk
characteristics that approximate that of the benchmark, the S&P 500 Index, which
Westpeak believes will produce the highest long -term returns consistent with
the portfolio's risk parameters.
<PAGE>
[graphic omitted] Goals, Strategies & Risks
-------------------------
NVEST STAR ADVISERS FUND FUND FOCUS
---------------------------
ADVISER: Nvest Funds Management, L.P. Stability Income Growth
("Nvest Management") High X
SUBADVISERS: Harris Associates L.P. --------- ------ ------
("Harris Associates") Mod.
Janus Capital Corporation ("Janus") --------- ------ ------
Kobrick Funds LLC ("Kobrick") Low X X
Loomis, Sayles & Company, L.P.
("Loomis Sayles")
CATEGORY: All-Cap Equity
TICKER SYMBOL: CLASS Y
-------
INVESTMENT GOAL NESYX
The Fund seeks long-term growth of capital.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Nvest Management believes the Star Concept -- the Star Funds' multi-manager
approach to equity investing, which combines the varied styles of multiple
subadvisers in selecting securities for each Fund's four segments -- offers
uncommon diversification and a different investment opportunity than funds
managed by a single adviser using a single style. Nvest Management believes that
having several subadvisers with varying and successful management styles may
increase the likelihood that the Fund may produce better returns for its
shareholders, with less variability of return and less risk of persistent
underperformance than a fund managed by a single adviser.
Under normal market conditions, the Fund will invest substantially all of its
assets in equity securities. Nvest Management allocates capital invested in the
Fund equally among the four subadvisers set forth above. Each subadviser manages
its segment of the Fund's assets in accordance with its distinct investment
style and strategy. Although the Fund primarily invests in equity securities, it
may also:
o Hold securities of foreign issuers traded over the counter or on foreign
exchanges, including securities in emerging markets and related currency
hedging transactions.
o Invest in fixed-income securities, including U.S. government bonds and
lower-quality corporate bonds.
o Invest in real estate investment trusts ("REITs").
o Engage in active and frequent trading of securities. Frequent trading may
produce higher transaction costs and higher levels of taxable capital gains,
which may lower your return.
o Purchase U.S. government securities, certificates of deposit, commercial
paper, and/or high quality debt securities or hold cash for temporary
defensive purposes in response to adverse market, economic or political
conditions. These investments may prevent the Fund from achieving its goal.
o Invest in convertible preferred stock and convertible debt securities.
o Enter into options, futures, swap contracts and currency hedging
transactions.
o Invest in initial public offerings ("IPOs") and Rule 144A securities.
For more detailed information on each subadviser's investment strategies, please
refer to the section entitled "Star Advisers Fund -- More On Investment
Strategies."
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in a stock's value or periods
of below-average performance in a given stock or in the stock market as a
whole. Small capitalization and emerging growth companies may be subject to
more abrupt price movements, limited markets and less liquidity than larger,
more established companies, which may adversely affect the value of the
portfolio. With special situation companies, the primary risk is that they
may not achieve their expected value because events do not materialize as
anticipated. IPO securities tend to involve greater market risk than other
equity securities due, in part, to public perception and the lack of publicly
available information and trading history. This may impact the Fund's
performance and result in increased tax liability to shareholders. Rule 144A
securities may be more illiquid than other equity securities. Growth stocks
are generally more sensitive to market movements than other types of stocks,
primarily because their stock prices are based heavily on future
expectations.
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise.
Lower-quality fixed-income securities may be subject to these risks to a
greater extent than other fixed-income securities.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic
and information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency. Investments in emerging markets
may be subject to these risks to a greater extent than those in more
developed markets.
REITS: Subject to changes in underlying real estate values, rising interest
rates, limited diversification of holdings, higher costs and prepayment risk
associated with related mortgages.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Star Advisers Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual returns for one-year,
five-year and since-inception periods compare with those of a broad measure of
market performance and those of indices of funds with similar objectives. The
Fund's past performance does not necessarily indicate how it will perform in the
future.
The bar chart shows the Fund's total returns for Class Y shares for each
calendar year since it first offered Class Y shares. The Class Y returns may be
generally higher than returns for Class A, B and C shares because of the sales
charges and higher expenses of those classes.
(total return)
1995 34.85%
1996 19.55%
1997 20.50%
1998 19.61%
1999 46.78%
/\ Highest Quarterly Return: Fourth Quarter 1999, up 31.02%
\/ Lowest Quarterly Return: Third Quarter 1998, down 13.15%
The table below shows the Fund's average annual total returns for the one-year,
five-year and since-inception periods compared to those of the Standard & Poor's
Midcap 400 Index ("S&P 400"), an unmanaged index representing the performance of
the mid-sized company segment of the U.S. market, and the Standard & Poor's
Composite Index of 500 Stocks ("S&P 500"), a market value-weighted, unmanaged
index of common stock prices for 500 selected stocks. The returns are also
compared to the Morningstar Large Blend and Lipper Multi-Cap Growth Averages,
each an average of the total returns of all mutual funds with an investment
style similar to that of the Fund as calculated by Morningstar, Inc. and Lipper,
Inc. The Fund previously compared its returns to the broad Lipper category in
which the Fund was categorized. In 1999, Lipper Inc. narrowed their existing
categories and created additional categories and the Fund falls within Lipper
Multi-Cap Growth Average, one of the newly created categories. You may not
invest directly in an index. The Fund's total returns reflect the expenses of
the Fund's Class Y shares. The S&P 400 and S&P 500 returns have not been
adjusted for ongoing management, distribution and operating expenses applicable
to mutual fund investments. The Morningstar Large Blend Average and Lipper
Multi-Cap Growth Average returns have been adjusted for these expenses.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999) SINCE CLASS
PAST 1 YEAR PAST 5 YEARS INCEPTION
<S> <C> <C> <C>
Nvest Star Advisers Fund: Class Y (inception 11/15/94) 46.78% 27.81% 26.50%
S&P 400 14.72% 23.05% 22.87%
S&P 500 21.04% 28.56% 28.42%
Morningstar Large Blend Average (calculated from 11/30/94) 19.27% 24.04% 23.86%
Lipper Multi-Cap Growth Average (calculated from 11/30/94) 52.30% 28.56% 28.31%
- ---------------------------------------------------------------------------------------------------------------------
For the actual past expenses of Class Y shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<PAGE>
[graphic omitted] Goals, Strategies & Risks
-------------------------
STAR ADVISERS FUND --
MORE ON INVESTMENT STRATEGIES
The Fund's portfolio is divided among four different subadvisers set forth
below. These subadvisers pursue the Fund's overall goal by employing the
strategies and techniques described below.
HARRIS ASSOCIATES
The segment of the Star Advisers Fund managed by Harris Associates will invest
primarily in common stock of large and mid-capitalization companies which Harris
Associates believes are trading at a substantial discount to the company's "true
business value." Harris Associates' value-oriented investment philosophy is
based upon its belief that over time a stock's discounted market price and its
true business value will converge. Harris Associates believes that this
philosophy provides the best opportunity to achieve long-term capital growth
while also protecting from downside risk. It therefore uses this philosophy to
locate companies with the following characteristics, although not all of the
companies selected by Harris Associates will have these attributes:
o Positive free cash flow
o High level of insider ownership
o Favorable earnings growth potential
In making investment decisions, Harris Associates generally employs the
following methods:
o It uses a fundamental bottom-up investment approach, which means that it
focuses on individual companies rather than macroeconomic factors or specific
industries. Each company is analyzed on a case-by-case basis to select those
which meet Harris Associates' standards of quality and value.
o Once Harris Associates determines that a stock sells at a significant
discount to its true business value and has other attractive qualities such
as a positive free cash flow, it will consider that stock for purchase by
analyzing the quality and motivation of the company's management as well as
the company's market position within its industry.
o Investments are continuously monitored by both analysts and portfolio
managers. A senior committee sets specific "buy" and "sell" targets for each
company. Harris Associates will generally buy a stock when it sells for a
price below 60% of its true business value, and will generally sell a stock
when it approaches 90% of its true business value.
JANUS
The segment of the Star Advisers Fund managed by Janus will invest substantially
all of its assets in common stocks of companies in the U.S. and foreign
(including emerging) markets. Janus takes a bottom-up approach in managing its
segment of the Fund which means that it seeks to identify individual companies
with good earnings growth potential that may not be recognized by the market at
large. Although themes may emerge, securities are generally selected without
regard to any defined industry sector or other similarly defined selection
procedure. Realization of income is not a significant investment consideration
for this segment of the Fund. Generally, Janus seeks companies which, in Janus'
opinion, possess the following attributes:
o Strong competitive position in a particular industry
o Secure current and expected financial position
o Proven and capable management teams
o Attractive valuations relative to growth prospects and peer group
o High return on equity o Special situation or catalyst
In making investment decisions, Janus employs the following methods:
o Janus' analysis and selection process focuses on stocks that, in its opinion,
possess earnings growth potential that may not be recognized by the market.
o Janus does not focus on particular market capitalization. The companies it
selects to include in its segment may be of any size, including large,
well-established companies as well as medium and smaller emerging growth
companies.
o During its selection process, Janus may also look for "special situation"
companies. A special situation may include a new product or process, a
technological breakthrough, a management change or other extraordinary
corporate event, or differences in market supply of and demand for the
security.
o Investments are continuously monitored by analysts and portfolio managers.
The analysts and portfolio managers will evaluate the companies to determine
whether they continue to possess the same fundamental characteristics for
growth which made them candidates for purchase originally.
o Janus will generally sell a position when earnings growth falls below the
market average, the fundamental outlook is deteriorating or when other more
appealing investment opportunities arise.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
KOBRICK
The segment of the Star Advisers Fund managed by Kobrick will, under normal
conditions, invest substantially in equity securities of companies with small,
medium and large capitalizations, including those that Kobrick believes are
undervalued special situations and emerging growth companies. This approach
provides Kobrick with flexibility to emphasize in the Fund companies with
different capitalizations as market conditions change. Kobrick considers
emerging growth companies to be those companies which are less mature and have
the potential to grow substantially faster than the economy. Kobrick's bottom-up
approach utilizes fundamental and qualitative analysis to select individual
companies, not sectors, with the greatest potential for growth. In selecting
investments for the Fund, Kobrick generally seeks companies in a wide variety of
industries and considers a variety of factors, including any one or more of the
following:
o The strength of a company's management team o Expected growth in earnings
o Relative financial condition o Competitive position and business strategy
o Entrepreneurial character o New or innovative products, services or processes
In making investment decisions, Kobrick employs the following four-part
investment approach:
o Screening: Kobrick analyzes thousands of companies in order to find a select
group that has the potential to meet its buy disciplines described below.
Many of the companies within this group are special situation companies
which, because of unique circumstances, such as an ability to fill a
particular niche, are attractive investments.
o Portfolio Construction: Kobrick applies buy disciplines which emphasize
strong management, compelling valuations and high earnings growth. At the
core of this approach is regular contact with a company's management team to
assess its ability to execute the company's strategy. Kobrick considers
potential risk in selecting securities to construct a diversified portfolio
that limits volatility.
o Portfolio Supervision: Kobrick closely monitors each holding in the Fund's
portfolio to determine whether it continues to possess the factors identified
when the original investment was made. This process includes continuous
review of absolute and relative valuations, evaluation of management's
execution of the company's strategy and assessment of the company's prospects
relative to the overall economic, political and financial environment.
o Portfolio Realignment: Kobrick will generally sell a position when its target
price, which is continuously evaluated, is reached, when there is a change in
a company's management or strategy, or when a company fails to execute its
strategy.
LOOMIS SAYLES
The segment of the Star Advisers Fund managed by Loomis Sayles will invest
primarily in common stocks with a market capitalization, at the time of the
investment, within the range of the market capitalization of those companies
constituting the Russell 2500 Index. Loomis Sayles may also invest up to 35% of
its segment's assets in companies with larger capitalization levels. Loomis
Sayles seeks to achieve the objective of the Fund by emphasizing companies
undervalued by the market in relation to earnings, dividends, assets and growth
prospects. This segment of the Fund is value-oriented with emphasis on security
selection rather than sector rotation and market timing. The securities selected
by Loomis Sayles for the segment typically have the following characteristics
relative to those companies constituting the Russell 2500 Index:
o Strong fundamental prospects o Low price-to-earnings ratio
o Higher than average cash flows o Strong balance sheets
Loomis Sayles will build a core portfolio of companies which in its opinion
possess the attributes set forth above. It will also invest a smaller portion of
its segment's assets in companies which it believes are undergoing a "special
situation" or turnaround. These types of companies may have experienced
significant business problems but, in the opinion of Loomis Sayles, have
favorable prospects for recovery.
In making investment decisions, Loomis Sayles generally employs the following
methods:
o It begins with a universe of approximately 3,000 companies, identified
through the intensive research of Loomis Sayles analysts. This research
consists of broad, in-depth coverage, including regular contact with company
management, near- and long-term projections of company fundamentals and
evaluations of potential earnings growth. The market capitalization of these
companies will generally be within the range of the Russell 2500 Index.
o Next, the portfolio managers with the assistance and guidance of the Loomis
Sayles analysts put the companies through several screens to determine which
companies provide the best earnings growth potential while at the same time
appear to be the most undervalued by the market relative to the Russell 2500
Index.
o Out of the remaining candidates, Loomis Sayles builds a diversified portfolio
across many economic sectors so that the portfolio is protected against the
inherent volatility of small capitalization companies.
o Investments are continuously monitored by analysts and portfolio managers.
The analysts and portfolio managers will evaluate the companies as to whether
they continue to possess the same fundamental characteristics for growth
which made them candidates for investment originally.
o Loomis Sayles will sell a position when it reaches its target valuation, the
fundamental outlook is deteriorating or when other more favorable
opportunities arise.
<PAGE>
[graphic omitted] Goals, Strategies & Risks
-------------------------
NVEST STAR SMALL CAP FUND FUND FOCUS
----------------------------
ADVISER: Nvest Funds Management, L.P. Stability Income Growth
("Nvest Management") High X
SUBADVISERS: Harris Associates L.P. --------- ------ ------
("Harris Associates") Mod.
Loomis, Sayles & Company, L.P. --------- ------ ------
("Loomis Sayles") Low X X
Montgomery Asset Management, LLC
("Montgomery")
RS Investment Management, L.P.
("RS Investment Management")
CATEGORY: Small-Cap Equity
INVESTMENT GOAL
The Fund seeks capital appreciation.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Nvest Management believes the Star Concept -- the Star Funds' multi-manager
approach to equity investing, which combines the varied styles of multiple
subadvisers in selecting securities for each Fund's four segments -- offers
uncommon diversification and a different investment opportunity than funds
managed by a single adviser using a single style. Nvest Management believes that
having several subadvisers with varying and successful management styles may
increase the likelihood that the Fund may produce better returns for its
shareholders, with less variability of return and less risk of persistent
underperformance than a fund managed by a single adviser.
The Fund seeks to attain its goal by investing primarily in equity securities of
small capitalization companies. The Fund's potential investment universe
includes companies whose total market capitalization, at the time of purchase,
falls within the range of the Russell 2000 Index. The Fund may, however, invest
in companies with larger capitalizations.
Nvest Management allocates capital invested in the Fund equally among the four
subadvisers set forth above. Each subadviser manages its segment of the Fund's
assets in accordance with its distinct investment style and strategy. Although
the Fund primarily invests in equity securities, it may also:
o Invest up to 35% of its assets in fixed-income securities, including U.S.
government bonds as well as lower-quality debt securities.
o Invest in convertible preferred stock and convertible debt securities.
o Purchase U.S. government securities, certificates of deposit, commercial
paper, and/or high quality fixed-income securities or hold cash for temporary
defensive purposes in response to adverse market, economic or political
conditions. Such positions may prevent the Fund from achieving its goal.
o Invest in foreign securities, including emerging market securities.
o Engage in active and frequent trading of securities. Frequent trading may
produce higher transaction costs and higher levels of taxable capital gains,
which may lower your return.
o Invest in real estate investment trusts ("REITs").
For more detailed information on each subadviser's investment strategies please
refer to the section entitled "Star Small Cap Fund -- More On Investment
Strategies."
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in a stock's value or periods of
below-average performance in a given stock or in the stock market as a whole.
Small capitalization companies may be subject to more abrupt price movements,
limited markets and less liquidity than larger, more established companies,
which may adversely affect the value of the portfolio. Growth stocks are
generally more sensitive to market movements than other types of stocks,
primarily because their stock prices are based heavily on future expectations.
Value stocks present the risk that they may fall out of favor with investors
and underperform growth stocks during given periods.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency. Investments in emerging markets
may be subject to these risks to a greater extent than those in more
developed markets.
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise.
Lower-quality fixed-income securities may be subject to these risks to a
greater extent than other fixed-income securities.
REITS: Subject to changes in underlying real estate values, rising interest
rates, limited diversification of holdings, higher costs and prepayment risk
associated with related mortgages.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Star Small Cap Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual returns for one-year
and since-inception periods compare with those of a broad measure of market
performance and those of indices of funds with similar objectives. The returns
shown are those of the Fund's Class A, B and C shares which are not offered in
this Prospectus. Class Y shares would have substantially similar annual returns
because they would be invested in the same portfolio of securities as the Class
A shares and would only differ to the extent that the classes do not have the
same expenses. Class Y returns may be generally higher than the returns of Class
A shares because Class A shares have sales charges and higher expenses. The
Fund's past performance does not necessarily indicate how it will perform in the
future.
The bar chart shows the Fund's total returns for Class A shares for each
calendar year since its first full year of operations. The returns for Class B
and C shares differ from the Class A returns shown in the bar chart, depending
upon the respective expenses of each class. The chart does not reflect any sales
charge that you may be required to pay when you buy or redeem the Fund's shares.
A sales charge will reduce your return.
(total return)
1997 26.97%
1998 2.05%
1999 65.38%
/\ Highest Quarterly Return: Fourth Quarter 1999, up 42.28%
\/ Lowest Quarterly Return: Third Quarter 1998, down 22.85%
The table below shows the Fund's average annual total returns for the one-year
and since-inception periods compared to those of the Russell 2000 Index, a
market value-weighted, unmanaged index of small company common stocks. The
returns are also compared to the Morningstar Small-Cap Growth and Lipper
Small-Cap Growth Averages, each an average of the total returns of all mutual
funds with an investment style similar to that of the Fund, as calculated by
Morningstar, Inc. and Lipper, Inc. The Fund previously compared its returns to
the broad Lipper category in which the Fund was categorized. In 1999, Lipper,
Inc. narrowed their existing categories and created additional categories and
the Fund falls within Lipper Small-Cap Growth Average, one of the newly created
categories. You may not invest directly in an index. The Fund's total returns
reflect its expenses and the maximum sales charge that you may pay when you buy
or redeem the Fund's shares. The Russell 2000 Index returns have not been
adjusted for ongoing management, distribution and operating expenses and sales
charges applicable to mutual fund investments. The Morningstar Small-Cap Growth
Average and Lipper Small-Cap Growth Average returns have been adjusted for these
expenses but do not reflect any sales charges.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1999) PAST 1 YEAR SINCE CLASS
INCEPTION*
Nvest Star Small Cap Fund: Class A 55.82% 26.41%
Nvest Star Small Cap Fund: Class B 59.14% 27.37%
Nvest Star Small Cap Fund: Class C 63.14% 27.98%
Russell 2000 Index 21.26% 13.08%
Morningstar Small-Cap Growth Average 65.85% 26.18%
Lipper Small-Cap Growth Average 62.33% 24.53%
*The inception date of the Fund's Class A, B and C shares is December 31, 1996.
- --------------------------------------------------------------------------------
For the expenses of Class Y shares, see the section entitled "Fund Fees
& Expenses."
<PAGE>
[graphic omitted] Goals, Strategies & Risks
-------------------------
STAR SMALL CAP FUND --
MORE ON INVESTMENT STRATEGIES
The Fund's portfolio is divided among four different subadvisers set forth
below. These subadvisers pursue the Fund's overall goal by employing the
strategies and techniques described below.
HARRIS ASSOCIATES
The segment of the Fund managed by Harris Associates will primarily invest in
the common stocks of "small cap companies" in the U.S. Harris considers a small
cap company to have a market capitalization no larger than the largest market
capitalization of the companies included in the S&P Small Cap 600 Index ($4.156
billion as of December 31, 1999). Harris Associates' value-oriented investment
philosophy is based upon its belief that over time a stock's discounted market
price and its true business value will converge. Harris Associates believes that
this philosophy provides the best opportunity to achieve long-term capital
growth while also protecting from downside risk. It therefore it uses this
philosophy to identify companies with the following characteristics, although
not all of the companies selected by Harris Associates will have these
attributes:
o Positive free cash flow
o High level of insider ownership o Favorable earnings growth potential
In making investment decisions for its segment of the Fund, Harris Associates
generally employs the following methods:
o It uses a fundamental bottom-up investment approach, which means that it
focuses on individual companies rather than macroeconomic factors or specific
industries. Each company is analyzed on a case-by-case basis to select those
which meet Harris Associates' standards of quality and value.
o Once Harris Associates determines that a stock sells at a significant
discount to its true business value and has other attractive qualities such
as positive free cash flow, it will consider that stock for purchase by
analyzing the quality and motivation of the company's management as well as
the company's market position within its industry.
o Investments are continuously monitored by both analysts and portfolio
managers. A senior committee sets specific "buy" and "sell" targets for each
company. Harris Associates will generally buy a stock when it sells for a
price below 60% of its true business value, and will generally sell a stock
when it approaches 90% of its true business value.
LOOMIS SAYLES
Under normal market conditions, Loomis Sayles will invest at least 65% of its
segment's total assets in equity securities of companies with market
capitalizations that, at the time of purchase, fall within the capitalization
range of those companies constituting the Russell 2000 Index. Loomis Sayles may
also invest up to 35% of its segment's assets in companies with larger
capitalization levels.
This segment of the Star Small Cap Fund focuses on rapidly growing companies
which Loomis Sayles believes have the potential for strong revenue growth,
rising profit margins and accelerating earnings growth. The stock selection
process uses a bottom-up approach that Loomis Sayles believes emphasizes
companies that possess the best growth prospects. Loomis Sayles uses this
approach to identify companies with the following characteristics, although not
all of the companies selected will have these attributes:
o New and/or distinctive products, technologies or services
o Expected growth of at least 20% per year driven by strong sales
and improving profitability
o Strong, experienced management with the vision and the capability to
grow a large, profitable organization
In making investment decisions, Loomis Sayles generally employs the following
methods:
o It begins with a universe of approximately 3,000 companies that generally
fall within the market capitalization range of those companies constituting
the Russell 2000 Index.
o Next, the portfolio managers with the assistance and guidance of the Loomis
Sayles' analysts evaluate this universe through screening techniques to
determine which companies appear to offer the best earnings growth prospects.
o Once Loomis Sayles determines that a company may have the potential for
earnings growth and rising profitability, it considers that company's stock
for purchase. This process includes analysis of the company's income
statements and balance sheets, an assessment of the quality of its management
team as well as the company's competitive position.
o Out of the remaining candidates, Loomis Sayles builds a diversified portfolio
of small cap growth securities. The portfolio's holdings are generally
equally weighted, although under certain circumstances such as low liquidity
or lack of near term earnings prospects, positions will be reduced. Under
normal market conditions, the portfolio remains fully invested with less than
5% of its assets held as cash.
o Investments are continuously monitored by the Loomis Sayles small cap growth
team. Any erosion in the fundamental characteristics of portfolio holdings
may result in the sale of that security. Additionally, securities are sold
when their market capitalization exceeds the capitalization range of the
Russell 2000 Index. Finally, stocks may be sold if a better opportunity is
identified by the portfolio managers.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
MONTGOMERY
Montgomery seeks capital appreciation by investing in growth-oriented U.S. small
capitalization companies whose stock price appears to be undervalued relative to
their growth potential. Potential investments are rigorously analyzed and
subjected to the following three steps of its investment process:
o Quantitative screen identifying growth-oriented companies
with improving business fundamentals
o Fundamental analysis to determine the long-term sustainability
of the company's growth characteristics
o Valuation to ensure that the company's growth prospects have not
yet been fully recognized by the market
In making investment decisions, Montgomery generally employs the following
methods:
o Montgomery uses a quantitative screen to identify growth oriented companies.
This screening process provides the means for narrowing a very large universe
of companies to a smaller universe of companies which display the
characteristics that Montgomery desires. Montgomery begins with a database of
over 2,000 companies which is continuously updated with the most current
financial information on such companies. After identifying those companies
with the market capitalizations desired (generally less than $1.5 billion),
Montgomery's proprietary interface allows it to quickly visualize changes in
revenue and earnings growth and generate a research pipeline of companies
that appear to have improving business fundamentals.
o Once those companies displaying desirable quantitative characteristics are
identified, Montgomery performs fundamental analysis to validate the nature
and sustainability of the observed trends in revenues and earnings.
o Montgomery uses several valuation measures for those companies that pass both
the quantitative screen and the qualitative analysis. Montgomery compares
each company's price-to-earnings ratio to its earnings-per-share growth
rate. It invests in companies selling at substantial discounts to their
earnings growth rates and sells its investments in companies trading at a
premium to their earnings growth rates. Montgomery also compares each
company's price-to-earnings, price-to-sales and price-to-cash flow ratios to
its industry group. Each investment selected by Montgomery is typically
inexpensive versus its internal growth rate on an absolute basis and relative
to its peer group.
o Investments are continuously monitored by analysts and portfolio managers.
The analysts along with portfolio managers will evaluate the companies to
determine whether they continue to possess the fundamental characteristics
for growth which made them a candidate for purchase originally.
o Montgomery will sell a stock when its return objective has been achieved and
the stock is no longer attractive on a valuation basis. Earnings
disappointments, fundamental outlook deterioration and more appealing
investment opportunities also trigger sell decisions.
RS INVESTMENT MANAGEMENT
RS Investment Management pursues the Fund's objective by selecting securities
for its segment based on a flexible, research-driven, bottom-up approach to
value recognition and trend analysis. Stock selection focuses on growth that is
expected to drive earnings and valuations higher over the one to three year time
horizon. The catalysts that spur growth in these small companies may consist of:
o A new product launch o A new management team
o Expansion into new markets o Realization of undervalued assets
In making investment decisions, RS Investment Management generally employs the
following methods:
o RS Investment Management begins with a broad universe of companies which it
believes possess the prospect for superior long-term growth.
o It identifies this initial universe of potential investments by conducting
proprietary, fundamental research, focusing on a company's level of available
cash, its existing cash flow rate, its price-to-earnings ratio and the
company's expected return on capital.
o Next, RS Investment Management evaluates the company's management teams to
identify how they allocate the company's capital as well as to discern the
sources, and management's intended use, of cash.
o RS Investment Management will then consider the current stock price relative
to its future price projections. Only after this thorough analysis has been
made will RS Investment Management make a decision to buy a particular stock.
o RS Investment Management considers selling or initiating the sell process
when:
- A stock has reached the price objective set by RS Investment Management.
- A stock declines 15% from the original purchase price. If this occurs,
RS Investment Management will generally sell a portion of the position
and reevaluate the company to ensure that a growth catalyst remains.
- Negative fundamental changes occur relating to management, product
definition or economic environment.
- More attractive opportunities are identified.
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- ----------------------------
NVEST STAR WORLDWIDE FUND Stability Income Growth
High X
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Management") Mod.
SUBADVISERS: Harris Associates L.P. --------- ------ ------
("Harris Associates") Low X X
Loomis, Sayles & Company, L.P.
("Loomis Sayles")
Montgomery Asset Management LLC
("Montgomery")
CATEGORY: Global Equity
INVESTMENT GOAL
The Fund seeks long-term growth of capital.
The Fund's investment goal may be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
Nvest Management believes the Star Concept -- the Star Funds' multi-manager
approach to equity investing, which combines the varied styles of multiple
subadvisers in selecting securities for each Fund's four segments -- offers
uncommon diversification and a different investment opportunity than funds
managed by a single adviser using a single style. Nvest Management believes that
having several subadvisers with varying and successful management styles may
increase the likelihood that the Fund may produce better returns for its
shareholders, with less variability of return and less risk of persistent
underperformance than a fund managed by a single adviser.
The Fund seeks to attain its goal by investing substantially all of its assets
in equity securities. The Fund is a global mutual fund, which means that it will
seek to invest in equity securities traded on foreign stock markets as well as
the markets of the United States. Foreign markets represent two-thirds of the
value of all stocks traded in the world and offer opportunities for investment
in addition to those found in the United States. Foreign markets may be located
in large, developed countries such as Great Britain or in smaller, developing
markets like Singapore.
Nvest Management allocates capital invested in the Fund equally among its four
segments which are managed by the three subadvisers listed above. Each
subadviser manages its segment of the Fund's assets in accordance with its
distinct investment style and strategy.
Aside from investing primarily in equity securities of foreign and domestic
companies, the Fund may:
o Invest up to 35% of its assets in fixed-income securities, including
government bonds and lower-quality debt securities.
o Invest in convertible preferred stock and convertible debt securities.
o Purchase U.S. government securities, certificates of deposit, commercial
paper, and/or high quality debt securities or hold cash for temporary
defensive purposes in response to adverse market, economic or political
conditions. Such positions may prevent the Fund from achieving its goal.
o Invest in real estate investment trusts ("REITs").
For more detailed information on each subadviser's investment strategies please
refer to the section entitled "Star Worldwide Fund -- More On Investment
Strategies."
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report (see back cover).
PRINCIPAL INVESTMENT RISKS
EQUITY SECURITIES: Subject to market risks. This means that you may lose money
on your investment due to unpredictable drops in a stock's value or periods
of below-average performance in a given stock or in the stock market as a
whole. Small capitalization companies may be subject to more abrupt price
movements, limited markets and less liquidity than larger, more established
companies, which may adversely affect the value of the portfolio. Growth
stocks are generally more sensitive to market movements than other types of
stocks, primarily because their stock prices are based heavily on future
expectations. Value stocks present the risk that they may fall out of favor
with investors and underperform growth stocks during any given periods.
FOREIGN SECURITIES: May be affected by foreign currency fluctuations, higher
volatility than U.S securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of
several European countries to the "euro" currency. Investments in emerging
markets may be subject to these risks to a greater extent than those in more
developed markets.
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Generally, the value of fixed-income securities rises when
prevailing interest rates fall and falls when interest rates rise.
Lower-quality fixed-income securities may be subject to these risks to a
greater extent than other fixed-income securities.
REITS: Subject to changes in underlying real estate values, rising interest
rates, limited diversification of holdings, higher costs and prepayment risk
associated with related mortgages.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in Nvest Star Worldwide Fund by showing changes in the Fund's performance from
year to year and by showing how the Fund's average annual returns for one-year
and since-inception periods compared with those of a broad measure of market
performance and those of indices of funds with similar objectives. The returns
shown are those of the Fund's Class A, B and C shares which are not offered in
this Prospectus. Class Y shares would have substantially similar annual returns
because they would be invested in the same portfolio of securities as the Class
A shares and would only differ to the extent that the classes do not have the
same expenses. Class Y returns may be generally higher than the returns for
Class A shares because Class A shares have sales charges and higher expenses.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
The bar chart shows the Fund's total returns for Class A shares for each
calendar year since its first full year of operations. The returns for Class B
and C shares differ from the Class A returns shown in the bar chart, depending
upon the respective expenses of each class. The chart does not reflect any sales
charge that you may be required to pay when you buy or redeem the Fund's shares.
A sales charge will reduce your return.
(total return)
1996 16.67%
1997 12.68%
1998 4.01%
1999 37.63%
/\ Highest Quarterly Return: Fourth Quarter 1999, up 24.05%
\/ Lowest Quarterly Return: Third Quarter 1998, down 16.88%
The table below shows the Fund's average annual total returns for the one-year
and since-inception periods compared to those of the Morgan Stanley Capital
International World Index ("MSCI World Index"), an unmanaged index of stocks
throughout the world. The returns are also compared to the Morningstar World
Stock and Lipper Global Averages, each an average of the total returns of all
mutual funds with an investment style similar to that of the Fund as calculated
by Morningstar, Inc. and Lipper, Inc. You may not invest directly in an index.
The Fund's total returns reflect the maximum sales charge that you may pay when
you buy or redeem the Fund's shares. The MSCI World Index returns have not been
adjusted for ongoing management, distribution and operating expenses and sales
charges applicable to mutual fund investments. The Morningstar World Stock
Average and Lipper Global Average returns have been adjusted for these fees but
do not reflect sales charges.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1999) SINCE CLASS
PAST 1 YEAR INCEPTION*
Nvest Star Worldwide Fund: Class A 29.72% 15.39%
Nvest Star Worldwide Fund: Class B 31.62% 15.94%
Nvest Star Worldwide Fund: Class C 35.50% 16.28%
MSCI World Index 24.93% 19.52%
Morningstar World Stock Average 37.76% 18.62%
Lipper Global Average 36.08% 20.13%
*The inception date of the Fund's Class A, B and C shares is December 29, 1995.
- --------------------------------------------------------------------------------
For the expenses of Class Y shares, see the section entitled "Fund Fees &
Expenses."
<PAGE>
[graphic omitted] Our Goals, Strategies & Risks
-----------------------------
STAR WORLDWIDE FUND --
MORE ON INVESTMENT STRATEGIES
The Fund's portfolio is divided among three different subadvisers set forth
below. These subadvisers pursue the Fund's overall goal by employing the
strategies and techniques described below.
HARRIS ASSOCIATES -- U.S. SEGMENT
The U.S. segment of the Fund is subadvised by Harris Associates and will
primarily invest in common stock of large and mid- capitalization companies
which Harris Associates believes are trading at a substantial discount to the
company's "true business value." Harris Associates' value-oriented investment
philosophy is based upon its belief that over time a stock's discounted market
price and its true business value will converge. Harris Associates believes that
this philosophy provides the best opportunity to achieve long-term capital
growth while also protecting from downside risk. It therefore uses this
philosophy to locate companies with the following characteristics, although not
all of the companies selected by Harris Associates will have these attributes:
o Positive free cash flow
o High level of insider ownership
o Favorable earnings growth potential
In making investment decisions, Harris Associates generally employs the
following methods:
o It uses a fundamental bottom-up investment approach, which means that it
focuses on individual companies rather than macroeconomic factors or specific
industries. Each company is analyzed on a case-by-case basis to select those
which meet Harris Associates' standards of quality and value.
o Once Harris Associates determines that a stock sells at a significant
discount to its true business value and has other attractive qualities such
as a positive free cash flow, it will consider that stock for purchase by
analyzing the quality and motivation of the company's management as well as
the company's market position within its industry.
o Investments are continuously monitored by both analysts and portfolio
managers. A senior committee sets specific "buy" and "sell" targets for each
company. Harris Associates will generally buy a stock when it sells for a
price below 60% of its true business value, and will generally sell a stock
when it approaches 90% of its true business value.
HARRIS ASSOCIATES -- INTERNATIONAL SEGMENT
In managing its international segment of the Fund, Harris Associates generally
employs the same screening techniques that it uses for its U.S. segment;
however, due to the inherent risks associated with investing in foreign
securities, Harris Associates further evaluates:
o The relative political and economic stability of the issuer's home country
o The ownership structure of the company
o The company's accounting practices
This segment of the Fund may invest in securities traded in both developed and
emerging markets. There are no limits to this segment's geographic asset
distribution, but to provide adequate diversification, this segment of the Fund
will generally be invested in at least five countries outside the United States.
<PAGE>
Goals, Strategies & Risks [graphic omitted]
-------------------------
LOOMIS SAYLES
The segment of the Star Worldwide Fund managed by Loomis Sayles will invest
primarily in equity securities of companies organized or headquartered outside
of the United States. The segment will hold securities from at least 3 different
countries including those within emerging markets. The segment will focus on
securities with large market capitalization but may invest in securities with
any size capitalization. The securities selected by Loomis Sayles for the
segment typically have the following characteristics:
o Strong, competitive position as an industry leader o Strong pricing power
o Strong distribution channels o Improving business or financial fundamentals
In making investment decisions, Loomis Sayles employs the following methods:
o Loomis Sayles uses a bottom-up, fundamental research process to build the
segment's portfolio.
o It looks for growth-oriented stocks of well-managed companies that typically
have the characteristics listed above.
o In addition to its bottom-up approach to security selection, an overlay of
country and industry macro-economic data is used to provide guidelines for
portfolio weighting with a view towards minimizing portfolio risk.
o The strong Loomis Sayles research team is combined with a global network of
research contacts to provide a steady stream of information and ideas.
o Loomis Sayles will sell a position when the fundamental outlook is
deteriorating or when other more favorable opportunities arise.
o Loomis Sayles uses a "No-Walls Decision MakingSM" investment process, in
which the managers all meet in person to exchange ideas and make portfolio
decisions; each buy and sell decision is subject to intense scrutiny by the
entire team; and the skill and unique perspective of each manager on the team
is leveraged.
MONTGOMERY
Montgomery will invest at least 65% of its segment's assets in equity securities
of companies of any size located throughout the world. The segment invests in at
least three different countries, one of which may be the United States. Its
global equities investment strategy employs a bottom-up selection process
complemented by proprietary sector and country research. Montgomery's process is
distinguished by extensive use of primary (original) research as opposed to
secondary (broker) research and global sector specialization. The end result is
a global equity portfolio diversified across industries and countries, designed
to deliver consistent returns versus a designated benchmark. The securities
selected by Montgomery for the segment typically have the following
characteristics:
o Strong management with increased sales and earnings potential
o Under or reasonably valued relative to their long-term prospects
o Competitive advantage, innovative products or services or the beneficiary
from deregulation and privatization trends.
In making investment decisions, Montgomery employs the following methods:
o Primary (original) research is the foundation of Montgomery's investment
process and should be distinguished from secondary (broker) research. Its
team of global equity analysts' primary responsibilities are allocated on a
global sector basis. Sector analysis is bottom-up in nature and supports
Montgomery's specific security research.
o Montgomery's investment process begins with its original ideas. New ideas are
generated from both primary research and strategic universe screening with
the assistance of Montgomery's advanced information technology. Montgomery's
goal is to identify companies that are attractive on the basis of long-term
projected earnings growth, near-term earnings/business momentum, and
valuation.
o A formal process to evaluate the new ideas generated from sector-level
analysis and strategic universe screening results in a short list of
potential investments warranting further research. All potential investments
are subjected to rigorous fundamental analysis before a recommendation to buy
is made.
o At Montgomery, security selection is a result of a peer review process
conducted by sector specialists and senior portfolio management. The peer
review process encourages thorough research, accountability and articulation
of analysis. Value is added through earnings estimates that are different
from the analysts' consensus and analysts' insight to companies' ratings
within their peer groups.
o Investments are monitored continuously and are compared against Montgomery's
price objective and their respective peer groups, to identify potential
deterioration in any of the fundamental reasons for purchase.
o Specific factors that bring about a decision to sell in Montgomery's process
include but are not limited to: premium valuation, negative business
momentum, lack of management credibility, and accessibility and competitive
force-out.
<PAGE>
[graphic omitted] 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)
- --------------------------------------------------------------------------------
ALL FUNDS
CLASS Y
Maximum sales charge (load) imposed on purchases None
Maximum deferred sales charge (load) None
Redemption fees *None*
* Generally, a transaction fee will be charged for expedited payment of
redemption proceeds such as by wire or overnight delivery.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, as a percentage of average daily
net assets)
Expense information in the table has been restated to reflect current fees and
expenses.
<TABLE>
<CAPTION>
STAR VALUE FUND STAR ADVISERS FUND STAR SMALL CAPFUND*
CLASS Y CLASS Y CLASS Y
<S> <C> <C> <C>
Management fees 0.73% 1.04% 1.05%
Distribution and/or service (12b-1) fees 0.00% 0.00% 0.00%
Other expenses 0.21% 0.21% 0.46%
Total annual fund operating expenses 0.94% 1.25% 1.51%
STAR WORLDWIDE FUND*
CLASS Y
Management fees 1.05%
Distribution and/or service (12b-1) fees 0.00%
Other expenses 0.48%
Total annual fund operating expenses 1.53%
* Star Small Cap Fund and Star Worldwide Fund may not currently offer Class Y shares. Expenses for Star
Small Cap Fund and Star Worldwide Fund have been estimated and annualized.
</TABLE>
<PAGE>
FUND FEES & EXPENSES [graphic omitted]
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:
- --------------------------------------------------------------------------------
STAR VALUE FUND STAR ADVISERS FUND STAR SMALL CAP FUND
Class Y Class Y Class Y
1 year $ 96 $ 128 $ 155
3 years $ 301 $ 399 $ 481
5 years $ 522 $ 690 $ 829
10 years $1,159 $1,518 $1,812
- ---------------------------------
STAR WORLDWIDE FUND
CLASS Y
1 year $ 157
3 years $ 487
5 years $ 840
10 years $1,834
<PAGE>
MORE ABOUT RISK
The Funds have principal investment strategies that come with inherent risks.
The following is a list of risks to which each Fund may be subject by investing
in various types of securities or engaging in various practices.
MARKET RISK (All Funds) The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably based upon change in a company's
financial condition as well as overall market and economic conditions. IPO
securities tend to involve greater market risk than other equity securities due,
in part, to public perception and the lack of public information and trading
history.
RISK OF SMALL CAPITALIZATION COMPANIES (Star Advisers, Star Small Cap and Star
Worldwide Funds) These companies carry special risks, including narrower
markets, limited financial and management resources, less liquidity and greater
volatility than large company stocks.
MANAGEMENT RISK (All Funds) The risk that a strategy used by a Fund's portfolio
management may fail to produce the intended result.
CREDIT RISK (All Funds) The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to honor a
financial obligation.
CURRENCY RISK (All Funds) The risk that fluctuations in the exchange rates
between the U.S. dollar and foreign currencies may negatively affect an
investment.
EMERGING MARKET RISK (Star Advisers, Star Small Cap and Star Worldwide Funds)
The risk associated with developing securities markets of smaller sizes or with
short operating histories. Emerging markets involve risks in addition to and
greater than those generally associated with investing in developed foreign
markets. The extent of economic development, political stability, market depth,
infrastructure and capitalization, and regulatory oversight in emerging market
economies is generally less than in more developed markets.
RISKS OF OPTIONS, FUTURES AND SWAP CONTRACTS (All Funds) These transactions are
subject to changes in the underlying security on which such transactions are
based. It is important to note that even a small investment in these types of
derivative securities can have a significant impact on a Fund's exposure to
stock market values, interest rates or the currency exchange rate. These types
of transactions will be used primarily for hedging purposes.
LEVERAGE RISK (All Funds) The risk associated with securities or practices (e.g.
borrowing) that multiply small index or market movements into large changes in
value. When a derivative security (a security whose value is based on another
security or index) is used as a hedge against an offsetting position that a Fund
also holds, any loss generated by the derivative security should be
substantially offset by gains on the hedged instrument, and vice versa. To the
extent that a Fund uses a derivative security for purposes other than as a
hedge, that Fund is directly exposed to the risks of that derivative security
and any loss generated by the derivative security will not be offset by a gain.
INTEREST RATE RISK (All Funds) The risk of market losses attributable to changes
in interest rates. In general, the prices of fixed-income securities rise when
interest rates fall, and fall when interest rates rise.
INFORMATION RISK (All Funds) The risk that key information about a security is
inaccurate or unavailable. IPOsecurities involve greater information risk than
other equity securities due to the lack of public information.
OPPORTUNITY RISK (All Funds) The risk of missing out on an investment
opportunity because the assets necessary to take advantage of it are tied up in
less profitable investments.
LIQUIDITY RISK (All Funds) The risk that certain securities may be difficult or
impossible to sell at the time and at the price that the seller would like. This
may result in a loss or may be costly to a Fund. These types of risks may apply
to restricted securities, Section 4(2) Commercial Paper or Rule 144A securities.
CORRELATION RISK (All Funds) The risk that changes in the value of a hedging
instrument will not match those of the asset being hedged.
EXTENSION RISK (Star Advisers, Star Small Cap and Star Worldwide Funds) The risk
that an unexpected rise in interest rates will extend the life of a mortgage- or
asset-backed security beyond the expected prepayment time, typically reducing
the security's value.
VALUATION RISK (All Funds) The risk that a Fund has valued certain securities at
a higher price than it can sell them for.
PREPAYMENT RISK (Star Advisers, Star Small Cap and Star Worldwide Funds) The
risk that unanticipated prepayments may occur, reducing the value of mortgage-
or asset-backed securities, or real estate investment trusts.
POLITICAL RISK (All Funds) The risk of losses directly attributable to
government or political actions.
EURO CONVERSION (All Funds) Many European countries have adopted a single
European currency, the "euro." The consequences of this conversion for foreign
exchange rates, interest rates and the value of European securities are unclear
presently. Such consequences may decrease the value and/or increase the
volatility of securities held by a Fund.
<PAGE>
Management Team [graphic omitted]
---------------
MEET THE FUNDS' INVESTMENT ADVISERS
AND SUBADVISERS
The Nvest Funds family includes 25 mutual funds with a total of over $8 billion
in assets under management as of December 31, 1999. Nvest Funds are distributed
through Nvest Funds Distributor, L.P. (the "Distributor"). This Prospectus
covers Class Y shares of Nvest Star Funds (the "Funds" or each a "Fund"), which
along with Nvest Stock Funds, Nvest Bond Funds, Kobrick Funds and Nvest State
Tax-Free Funds, constitute the "Nvest Funds." Nvest Cash Management Trust Money
Market Series and Nvest Tax Exempt Money Market Trust constitute the "Money
Market Funds."
NVEST FUNDS MANAGEMENT, L.P.
Nvest Management, located at 399 Boylston Street, Boston, Massachusetts 02116,
serves as the adviser to each Fund. Nvest Management is a subsidiary of Nvest
Companies, L.P. ("Nvest Companies"), which is part of an affiliated group
including Nvest, L.P., a publicly-traded company listed on the New York Stock
Exchange (the "Exchange"). Nvest Companies' 18 principal subsidiary or
affiliated asset management firms, collectively, had more than $133 billion in
assets under management as of December 31, 1999. Nvest Management oversees,
evaluates and monitors the subadvisory services provided to each Fund. It also
provides general business management and administration to the Funds. Nvest
Management, however, does not determine what investments will be purchased by
the Funds. The subadvisers listed below and CGM make the investment decisions
for their respective Fund.
The combined advisory and subadvisory fees paid by each Fund in 1999 as a
percentage of each Fund's average daily net assets were 1.04% for Star Advisers
Fund, 1.05% for Star Small Cap Fund, 1.05% for Star Worldwide Fund and 0.73% for
Star Value Fund.
SUBADVISERS
HARRIS ASSOCIATES, located at Two North LaSalle Street, Chicago, Illinois 60602,
serves as subadviser to segments of the Star Advisers, Star Worldwide, Star
Small Cap and Star Value Funds. Harris Associates, a subsidiary of Nvest
Companies, manages over $12.6 billion in assets as of December 31, 1999, and,
together with its predecessor, has managed mutual funds since 1970. It also
manages investments for other mutual funds as well as assets of individuals,
trusts, retirement plans, endowments, foundations, and several private
partnerships.
JANUS, located at 100 Fillmore Street, Denver, Colorado 80206, serves as a
subadviser to a segment of the Star Advisers Fund. Janus has managed mutual
funds since 1970 and also advises individual, corporate, charitable and
retirement accounts. Kansas City Southern Industries Inc., ("KCSI") a publicly
traded holding company, owns approximately 82% of the outstanding voting stock
of Janus, indirectly through its wholly owned subsidiary, Stilwell Financial
Inc. Thomas H. Baily, President and Chairman of the Board of Janus, owns
approximately 12% of its voting stock and, by agreement with KCSI, selects a
majority of Janus' Board. KCSI has announced its intention to spin off its
financial services subsidiaries, which it expects to complete in the first half
of 2000.
KOBRICK, located at 101 Federal Street, Boston, Massachusetts 02110, serves as
subadviser to the Star Advisers Fund. Kobrick is a subsidiary of Nvest
Companies. Kobrick, the predecessor to which was formed in 1997, focuses
primarily on managing growth-oriented equity funds, including three mutual
funds.
LOOMIS SAYLES, located at One Financial Center, Boston, Massachusetts, 02111,
serves as subadviser to segments of the Star Advisers, Star Worldwide, Star
Small Cap and Star Value Funds. Founded in 1926, Loomis Sayles is one of
America's oldest investment advisory firms with over $67 billion in assets under
management as of December 31, 1999. Loomis Sayles, a subsidiary of Nvest
Companies, is well known for its professional research staff, which is one of
the largest in the industry.
MONTGOMERY, located at 101 California Street, San Francisco, California 94111,
serves as subadviser to the Star Small Cap Fund and Star Worldwide Fund.
Montgomery was formed in 1990 and advises institutional separate accounts as
well as a family of no-load mutual funds. Montgomery is a subsidiary of
Commerzbank AG, a German commercial bank.
<PAGE>
[graphic omitted] Management Team
---------------
RS INVESTMENT MANAGEMENT, located at 388 Market Street, San Francisco,
California 94111 (formerly Robertson, Stephens & Company Investment Management,
L.P.), serves as subadviser to a segment of the Star Small Cap Fund. RS
Investment Management was formed in 1993 and provides investment advisory
services to both private and public investment funds. On February 26, 1999,
Robertson Stephens Investment Management Co. LLC purchased Robertson Stephens
Investment Management Co. Inc. and its subsidiary, RS Investment Management,
from BankAmerica Corporation. The Fund's Board of Trustees approved the
continuation of the Fund's arrangement with RS Investment Management following
consummation of the transaction.
VAUGHAN, NELSON, SCARBOROUGH & MCCULLOUGH (VNSM), located at 6300 Chase Tower,
Houston, Texas 77002, serves as subadviser to a segment of the Star Value Fund.
VNSM is a subsidiary of Nvest Companies. Originally incorporated in 1970, VNSM
focuses primarily on managing equity and fixed-income funds for clients who
consist of foundations, university endowments and corporate retirement and
family/individual core funds. As of December 31, 1999, VNSM has approximately
$4.4 billion in assets under management.
WESTPEAK, located at 1011 Walnut Street, Boulder, Colorado 80302, serves as
subadviser to a segment of the Star Value Fund. Westpeak is a subsidiary of
Nvest Companies. Founded in 1991, Westpeak has approximately $10 billion in
assets under management as of December 31, 1999.
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 the Fund's Board of Trustees. Shareholders
will be notified of any subadviser changes.
PORTFOLIO TRADES
In placing portfolio trades, a Fund's subadviser may use brokerage firms that
market the Fund's shares or are affiliated with Nvest Companies, Nvest
Management or any of the subadvisers. In placing such trades the subadvisers
will seek to obtain the best combination of price and execution, which involves
a number of judgmental factors. Such Fund trades are subject to applicable
regulatory restrictions and related procedures adopted by the Fund's Board of
Trustees.
<PAGE>
Management Team [graphic omitted]
---------------
MEET THE FUNDS' PORTFOLIO MANAGERS
STAR VALUE FUND
ROBERT M. LEVY
Robert Levy has co-managed the Harris Associates segment of Star Value Fund
since February 2000. Mr. Levy is Partner, President and Chief Executive Officer
of Harris Associates and he joined the company in 1985. Mr. Levy, a Chartered
Financial Analyst, received a B.A. from Vanderbilt University and an M.B.A. from
the Wharton School of Business, University of Pennsylvania and has 23 years of
investment experience.
FLOYD J. BELLMAN
Floyd Bellman has assisted in managing the Harris Associates segment of Star
Value Fund since February 2000. Mr. Bellman is a Portfolio Manager and Vice
President in charge of Harris Associates Investment Advisory Department. Mr.
Bellman, a Chartered Financial Analyst, received a B.B.A. from the University of
Wisconsin and has 19 years of investment experience. Mr. Bellman joined Harris
Associates in 1995.
JEFFREY W. WARDLOW
Jeffrey W. Wardlow has co-managed Star Value Fund since August 1998 and managed
the Loomis Sayles segment of Star Value Fund since May 2000. He also manages the
equity portion of Nvest Balanced Fund. Mr. Wardlow, Vice President of Loomis
Sayles, joined the company over 10 years ago. Mr. Wardlow received both his
B.B.A. and his M.B.A. from Michigan State University and has over 17 years of
investment experience.
MARGARET M. BUESCHER
Margaret M. Buescher has co-managed the VNSM segment of Star Value Fund since
February 2000. She also co-manages Nvest Equity Income Fund. Ms. Buescher,
Principal of VNSM, joined the company in 1994. From 1980 to 1994, she was a
Managing Director and Senior Portfolio Manager for the Texas Commerce Investment
Management Company. Ms. Buescher, a Chartered Financial Analyst, received a B.A.
from Vanderbilt University and has over 25 years of investment experience.
JEAN MALO
Jean Malo has co-managed the VNSM segment of Star Value Fund since February
2000. He also co-manages Nvest Equity Income Fund. Mr. Malo is Partner,
Principal and Chief Investment Officer of VNSM. Previously, he was a Senior
Vice-President at Daniel Breen & Co., which was bought by VNSM in 1997. Mr. Malo
joined Daniel Breen & Co. in 1989. He is also a Chartered Financial Analyst. Mr.
Malo received his M.B.A. from ESSEC in Paris, France and has over 22 years of
investment experience.
GERALD H. SCRIVER
Gerald H. Scriver has managed the Westpeak segment of Star Value Fund since
February 2000. He also manages Nvest Growth and Income Fund and Nvest Capital
Growth Fund. Mr. Scriver is the founder, President and Chief Executive officer
of Westpeak Investment Advisors. Mr. Scriver is a graduate of the State
University of N.Y. at Buffalo and has over 34 years of investment experience.
STAR ADVISERS FUND
ROBERT J. SANBORN
Robert J. Sanborn has managed the Harris Associates segment of Star Advisers
Fund since June 1997 and Harris Associates domestic segment of Star Worldwide
Fund since its inception in December 1995. He also managed Oakmark Fund since
its inception in August 1991 to March 2000. Mr. Sanborn, Vice President of
Harris Associates, joined the firm in 1988. He is also a Chartered Financial
Analyst. He received an M.B.A. from the University of Chicago, his B.A. from
Dartmouth College, and has 16 years of investment experience.
<PAGE>
[graphic omitted] Management Team
---------------
WARREN B. LAMMERT
Warren B. Lammert has served as portfolio manager for the Janus segment of Star
Advisers Fund since its inception. Mr. Lammert, Vice President of Janus, joined
the firm in 1987. He has earned the right to use the Chartered Financial Analyst
designation. He is also portfolio manager of Janus Mercury Fund. He holds his
B.A. from Yale University and his M.S. from the London School of Economics and
has 13 years of investment experience.
FREDERICK R. KOBRICK
Frederick R. Kobrick has managed the Kobrick segment of Star Advisers Fund since
August 23, 1999. Mr. Kobrick also manages Kobrick Capital Fund (since its
inception on December 31, 1997) and Kobrick Emerging Growth Fund (from its
inception on December 31, 1997 until February 1, 1999 and returned as manager on
April 9, 1999). For the 12-year period immediately prior to becoming President
of the predecessor to Kobrick Funds LLC in 1997, he was an equity portfolio
manager at State Street Research & Management Company, where he had served as
Senior Vice President since 1989 and as a member of the firm's Equity Investment
Committee since 1985. Mr. Kobrick, a Chartered Financial Analyst, received an
M.B.A. from Harvard Business School, a B.A. from Boston University and has over
29 years of investment experience.
JOSEPH R. GATZ
Joseph R. Gatz has served as lead portfolio manager of the Loomis Sayles segment
of Star Advisers Fund since January 2000. Mr. Gatz, Vice President of Loomis
Sayles, joined the firm in 1999. He is also co-portfolio manager of Loomis
Sayles Mid-Cap Value Fund and lead portfolio manager of Loomis Sayles Small Cap
Value Fund. Prior to joining Loomis Sayles, Mr. Gatz was a portfolio manager at
Banc One Investment Advisers Corporation and certain of its corporate
predecessors since 1993. Mr. Gatz, a Chartered Financial Analyst, received a
M.B.A. from Indiana University, a B.A. from Michigan State University and has 15
years of investment experience.
DAWN ALSTON PAIGE
Dawn Alston Paige has served as co-portfolio manager of the Loomis Sayles
segment of Star Advisers Fund since January 2000. Ms. Alston Paige, Vice
President of Loomis Sayles, joined the firm in 1992. She is also co-portfolio
manager of Loomis Sayles Mid-Cap Value Fund and co-portfolio manager of Loomis
Sayles Small Cap Value Fund. Ms. Alston Paige, a Chartered Financial Analyst,
received a M.B.A. from University of Michigan, a B.S. from Virginia Commonwealth
University and has eight years of investment experience.
DANIEL G. THELEN
Daniel G. Thelen has served as co-portfolio manager of the Loomis Sayles segment
of Star Advisers Fund since April 2000. Mr. Thelen, Vice President of Loomis
Sayles, joined the firm in 1996. He is also co-portfolio manager of Loomis
Sayles Small Cap Value Fund. Prior to joining Loomis Sayles, Mr. Thelen was a
manager at PricewaterhouseCoopers LLC. Mr. Thelen, a Chartered Financial
Analyst, received a M.B.A. and B.A. from Michigan State University, and has 10
years of investment experience.
STAR SMALL CAP FUND
JAMES P. BENSON
James P. Benson has served as co-manager of the Harris Associates segment of
Star Small Cap Fund since November 23, 1999. Mr. Benson joined Harris Associates
in 1997 as an investment analyst. Prior to joining Harris, he served as an
executive vice president and director of equity research for Ryan Beck & Co. Mr.
Benson holds an M.M. in Finance from Northwestern University and a B.A. in
Economics and Computer Sciences from Westminster College. He is a Chartered
Financial Analyst with 19 years of investment experience.
STEVEN J. REID
Steven J. Reid has served as portfolio manager of the Harris Associates segment
of Star Small Cap Fund since its inception. Mr. Reid has also managed the
Oakmark Small Cap Fund since its inception in November 1995. Mr. Reid, Vice
President of Harris Associates, joined the firm in 1980. Mr. Reid is a Chartered
Financial Analyst. He holds a B.A. from Roosevelt University. He has 13 years of
investment experience.
<PAGE>
Management Team [graphic omitted]
---------------
CHRISTOPHER R. ELY
Christopher R. Ely has co-managed the Loomis Sayles segment of Star Small Cap
Fund since its inception in December 1996. Mr. Ely, Vice President of Loomis
Sayles, joined the firm in 1996. He also manages Loomis Sayles Small Cap Growth
Fund. Prior to joining Loomis Sayles, Mr. Ely was Senior Vice President and
Portfolio Manager at Keystone Investment Management Company, Inc. He holds a
B.A. from Brown University and an M.B.A. from Babson College. He has 21 years of
investment management experience.
PHILIP C. FINE
Dr. Philip C. Fine has co-managed the Loomis Sayles segment of Star Small Cap
Fund since its inception. Dr. Fine, Vice President of Loomis Sayles, joined the
firm in 1996. He also manages Loomis Sayles Small Cap Growth Fund. Prior to
joining Loomis Sayles, Dr. Fine was a Vice President and Portfolio Manager at
Keystone Investment Management Company, Inc. He received an A.B. and a Ph.D.
from Harvard University. He has 12 years of investment management experience.
DAVID L. SMITH
David L. Smith has co-managed the Loomis Sayles segment of Star Small Cap Fund
since its inception. Mr. Smith, Vice President of Loomis Sayles, joined the firm
in 1996. He also manages Loomis Sayles Small Cap Growth Fund. Prior to joining
Loomis Sayles, Mr. Smith was a Vice President and Portfolio Manager at Keystone
Investment Management Company, Inc. He holds an M.B.A. from Cornell University
and a B.A. from the University of Massachusetts at Amherst. He has 14 years of
investment management experience.
KATHRYN PETERS
Kathryn Peters has served as portfolio manager of Montgomery's segment of Star
Small Cap Fund since March 1999. Ms. Peters, Portfolio Manager and Principal of
Montgomery, joined the firm in January 1995. She also manages the Montgomery U.
S. Emerging Growth Fund. Prior to joining Montgomery she was an associate in the
investment banking division of Donaldson, Lufkin & Jenrette. Ms. Peters is a
graduate of Boston College and holds an M.B.A. from Harvard University. She has
13 years of investment management experience.
JOHN L. WALLACE
John L. Wallace has served the RS Investment Management segment of Star Small
Cap Fund as portfolio manager from that Fund's inception until October 1997 and
as co-portfolio manager thereafter. He also serves as portfolio manager to RS
MidCap Opportunities Fund as well as RS Diversified Growth Fund. Mr. Wallace,
Vice President of RS Investment Management, joined the firm in 1995. Prior to
joining RS Investment Management, Mr. Wallace managed over $4 billion in assets
at Oppenheimer as portfolio manager of Main Street Income & Growth Fund and
Total Return Fund. He holds a B.A. from the University of Idaho and an M.B.A.
from Pace University. He has 19 years of investment experience.
JOHN H. SEABERN
John H. Seabern has served as co-portfolio manager for the RS Investment
Management segment of the Star Small Cap Fund since October 1997. Mr. Seabern,
Vice President of RS Investment Management, joined the firm in 1993. He is also
co-manager of RS Diversified Growth Fund. Prior to joining RS Investment
Management, he served as a performance analyst at Duncan-Hurst Capital
Management. Mr. Seabern holds a B.S. degree in finance from the University of
Colorado and has 9 years of investment management experience.
STAR WORLDWIDE FUND
ROBERT J. SANBORN
Robert J. Sanborn has managed the Harris Associates U.S. segment of Star
Worldwide Fund since its inception in December 1995 and the Harris Associates
segment of Star Advisers Fund since June 1997. He also managed Oakmark Fund
since its inception in August 1991 to March 2000. Mr. Sanborn, a Vice President
of Harris Associates, joined the firm in 1988. He is also a Chartered Financial
Analyst. He received an M.B.A. from the University of Chicago and a B.A. from
Dartmouth College, and has 16 years of investment experience.
DAVID G. HERRO
David G. Herro has co-managed the Harris Associates international segment of
Star Worldwide Fund since the Fund's inception. He also co-manages Oakmark
International Fund. Mr. Herro, Portfolio Manager at Harris Associates, joined
the firm in 1992. He is a Chartered Financial Analyst and holds an M.A. and a
B.S. from the University of Wisconsin. He has 14 years of investment
experience.
<PAGE>
[graphic omitted] Management Team
---------------
MICHAEL J. WELSH
Michael J. Welsh has co-managed the Harris Associates international segment of
Star Worldwide Fund since the Fund's inception. He also co-manages Oakmark
International Fund. Mr. Welsh, Vice President of Harris Associates, joined the
firm in 1992. He is a Chartered Financial Analyst and a Certified Public
Accountant. He holds an M.M. from Northwestern University and a B.S. from the
University of Kansas, and has 15 years of investment management experience.
ALEXANDER MUROMCEW
Alexander Muromcew serves as co-portfolio manager for the Loomis Sayles segment
of Star Worldwide Fund (concentrating on Asian markets), Nvest International
Equity Fund, the International Equities sector of Loomis Sayles Worldwide Fund,
Loomis Sayles International Equity Fund and Loomis Sayles Emerging Markets Fund.
Prior to joining Loomis Sayles in 1999, Mr. Muromcew was a portfolio manager at
Nicholas Applegate Capital Management since 1996. Prior to 1996, Mr. Muromcew
held positions with Jardine Fleming Securities in Japan, Emerging Markets
Investors Corporation and Teton Partners L.P. He received an M.B.A. from
Stanford University, a B.A. from Dartmouth College and has over 10 years of
investment experience.
JOHN TRIBOLET
John Tribolet serves as co-portfolio manager for the Loomis Sayles segment of
Star Worldwide Fund (concentrating on European markets), Nvest International
Equity Fund, the International Equities sector of Loomis Sayles Worldwide Fund,
Loomis Sayles International Equity Fund and Loomis Sayles Emerging Markets Fund.
Prior to joining Loomis Sayles in 1999, Mr. Tribolet was a portfolio manager for
European Equities at Nicholas Applegate Capital Management since 1997. From 1995
to 1997 he was a full time MBA student at the University of Chicago. Prior to
1995, he spent three years in the investment banking industry, most recently at
Paine Webber Inc. He received his B.S. from Columbia University and has over 8
years of investment experience.
ESWAR MENON
Eswar Menon serves as co-portfolio manager for the Loomis Sayles segment of Star
Worldwide Fund (concentrating on Emerging markets), Nvest International Equity
Fund, the International Equities sector of Loomis Sayles Worldwide Fund, Loomis
Sayles International Equity Fund and Loomis Sayles Emerging Markets Fund. Prior
to joining Loomis Sayles in 1999, Mr. Menon was the Portfolio Manager for
Emerging Countries at Nicholas Applegate Capital Management since 1995. Prior to
his position at Nicholas Applegate Capital Management, he spent five years with
Koeneman Capital Management and Integrated Device Technology. Mr. Menon received
an M.B.A. from the University of Chicago, an M.S. from the University of
California, a B.S. from Indian Institute of Technology, Madras, India and has
over 10 years of investment experience.
OSCAR CASTRO
Oscar Castro has co-managed the Montgomery segment of Star Worldwide Fund since
August 1998. Mr. Castro, Senior Portfolio Manager of Montgomery, has been
employed by the firm since 1993. He also co-manages Montgomery Global
Opportunities Fund. He is a graduate of Simon Bolivar University and holds an
M.B.A. from Drexel University and has 17 years of investment experience.
<PAGE>
JOHN BOICH
John Boich has co-managed the Montgomery segment of Star Worldwide Fund since
August 1998. Mr. Boich, Senior Portfolio Manager of Montgomery, joined the firm
in 1993. He also co-manages Montgomery Global Opportunities Fund. He is a
graduate of the University of Colorado and has 15 years of investment
experience.
<PAGE>
Fund Services [graphic omitted]
-------------
IT'S EASY TO OPEN AN ACCOUNT
TO OPEN AN ACCOUNT WITH NVEST FUNDS:
1. Read this Prospectus carefully.
2. Read the following eligibility and minimum investment requirements to
determine if you may purchase Class Y shares.
Class Y shares of the Funds may be purchased by the following entities at
the following investment minimums.
A minimum initial investment is $1 million and $10,000 is the minimum
subsequent investment for:
o Other mutual funds, endowments, foundations, bank trust departments or
trust companies.
There is no initial or subsequent investment minimum for:
o RETIREMENT PLANS (401(a), 401(k), 457 or 403(b) plans) that have total
investment assets of at least $10 million. Plan sponsor accounts can be
aggregated to meet this minimum.
o INSURANCE COMPANY ACCOUNTS of New England Financial, Metropolitan Life
Insurance Company ("MetLife") or their affiliates.
o SEPARATE ACCOUNTS of New England Financial, MetLife, or their
affiliates.
o WRAP FEE PROGRAMS of certain broker-dealers not being paid by the Funds,
Nvest Management or the Distributor. Such wrap fee programs may be
subject to additional or different conditions, including a wrap account
fee. Each broker-dealer is responsible for transmitting to its customer
a schedule of fees and other information regarding any such conditions.
If the participant who purchased Class Y shares through a wrap fee
program should terminate the wrap fee arrangement with the
broker-dealer, then the Class Y shares will, at the discretion of the
broker-dealer, automatically be converted to a number of Class A shares
of the same Fund having the same dollar value of the shares converted,
and the broker-dealer may thereafter be entitled to receive from that
Fund an annual service fee of 0.25% of the value of Class A shares owned
by that shareholder.
o CERTAIN INDIVIDUAL RETIREMENT ACCOUNTS if the amounts invested represent
rollover distributions from investments by any of the Retirement Plans
set forth above.
o DEFERRED COMPENSATION PLAN ACCOUNTS OF NEW ENGLAND LIFE INSURANCE
COMPANY ("NELICO"), METLIFE OR THEIR AFFILIATES (DEFERRED COMPENSATION
ACCOUNTS").
o SERVICE ACCOUNTS through an omnibus account by investment advisers,
financial planners, broker-dealers or other intermediaries who have
entered into a service agreement with a Fund. A fee may be charged to
shareholders purchasing through a service account if they effect
transactions through such parties and should contact such parties
regarding information regarding such fees.
3. You should contact Nvest Funds at 800-225-5478 for an application or if you
have any questions about purchasing Fund shares.
4. Use the sections of this Prospectus that follow as your guide for purchasing
shares.
CERTIFICATES
You will not receive certificates representing Class Y shares.
NVEST FUNDS WEB SITE
You may have access to your account 24 hours a day by visiting us online at
www.nvestfunds.com.
<PAGE>
[graphic omitted] Fund Services
-------------
BUYING SHARES
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
THROUGH YOUR INVESTMENT DEALER
o Call your investment dealer o Call your investment dealer
for information. for information.
BY MAIL
[graphic omitted]
o Make out a check in U.S. dollars o Make out a check in U.S. dollars
for the investment amount, for the investment amount,
payable to "Nvest Funds." Third payable to "Nvest Funds." Third
party and "starter" checks will party and "starter" checks will
generally not be accepted. generally not be accepted.
o Mail the check with your o Fill out the detachable
completed application to Nvest investment slip from an account
Funds, P.O. Box 8551, Boston, MA statement. If no slip is
02266-8551. available, include with the check
a letter specifying the Fund
name, your class of shares, your
account number and the registered
account name(s). To make
investing even easier, you can
order more investment slips by
calling 800-225-5478.
BY EXCHANGE
[graphic omitted
o Obtain a current prospectus for o Call your investment dealer or
the Fund into which you are Nvest Funds at 800-225-5478 or
exchanging by calling your visit nvestfunds.com to request
investment dealer or Nvest Funds an exchange.
at 800-225-5478.
o See the section entitled
o Call your investment dealer or "Exchanging Shares."
Nvest Funds to request an
exchange.
o See the section entitled
"Exchanging Shares."
BY WIRE
[graphic omitted]
o Call Nvest Funds at 800-225-5478 o Visit nvestfunds.com to add
to obtain an account number and shares to your account by wire.
wire transfer instructions. Your
bank may charge you for such a o Instruct your bank to transfer
transfer. funds to State Street Bank &
Trust Company, ABA# 011000028,
DDA# 99011538.
o Specify the Fund name, your
account number and the registered
account name(s). Your bank may
charge you for such a transfer.
THROUGH AUTOMATED CLEARING HOUSE ("ACH")
[graphic omitted]
o Ask your bank or credit union o Call Nvest Funds at 800-225-5478
whether it is a member of the ACH or visit nvestfunds.com to add
system. shares to your account through ACH.
o Complete the "Telephone
Withdrawal and Exchange" and o If you have not signed up for the
"Bank Information" sections on ACH system, please call Nvest
your account application. Funds for a Service Options Form.
A signature guarantee may be
o Mail your completed application required to add this privilege.
to Nvest Funds, P.O. Box 8551,
Boston, MA 02266-8551.
<PAGE>
Fund Services [graphic omitted]
-------------
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
[graphic omitted]
o Call your investment dealer for information.
BY MAIL
[graphic omitted]
o Write a letter to request a redemption specifying the name of the Fund, your
class of shares, your account number, the exact registered account name(s),
the number of shares or the dollar amount to be redeemed and the method by
which you wish to receive your proceeds. Additional materials may be
required. See the section entitled "Selling Shares in Writing."
o The request must be signed by all of the owners of the shares including the
capacity in which they are signing, if appropriate.
o Mail your request to Nvest Funds, P.O. Box 8551, Boston, MA 02266-8551.
o Your proceeds will be delivered by the method chosen in your letter. If you
choose to have your proceeds delivered by mail, they will generally be mailed
to you on the business day after the request is received. You may also choose
to redeem by wire or through ACH (see below).
BY EXCHANGE
[graphic omitted]
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
[graphic omitted]
o Fill out the "Telephone Withdrawal and Exchange" and "Bank Information"
sections on your account application.
o Call Nvest Funds at 800-225-5478; visit nvestfunds.com or indicate in your
redemption request letter (see above) that you wish to have your proceeds
wired to your bank.
o Proceeds will generally be wired on the next business day. A wire fee
(currently $5.00) will be deducted from the proceeds.
THROUGH AUTOMATED CLEARING HOUSE ("ACH")
[graphic omitted]
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 or visit nvestfunds.com to request a redemption through this
system.
o Proceeds will generally arrive at your bank within three business days.
o BY TELEPHONE
[graphic omitted]
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.
<PAGE>
[graphic omitted] Fund Services
-------------
SELLING SHARES IN WRITING
If you wish to redeem your shares in writing, all owners of the shares must sign
the redemption request in the exact names in which the shares are registered and
indicate any special capacity in which they are signing. In certain situations,
you will be required to make your request to sell shares in writing. In these
instances, a letter of instruction signed by the authorized owner is necessary.
In certain situations we also may require a signature guarantee or additional
documentation.
A signature guarantee protects you against fraudulent orders and is necessary
if:
o your address of record has been changed within the past 30 days;
o you are selling more than $100,000 worth of shares and you are requesting the
proceeds by check; or
o a proceeds check for any amount is mailed to an address other than the
address of record or not payable to the registered owner(s).
A notary public CANNOT provide a signature guarantee. A signature guarantee can
be obtained from one of the following sources:
o a financial representative or securities dealer;
o a federal savings bank, cooperative or other type of bank;
o a savings and loan or other thrift institution;
o a credit union; or
o a securities exchange or clearing agency.
<PAGE>
Fund Services
EXCHANGING SHARES
You may exchange Class Y shares of your Fund for Class Y shares of any other
Nvest Fund which offers Class Y shares or for Class A shares of the Money Market
Funds. Agents, general agents, directors and senior officers of NELICO and its
insurance company subsidiaries may, at the discretion of NELICO, elect to
exchange Class Y shares of any Nvest Fund in a NELICO Deferred Compensation
Account for Class A shares of any other Nvest Fund which does not offer Class Y
shares. Class A shares of any Nvest Fund in a NELICO Deferred Compensation
Account may also be exchanged for Class Y shares of any Nvest Fund. All
exchanges are subject to the eligibility requirements of the Nvest Fund or Money
Market 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.
For federal income tax purposes, an exchange of fund shares for shares of
another Nvest Fund or Money Market Fund is treated as a sale on which gain or
loss may be recognized. Please refer to the Statement of Additional Information
(the "SAI") for more detailed information on exchanging Fund shares.
RESTRICTIONS ON BUYING, SELLING AND EXCHANGING SHARES
PURCHASE AND EXCHANGE RESTRICTIONS
Although the Funds do not anticipate doing so, they reserve the right to suspend
or change the terms of purchasing or exchanging shares. The Funds and the
Distributor reserve the right to refuse or limit any purchase or exchange order
by a particular purchaser (or group of related purchasers) if the transaction
is deemed harmful to the best interest of the Fund's other shareholders or would
disrupt the management of the Fund. The Funds and the Distributor reserve the
right to restrict purchases and exchanges for the accounts of "market timers" by
limiting the transaction to a maximum dollar amount. An account will be deemed
to be one of a market timer if: (i) more than two exchange purchases of a given
Fund are made for the account in a calendar quarter or (ii) the account makes
one or more exchange purchases of a given Fund in a calendar quarter in an
aggregate amount in excess of 1% of the Fund's total net assets.
SELLING RESTRICTIONS
The table below describes restrictions placed on selling shares of any Fund
described in this Prospectus:
RESTRICTION SITUATION
The Fund may suspend the right of redemption or o When the Exchange is
postpone payment for more 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 account o With a notice of a
services or refuse transaction requests: dispute between
registered owners
o With suspicion/evidence
of a fraudulent act
The Fund may pay the redemption price in whole or o When it is detrimental
part by a distribution in kind of readily for a Fund to make cash
marketable securities in lieu of cash or may take payments as determined
up to 7 days to pay a redemption request in order in the sole discretion
to raise capital: of the adviser or
subadviser
The Fund may withhold redemption proceeds until o When redemptions are
the check or funds have cleared: made within 10 calendar
days of purchase by
check or ACH of the
shares being redeemed
Telephone redemptions are not accepted for tax-qualified retirement accounts.
<PAGE>
[graphic omitted] Fund Services
-------------
HOW FUND SHARES ARE PRICED
"Net asset value" is the price of one share of a Fund without a sales charge,
and is calculated each business day using this formula:
TOTAL MARKET VALUE OF SECURITIES + CASH AND
NET ASSET VALUE = OTHER ASSETS - LIABILITIES
-------------------------------------------
NUMBER OF OUTSTANDING SHARES
The net asset value of Fund shares is determined according to this schedule:
o A share's net asset value is determined at the close of regular trading on
the Exchange on the days the Exchange is open for trading. This is normally
4:00 p.m. Eastern time.
o The price you pay for purchasing, redeeming or exchanging a share will be
based upon the net asset value next calculated after your order is received
"in good order" by State Street Bank and Trust Company, the Fund's custodian
(plus or minus applicable sales charges as described earlier in this
Prospectus).
o Requests received by the Distributor after the Exchange closes will be
processed based upon the net asset value determined at the close of regular
trading on the next day that the Exchange is open, with the exception that
those orders received by your investment dealer before the close of the
Exchange and received by the Distributor before 5:00 p.m. Eastern time* on
the same day will be based on the net asset value determined on that day.
o A Fund heavily invested in foreign securities may have net asset value
changes on days when you cannot buy or sell its shares.
* Under limited circumstances, the Distributor may enter into a contractual
agreement where it may accept orders after 5:00 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."
Generally, Fund securities are valued as follows:
o EQUITY SECURITIES -- most recent sales or quoted bid price as provided by a
pricing service.
o DEBT SECURITIES (OTHER THAN SHORT-TERM OBLIGATIONS) -- based upon pricing
service valuations.
o SHORT-TERM OBLIGATIONS (REMAINING MATURITY OF LESS THAN 60 DAYS) --
amortized cost (which approximates market value).
o SECURITIES TRADED ON FOREIGN EXCHANGES -- most recent sale/bid price on the
non-U.S. Exchange, unless an occurrence after the close of the exchange will
materially affect its value. In that case, it is given fair value as
determined by or under the direction of the Funds' Board of Trustees at the
close of regular trading on the Exchange.
o OPTIONS -- last sale price, or if not available, last offering price.
o FUTURES -- unrealized gain or loss on the contract using current settlement
price. When a settlement price is not used, futures contracts will be valued
at their fair value as determined by or under the direction of the Funds'
Board of Trustees.
o ALL OTHER SECURITIES -- fair market value as determined by the adviser or
subadviser of the Fund under the direction of the Funds' Board of Trustees.
The effect of fair value pricing as described above for "Securities traded on
foreign exchanges" and "All other securities" is that securities may not be
priced on the basis of quotations from the primary market in which they are
traded but rather, may be priced by another method that the Funds' Board of
Trustees believes accurately reflects fair value.
<PAGE>
Fund Services [graphic omitted]
-------------
DIVIDENDS AND DISTRIBUTIONS
The Funds generally distribute most or all of their net investment income (other
than capital gains) in the form of dividends. Each Fund expect to distribute
dividends on an annual basis. Each Fund distributes all net realized long- and
short-term capital gains annually, after applying any available capital loss
carryovers. 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 Receive distributions from dividends and interest in cash while reinvesting
distributions from capital gains in additional Class Y shares of the Fund or
in Class Y shares of another Nvest Fund.
o Receive all distributions in cash.
Unless you select one of the above options, distributions will automatically be
reinvested in Class Y shares of the Fund.
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
Fund, you will receive a Form 1099 to help you report the prior calendar year's
distributions on your federal income tax return. Be sure to keep the 1099 as a
permanent record. A fee may be charged for any duplicate information requested.
TAX CONSEQUENCES
Each Fund intends to meet all requirements of the Internal Revenue Code
necessary to qualify as a "regulated investment company" and thus does not
expect to pay any federal income tax on income and capital gains distributed to
shareholders.
Fund distributions paid to you either in cash or reinvested in additional shares
are generally taxable to you either as ordinary income or as capital gains.
Distributions derived from short-term capital gains or investment income are
generally taxable at ordinary income rates. If you are a corporation investing
in a Fund, a portion of these dividends may qualify for the dividends-received
deduction provided that you meet certain holding period requirements.
Distributions of gains from investments that a Fund owned for more than one year
that are designated by a Fund as capital gain dividends will generally be
taxable to a shareholder receiving such distributions as long-term capital gain,
regardless of how long the shareholder has held Fund shares.
An exchange of shares for shares of another Nvest Fund or Money Market Fund is
treated as a sale, and any resulting gain or loss may be subject to federal
income tax. If you purchase shares of a Fund shortly before it declares a
capital gain distribution or a dividend, a portion of the purchase price may be
returned to you as a taxable distribution.
You should consult your tax adviser about any federal, state and local taxes
that may apply to the distributions you receive. Shareholders of Funds investing
in foreign securities should also consult their tax advisers about consequences
of their investments under foreign laws.
<PAGE>
[graphic omitted] Fund Services
-------------
COMPENSATION TO SECURITIES DEALERS
The Distributor may, at its expense, pay concessions to dealers which satisfy
certain criteria established from time to time by the distributor relating to
increasing net sales of shares of the Nvest Funds over prior periods, and
certain other factors. See the SAI for more details.
<PAGE>
[graphic omitted] Fund Performance
----------------
The financial highlights table is intended to help you understand each Fund's
financial performance for the past 5 years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
Fund share. The total returns in the tables represent the return that an
investor would have earned (or lost) on an investment in the Funds (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, are incorporated by reference in
the SAI, which is available upon request
NVEST STAR VALUE FUND
<TABLE>
<CAPTION>
CLASS Y
. YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 7.24 $ 8.75 $ 9.55 $ 10.10 $ 9.65
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.12 0.08 0.06(a) 0.06(a) 0.06
Net Realized and Unrealized Gain on Investments 2.21 2.10 1.95 0.59 (0.71)
Distributions in Excess of Net Realized Gains 0.00 0.00 0.00 0.00 (0.15)
---------- ---------- ---------- ---------- ----------
Total From Investment Operations 2.33 2.18 2.01 0.65 (0.65)
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.11) (0.08) (0.03) (0.04) (0.05)
Distributions From Net Realized Capital Gains (0.71) (1.30) (1.43) (1.06) (1.38)
Distributions in Excess of Net Realized Gains 0.00 0.00 0.00 0.00 (0.15)
---------- ---------- ---------- ---------- ----------
Total Distributions (0.82) (1.38) (1.46) (1.10) (1.58)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Year $ 8.75 $ 9.55 $ 10.10 $ 9.65 $ 7.42
========== ========== ========== ========== ==========
TOTAL RETURN (%) 32.8 26.4 21.3 7.4 (6.7)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) 1.12 1.06 1.00 1.01 1.08
Ratio of Net Investment Income to Average Net Assets (%) 1.47 1.03 0.53 0.54 0.57
Portfolio Turnover Rate (%) 52 64 55 75 70
Net Assets, End of Year (000) $ 6,738 $ 12,716 $ 24,164 $ 17,789 $ 10,205
(a) Per share net investment income has been calculated using the average shares outstanding during the year.
</TABLE>
<PAGE>
[graphic omitted] Fund Performance
----------------
NVEST STAR ADVISERS FUND
<TABLE>
<CAPTION>
CLASS Y
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 13.24 $ 16.83 $ 18.33 $ 18.41 $ 20.37
---------- ---------- ---------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.00 (0.02)(a) 0.03(a) 0.00(a) (0.07)(a)
Net Realized and Unrealized Gain (Loss) on Investments 4.58 3.23 3.66 3.34 0.09
---------- ---------- ---------- ------- -------
Total From Investment Operations 4.58 3.21 3.69 3.34 9.02
---------- ---------- ---------- ------- -------
LESS DISTRIBUTIONS
Dividends From Net Investment Income 0.00 0.00 0.00 0.00 0.00
Distributions From Net Realized Capital Gains (0.99) (1.71) (3.61) (1.38) (4.31)
---------- ---------- ---------- ------- -------
Total Distributions (0.99) (1.71) (3.61) (1.38) (4.31)
---------- ---------- ---------- ------- -------
Net Asset Value, End of Year (000) $ 16.83 $ 18.33 $ 18.41 $ 20.37 $ 25.08
========== ========== ========== ======= =======
TOTAL RETURN (%) 34.8 19.6 20.5 19.6 46.8
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) 1.57 1.43 1.41 1.37 1.37
Ratio of Net Investment Income to Average Net Assets (%) (0.08) (0.11) 0.11 0.01 (0.29)
Portfolio Turnover Rate (%) 142 127 168 101 186
Net Assets, End of Year (000) $ 5,569 $ 18,649 $ 37,006 $42,517 $75,013
(a) Per share net investment loss has been calculated using the average shares outstanding during the year.
</TABLE>
<PAGE>
[graphic omitted] Fund Performance
----------------
NVEST STAR SMALL CAP FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1998 1999 1997 1998 1999 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Year (a) $ 12.50 $ 15.37 $ 15.66 $ 12.50 $ 15.26 $ 15.43 $ 12.50 $ 15.26 $15.43
------- ------- ------- ------- ------- -------- -------- ------- ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (b) (0.20) (0.23) (0.27) (0.30) (0.33) (0.39) (0.30) (0.33) (0.39)
Net Realized and Unrealized Gain on
Investments 3.55 0.54 10.22 3.54 0.52 10.00 3.54 0.52 10.00
------- ------- ------- ------- ------- -------- -------- ------- ------
Total from Investment Operations 3.35 0.31 9.95 3.24 0.19 9.61 3.24 0.19 9.61
------- ------- ------- ------- ------- -------- -------- ------- ------
LESS DISTRIBUTIONS
Distributions from Net Realized
Capital Gains (0.48) (0.02) (2.19) (0.48) (0.02) (2.19) (0.48) (0.02) (2.19)
------- ------- ------- ------- ------- -------- -------- ------- ------
Total Distributions (0.48) (0.02) (2.19) (0.48) (0.02) (2.19) (0.48) (0.02) (2.19)
------- ------- ------- ------- ------- -------- -------- ------- ------
Net Asset Value, End of Year $ 15.37 $ 15.66 $ 23.42 $ 15.26 $ 15.43 $ 22.85 $ 15.26 $ 15.43 $22.85
======= ======= ======= ======= ======= ======== ======== ======= ======
TOTAL RETURN (%)(C) 27.0 2.1 65.4 26.1 1.3 64.1 26.1 1.3 64.1
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 2.20 2.07 2.06 2.95 2.82 2.81 2.95 2.82 2.81
Ratio of Net Investment Income (Loss)
to Average Net Assets (%) (1.44) (1.52) (1.54) (2.19) (2.27) (2.29) (2.19) (2.27) (2.29)
Portfolio Turnover Rate (%) 140 182 263 140 182 263 140 182 263
Net Assets, End of Year (000) $52,066 $56,161 $84,725 $52,616 $61,409 $102,029 $13,970 $15,412 $26,027
(a) Commencement of operations December 31, 1996.
(b) Per share net investment loss has been calculated using the average shares outstanding during the year.
(c) A sales charge for Class A shares or a CDSC for Class B and C shares is not reflected in total return calculations.
</TABLE>
<PAGE>
[graphic omitted] Fund Performance
----------------
NVEST STAR WORLDWIDE FUND
<TABLE>
<CAPTION>
CLASS A
YEAR ENDED DECEMBER 31,
1996 1997 1998 1999
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year (a) $ 12.50 $ 14.40 $ 15.46 $ 16.08
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (b) (0.03) (0.02) 0.01 (0.07)
Net Realized and Unrealized Gain
(Loss) on Investments 2.11 1.88 0.61 5.98
----------- ----------- ----------- -----------
Total from Investment Operations 2.08 1.86 0.62 5.91
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Distributions from Net Realized
Capital Gains (0.18) (0.76) 0.00 (2.09)
Distributions from Paid-in Capital 0.00 (0.04) 0.00 0.00
----------- ----------- ----------- -----------
Total Distributions (0.18) (0.80) 0.00 (2.09)
----------- ----------- ----------- -----------
Net Asset Value, End of Year $ 14.40 $ 15.46 $ 16.08 $ 19.90
=========== =========== =========== ===========
TOTAL RETURN (%)(C) 16.7 12.7 4.0 37.6
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 2.58 2.07 2.09 2.06
Ratio of Net Investment Income
(Loss) to Average Net Assets (%) (0.21) (0.12) 0.03 (0.42)
Portfolio Turnover Rate (%) 57 80 84 91
Net Assets, End of Year (000) $ 68,509 $ 118,381 $ 106,763 $ 126,415
</TABLE>
<TABLE>
<CAPTION>
CLASS B
YEAR ENDED DECEMBER 31,
1996 1997 1998 1999
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year (a) $ 12.50 $ 14.30 $ 15.23 $ 15.73
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (b) (0.12) (0.14) (0.11) (0.20)
Net Realized and Unrealized Gain
(Loss) on Investments 2.10 1.87 0.61 5.82
----------- ----------- ----------- -----------
Total from Investment Operations 1.98 1.73 0.50 5.62
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Distributions from Net Realized
Capital Gains (0.18) (0.76) 0.00 (2.09)
Distributions from Paid-in Capital 0.00 (0.04) 0.00 0.00
----------- ----------- ----------- -----------
Total Distributions (0.18) (0.80) 0.00 (2.09)
----------- ----------- ----------- -----------
Net Asset Value, End of Year $ 14.30 $ 15.23 $ 15.73 $ 19.26
=========== =========== =========== ===========
TOTAL RETURN (%)(C) 15.9 11.9 3.3 36.6
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 3.33 2.82 2.84 2.81
Ratio of Net Investment Income
(Loss) to Average Net Assets (%) (0.96) (0.87) (0.72) (1.17)
Portfolio Turnover Rate (%) 57 80 84 91
Net Assets, End of Year (000) $ 65,367 $ 123,467 $ 116,305 $ 141,338
</TABLE>
<TABLE>
<CAPTION>
CLASS C
YEAR ENDED DECEMBER 31,
1996 1997 1998 1999
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year (a) $ 12.50 $ 14.31 $ 15.24 $ 15.75
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (b) (0.12) (0.13) (0.11) (0.21)
Net Realized and Unrealized Gain
(Loss) on Investments 2.11 1.86 0.62 5.82
----------- ----------- ----------- -----------
Total from Investment Operations 1.99 1.73 0.51 5.61
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Distributions from Net Realized
Capital Gains (0.18) (0.76) 0.00 (2.09)
Distributions from Paid-in Capital 0.00 (0.04) 0.00 0.00
----------- ----------- ----------- -----------
Total Distributions (0.18) (0.80) 0.00 (2.09)
----------- ----------- ----------- -----------
Net Asset Value, End of Year $ 14.31 $ 15.24 $ 15.75 $ 19.27
=========== =========== =========== ===========
TOTAL RETURN (%)(C) 15.9 11.8 3.3 36.5
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 3.33 2.82 2.84 2.81
Ratio of Net Investment Income
(Loss) to Average Net Assets (%) (0.96) (0.87) (0.72) (1.17)
Portfolio Turnover Rate (%) 57 80 84 91
Net Assets, End of Year (000) $ 17,980 $ 26,137 $ 23,016 $ 28,703
(a) The Fund commenced operations on December 29, 1995.
(b) Per Share net investment income (loss) has been calculated using the average shares outstanding during the year.
(c) A sales charge for Class A shares or a CDSC for Class B and C shares is not reflected in total return calculations.
</TABLE>
<PAGE>
GLOSSARY OF TERMS
BID PRICE -- The price a prospective buyer is ready to pay. This term is used by
traders who maintain firm bid and offer prices in a given security by standing
ready to buy or sell security units at publicly quoted prices.
BOTTOM-UP ANALYSIS -- The search for outstanding performance of individual
stocks before considering the impact of economic trends. Such companies may be
identified from research reports, stock screens or personal knowledge of the
products and services.
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
S&P, Moody's or Fitch Investor Services, Inc. ("Fitch"). Bonds with a credit
rating of BBB or higher by S&P, Baa or higher by Moody's or BBB by Fitch are
generally considered investment grade.
DERIVATIVE -- Derivative A financial instrument whose value and performance are
based on the value and performance of another security or financial instrument.
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 companies or
industries to reduce the risk if an individual company or one sector of the
market suffers losses.
DIVIDEND YIELD -- The current or estimated annual dividend divided by the market
price per share of a security.
DURATION -- A measure of how much a bond's price fluctuates with changes in
comparable interest rates.
EARNINGS GROWTH -- A pattern of increasing rate of growth in earnings per share
from one period to another, which usually causes a stock's price to rise.
FUNDAMENTAL ANALYSIS -- An analysis of the balance sheet and income statements
of a company in order to forecast its future stock price movements. Fundamental
analysis considers past records of assets, earnings, sales, products, management
and markets in predicting future trends in these indicators of a company's
success or failure. By appraising a company's prospects, analysts using such an
approach assess whether a particular stock or group of stocks is undervalued or
overvalued at its current market price.
GROWTH INVESTING -- An investment style that emphasizes companies with strong
earnings growth. Growth investing is generally considered more aggressive than
"value" investing.
INCOME DISTRIBUTIONS -- Payments to 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.
MARKET CAPITALIZATION -- Market price multiplied by number of shares
outstanding. Large capitalization companies generally have over $5 billion in
market capitalization; medium cap companies between $1.5 billion and $5 billion;
and small cap companies less than $1.5 billion. These capitalization figures may
vary depending upon the index being used and/or the guidelines used by the
portfolio manager.
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.
PRICE-TO-BOOK VALUE RATIO -- Current market price of a stock divided by its book
value, or net asset value.
PRICE-TO-EARNINGS RATIO -- Current market price of a stock divided by its
earnings per share. Also known as the "multiple," the price-to-earnings ratio
gives investors an idea of how much they are paying for a company's earning
power and is a useful tool for evaluating the costs of different securities.
Some firms use the inverse ratio for this calculation(i.e. earnings-to-price
ratio).
QUALITATIVE ANALYSIS -- An analysis of the qualities possessed by a company,
including its management, products and competitive positions, to help determine
if the company can execute its strategy.
RETURN ON EQUITY -- The amount, expressed as a percentage, earned on a company's
common stock investment for a given period. It is calculated by dividing common
stock equity (net worth) at the beginning of the accounting period into net
income for the period after preferred stock dividends but before common stock
dividends. This tells common shareholders how effectively their money is being
employed.
RULE 144A SECURITIES -- Rule 144A securities are privately offered securities
that can be resold only to certain qualified institutional buyers. Rule 144A
securities are treated as illiquid, unless a manager has determined, under
guidelines established by a Fund's trustees, that a particular issue of Rule
144A securities is liquid.
TARGET PRICE -- Price that an investor is hoping a stock he or she has just
bought will rise to within a specified period of time. An investor may buy XYZ
at $20, with a target price of $40 in one year's time, for instance.
TECHNICAL ANALYSIS -- The research into the demand and supply for securities,
options, mutual funds and commodities based on trading volume and price studies.
Technical analysis uses charts or computer programs to identify and project
price trends in a market, security, mutual fund or futures contract.
TOP-DOWN APPROACH -- The method in which an investor first looks at trends in
the general economy, and next selects attractive industries and then companies
that should benefit from those trends.
TOTAL-RETURN -- The change in value of an investment in a Fund over a specific
time period expressed as a percentage. Total returns assume all earnings are
reinvested in additional shares of a Fund.
VALUE INVESTING -- A relatively conservative investment approach that focuses on
companies that may be temporarily out of favor or whose earnings or assets are
not fully reflected in their stock prices. Value stocks will tend to have a
lower price-to-earnings ratio than growth stocks.
VOLATILITY -- The general variability of a portfolio's value resulting from
price fluctuations of its investments. In most cases, the more diversified a
portfolio is, the less volatile it will be.
YIELD -- The rate at which a fund earns income, expressed as a percentage.
Mutual fund yield calculations are standardized, based upon a formula developed
by the SEC.
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.
<PAGE>
NOTES
<PAGE>
If you would like more information about the Funds, the
following documents are available free upon request:
ANNUAL AND SEMIANNUAL REPORTS -- Provide additional
information about each Fund's investments. Each
report includes a discussion of the market conditions
and investment strategies that significantly affected the
Fund's performance during its last fiscal year. 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 (SAI) -- Provides
more detailed information about the Funds, has been
filed with the Securities and Exchange Commission
and is incorporated into this Prospectus by reference.
TO ORDER A FREE COPY OF A FUND'S ANNUAL OR
SEMIANNUAL REPORT OR ITS SAI, CONTACT YOUR FINANCIAL
REPRESENTATIVE, OR THE FUNDS AT:
Nvest Funds Distributor, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Telephone: 800-225-5478
Internet: www.nvestfunds.com
Your financial representative or Nvest Fund
will also be happy to answer your questions or to provide any
additional information that you may require.
You can review the Funds' reports and SAIs at the
Public Reference Room of the Securities and Exchange
Commission 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.
NVEST STAR FUNDS
Class Y Shares of:
Nvest Star Value Fund
Nvest Star Advisers Fund
Nvest Star Small Cap Fund
Nvest Star Worldwide Fund
(Investment Company Act File No. 811-4323)
- --------------------------------------------------------------------------------
YR51-0500
<PAGE>
NVESTFUNDS(SM)
Where The Best Minds Meet(R)
- --------------------------------------------------------------------------------
NVEST CAPITAL GROWTH FUND NVEST BALANCED FUND
NVEST GROWTH AND INCOME FUND NVEST GROWTH FUND
NVEST INTERNATIONAL EQUITY FUND NVEST BULLSEYE FUND
NVEST EQUITY INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION -- PART I
MAY 1, 2000
This Statement of Additional Information (the "Statement") contains
information which may be useful to investors but which is not included in the
Prospectus of the Nvest Funds listed above (the "Funds" and each a "Fund"). This
Statement is not a prospectus and is authorized for distribution only when
accompanied or preceded by the Prospectus of the Funds dated May 1, 2000 for
Class A, Class B and Class C shares or the Prospectus of the Funds dated May 1,
2000 for Class Y shares (the "Prospectus" or "Prospectuses"). The Statement
should be read together with the Prospectus. Investors may obtain a free copy of
the Prospectus from Nvest Funds Distributor, L.P., Prospectus Fulfillment Desk,
399 Boylston Street, Boston, Massachusetts 02116, by calling Nvest Funds at
800-225-5478 or by placing an order online at www.nvestfunds.com. Part I of this
Statement contains specific information about the Funds. Part II includes
information about the Funds as well as other Nvest Funds.
Nvest Growth Fund, Nvest Capital Growth Fund, Nvest Balanced Fund and Nvest
International Equity Fund are each a diversified fund of Nvest Funds Trust I, a
registered open-end management investment company that offers a total of twelve
funds; Nvest Growth and Income Fund is a diversified fund of Nvest Funds Trust
II, a registered open-end management investment company that offers a total of
six funds; and Nvest Equity Income Fund and Nvest Bullseye Fund are diversified
and non-diversified, respectively, funds of Nvest Funds Trust III, a registered
open-end management investment company that currently offers a total of two
funds. Nvest Funds Trust I, Nvest Funds Trust II and Nvest Funds Trust III are
collectively referred to in this Statement as the "Trusts" and are each referred
to as a "Trust." The Funds' financial statements and accompanying notes that
appear in the Funds' annual and semi-annual reports are incorporated by
reference into this Statement. Each Fund's annual and semiannual report contains
additional performance information and is available upon request and without
charge by calling 800-225-5478.
T A B L E O F C O N T E N T S
PART I Page
Investment Restrictions ii
Fund Charges and Expenses viii
Ownership of Fund Shares xvi
Investment Performance of the Funds xix
PART II
Miscellaneous Investment Practices 2
Management of the Trusts 22
Portfolio Transactions and Brokerage 36
Description of the Trusts and Ownership of Shares 43
How to Buy Shares 46
Net Asset Value and Public Offering Price 46
Reduced Sales Charges - Class A Shares Only 47
Shareholder Services 49
Redemptions 56
Standard Performance Measures 58
Income Dividends, Capital Gain Distributions and Tax Status 63
Financial Statements 65
Appendix A - Description of Bond Ratings 66
Appendix B - Publications That May Contain Fund Information 68
Appendix C - Advertising and Promotional Literature 71
Appendix D - Portfolio Composition of the High Income, Bond Income, 75
Strategic Income and Municipal Income Funds
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The following is a description of restrictions on the investments to be
made by the Funds. The restrictions marked with an asterisk (*) may not be
changed without the vote of a majority of the outstanding voting securities of
the relevant Fund (as defined in the Investment Company Act of 1940, as amended
[the "1940 Act"]). Except in the case of restrictions marked with a dagger (+)
below, the percentages set forth below and the percentage limitations set forth
in the Prospectus will apply at the time of the purchase of a security and shall
not be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of a purchase of such security.
NVEST GROWTH FUND AND NVEST BALANCED FUND
Nvest Growth Fund (the "Growth Fund") and Nvest Balanced Fund (the "Balanced
Fund") each will not:
*(1) Purchase any security (other than U.S. Government securities) if, as a
result, more than 5% of the Fund's total assets (taken at current value)
would then be invested in securities of a single issuer or 25% of the
Fund's total assets (taken at current value) would be invested in any one
industry;
*(2) 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;
*(3) Acquire more than 10% of any class of securities of an issuer (taking all
preferred stock issues of an issuer as a single class and all debt issues
of an issuer as a single class) or acquire more than 10% of the
outstanding voting securities of an issuer;
*(4) Borrow money in excess of 10% of its total assets (taken at cost) or 5% of
its total assets (taken at current value), whichever is lower, and then
only as a temporary measure for extraordinary or emergency purposes;
*(5) Pledge more than 15% of its total assets (taken at cost);
*(6) Invest more than 5% of its total assets (taken at current value) in
securities of businesses (including predecessors) less than three years
old;
*(7) Purchase or retain securities of any issuer if officers and trustees of
Nvest Funds Trust I or of the investment adviser of the Fund who
individually own more than 1/2 of 1% of the shares or securities of that
issuer together own more than 5%;
*(8) Make loans, except by purchase of bonds, debentures, commercial paper,
corporate notes and similar evidences of indebtedness, which are a part of
an issue to the public or to financial institutions;
*(9) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
real estate or commodities or commodity contracts. (This restriction does
not prevent such Funds from purchasing securities of companies investing
in the foregoing);
*(10) 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 certain federal securities laws;
*(11) Make investments for the purpose of exercising control or management;
*(12) Participate on a joint or joint and several basis in any trading account
in securities;
*(13) Purchase options or warrants if, as a result, more than 1% of its total
assets (taken at current value) would be invested in such securities;
*(14) Write options or warrants;
*(15) Invest in the securities of other investment companies, except by
purchases in the open market involving only customary brokers'
commissions. (Under the 1940 Act, the Growth Fund and the Balanced Fund
each 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 total assets of
such Fund [taken at current value], or (c) own more than 3% of the
outstanding voting stock of any one investment company);
*(16) Issue senior securities. For the purpose of this restriction, none of the
following is deemed to be a senior security: any borrowing permitted by
restriction (4) above; any pledge or other encumbrance of assets permitted
by restriction (5) above; any collateral arrangements with respect to
options, forward contracts, futures contracts, swap contracts and other
similar contracts and options on futures contracts and with respect to
initial and variation margin; the purchase or sale of options, forward
contracts, futures contracts, swap contracts and other similar contracts
or options on futures contracts; and the issuance of shares of beneficial
interest permitted from time to time by the provisions of Nvest Funds
Trust I's Agreement and Declaration of Trust and by the 1940 Act, the
rules thereunder, or any exemption therefrom; or
+(17) Invest more than 15% of the Fund's total net assets in illiquid securities
(excluding Rule 144A securities and certain Section 4(2) commercial paper
deemed to be liquid under guidelines established by Nvest Funds Trust I's
trustees.)
The staff of the Securities and Exchange Commission (the "SEC") is
currently of the view that repurchase agreements maturing in more than
seven days are illiquid and thus subject to restriction (17) above.
NVEST CAPITAL GROWTH FUND
Nvest Capital Growth Fund (the "Capital Growth Fund") may not:
(1) With respect to 75% of its total assets, purchase any security (other than
U.S. Government securities) if, as a result, more than 5% of the Fund's
total assets (taken at current value) would then be invested in securities
of a single issuer;
*(2) Purchase any security (other than U.S. Government securities) if, as a
result, more than 25% of the Fund's total assets (taken at current value)
would be invested in any one industry (in the utilities category, gas,
electric, water and telephone companies will be considered as being in
separate industries, and each foreign country's government [together with
subdivisions thereof] will be considered to be a separate industry);
(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. (For this purpose,
the deposit or payment by the Fund of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin);
(4) Acquire more than 10% of any class of securities of an issuer (other than
U.S. Government securities and taking all preferred stock issues of an
issuer as a single class and all debt issues of an issuer as a single
class) or with respect to 75% of its total assets, acquire more than 10%
of the outstanding voting securities of an issuer;
*(5) Borrow money in excess of 10% of its total assets (taken at cost) or 5% of
its total assets (taken at current value), whichever is lower, and then
only as a temporary measure for extraordinary or emergency purposes;
(6) Pledge more than 15% of its total assets (taken at cost). (For the purpose
of this restriction, collateral arrangements with respect to options,
futures contracts and options on futures contracts and with respect to
initial and variation margin are not deemed to be a pledge of assets);
*(7) Make loans, except by entering into repurchase agreements or by purchase
of bonds, debentures, commercial paper, corporate notes and similar
evidences of indebtedness, which are a part of an issue to the public or
to financial institutions, or through the lending of the Fund's portfolio
securities;
*(8) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
real estate or commodities or commodity contracts, except that the Fund
may buy and sell futures contracts and related options. (This restriction
does not prevent the Fund from purchasing securities of companies
investing in the foregoing);
*(9) 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 certain federal securities laws;
(10) Except to the extent permitted by rule or order of the SEC, 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 the Fund's adviser or subadviser or accounts under its management to
reduce brokerage commissions, to average prices among them or to
facilitate such transactions is not considered a trading account in
securities for purposes of this restriction);
(11) Write, purchase or sell options, except that the Fund may (a) write,
purchase and sell put and call options on securities or securities indexes
and (b) enter into currency forward contracts;
+(12) Invest more than 15% of its net assets (taken at current value) in
illiquid securities (excluding Rule 144A securities and certain Section
4(2) commercial paper deemed to be liquid under guidelines established by
Nvest Funds Trust I's trustees); or
*(13) Issue senior securities. (For the purpose of this restriction, none of the
following is deemed to be a senior security: any pledge or other
encumbrance of assets permitted by restriction (6) above; any borrowing
permitted by restriction (5) above; any collateral arrangements with
respect to options, futures contracts and options on futures contracts and
with respect to initial and variation margin; the purchase or sale of
options, forward contracts, futures contracts or options on futures
contracts; and the issuance of shares of beneficial interest permitted
from time to time by the provisions of Nvest Funds Trust I's Agreement and
Declaration of Trust and by the 1940 Act, the rules thereunder, or any
exemption therefrom.)
The staff of the SEC is currently of the view that repurchase agreements
maturing in more than seven days are illiquid and thus subject to
restriction (12) above.
NVEST INTERNATIONAL EQUITY FUND
Nvest International Equity Fund (the "International Equity Fund") may not:
(1) With respect to 75% of its total assets, purchase any security (other than
U.S. Government securities) if, as a result, more than 5% of the Fund's
total assets (taken at current value) would then be invested in securities
of a single issuer;
*(2) Purchase any security (other than U.S. Government securities) if, as a
result, more than 25% of the Fund's total assets (taken at current value)
would be invested in any one industry (in the utilities category, gas,
electric, water and telephone companies will be considered as being in
separate industries, and each foreign country's government (together with
subdivisions thereof) will be considered to be a separate industry);
(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. (For this purpose,
the deposit or payment by the Fund of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin);
(4) Acquire more than 10% of any class of securities of an issuer (other than
U.S. Government securities and taking all preferred stock issues of an
issuer as a single class and all debt issues of an issuer as a single
class) or with respect to 75% of its total assets, acquire more than 10%
of the outstanding voting securities of an issuer (such percentage
limitations apply to closed-end management investment companies as well);
*(5) Borrow money in excess of 10% of its total assets (taken at cost) or 5% of
its total assets (taken at current value), whichever is lower, and then
only as a temporary measure for extraordinary or emergency purposes;
(6) Pledge more than 15% of its total assets (taken at cost). (For the purpose
of this restriction, collateral arrangements with respect to options,
futures contracts and options on futures contracts and with respect to
initial and variation margin are not deemed to be a pledge of assets);
*(7) Make loans, except by entering into repurchase agreements or by purchase
of bonds, debentures, commercial paper, corporate notes and similar
evidences of indebtedness, which are a part of an issue to the public or
to financial institutions, or through the lending of the Fund's portfolio
securities;
*(8) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
real estate or commodities or commodity contracts, except that the Fund
may buy and sell futures contracts and related options. (This restriction
does not prevent the Fund from purchasing securities of companies
investing in the foregoing);
*(9) 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 certain federal securities laws;
(10) Except to the extent permitted by rule or order of the SEC, 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 the Fund's adviser or subadviser or accounts under its management to
reduce brokerage commissions, to average prices among them or to
facilitate such transactions is not considered a trading account in
securities for purposes of this restriction);
(11) Write, purchase or sell options, except that the Fund may (a) write,
purchase and sell put and call options on securities, securities indexes,
currencies, futures contracts, swap contracts and other similar
instruments and (b) enter into currency forward contracts;
+(12) Purchase any illiquid security if, as a result, more than 15% of its net
assets (taken at current value) would be invested in such securities
(excluding Rule 144A securities and certain Section 4(2) commercial paper
deemed to be liquid under guidelines established by Nvest Funds Trust I's
trustees); or
*(13) Issue senior securities. For the purpose of this restriction none of the
following is deemed to be a senior security: any pledge or other
encumbrance of assets permitted by restriction (6) above; any borrowing
permitted by restriction (5) above; any collateral arrangements with
respect to options, futures contracts and options on futures contracts and
with respect to initial and variation margin; the purchase or sale of
options, forward contracts, futures contracts or options on futures
contracts; and the issuance of shares of beneficial interest permitted
from time to time by the provisions of Nvest Funds Trust I's Agreement and
Declaration of Trust and by the 1940 Act, the rules thereunder, or any
exemption therefrom.
The staff of the SEC is currently of the view that repurchase agreements
maturing in more than seven days are illiquid and thus subject to
restriction (12) above.
NVEST GROWTH AND INCOME FUND
Nvest Growth and Income Fund (the "Growth and Income Fund") will not:
*(1) Purchase securities of an issuer if such purchase would cause more than 5%
of the market value of the total Fund assets to be invested in the
securities of such issuer (exclusive of United States or Canadian
government obligations), or if such purchase would cause more than 10% of
the securities of such issuer to be held by the Fund;
*(2) Purchase or retain the securities of any issuer if the officers and
trustees of Nvest Funds Trust II owning beneficially 1/2 of 1% of the
securities of such issuer together own beneficially more than 5% of the
securities of such issuer;
*(3) Purchase the securities issued by any other investment company, except
that a purchase involving no commission or profit to a sponsor or dealer
(other than a customary broker's commission) is permitted and except that
a purchase that is part of a plan of merger or consolidation is permitted;
*(4) Purchase securities issued by companies with a record (including that of
their predecessors) of less than three years of continuous operation;
*(5) Purchase securities for the portfolio on margin, make short sales or make
loans to persons affiliated with Nvest Funds Trust II;
*(6) Act as underwriter of securities of other issuers, or invest directly in
real estate or in commodities or commodity contracts;
*(7) Make loans to other persons, provided, however, that this restriction
shall not prohibit the Fund from entering into repurchase agreements with
respect to not more than 25% of the Fund's total assets taken at current
value. The purchase of a portion of an issue of bonds, notes or debentures
publicly distributed or of a type customarily purchased by institutional
investors does not constitute the making of loans within the meaning of
this restriction;
*(8) Borrow money, except that the Fund may make secured or unsecured bank
borrowings, provided that an asset coverage of at least 300% for all such
borrowings (including the amount then being borrowed) is maintained as
required by the 1940 Act;
*(9) Issue senior securities. For the purpose of this restriction, none of the
following is deemed to be a senior security; any borrowing permitted by
restriction (8) above; any collateral arrangements with respect to
options, futures contracts, swap contracts and other similar contracts and
options on futures contracts and with respect to initial and variation
margin; the purchase or sale of options, forward contracts, futures
contracts, swap contracts and other similar contracts or options on
futures contracts; and the issuance of shares of beneficial interest
permitted from time to time by the provisions of Nvest Funds Trust II's
Agreement and Declaration of Trust and by the 1940 Act, the rules
thereunder, or any exemption therefrom; or
+(10) Invest more than 15% of the Fund's total net assets in illiquid securities
(excluding Rule 144A securities and certain Section 4(2) commercial paper
deemed to be liquid under guidelines established by Nvest Funds Trust II's
trustees).
The staff of the SEC is currently of the view that repurchase agreements
maturing in more than seven days are illiquid and thus subject to
restriction (10) above.
It is a fundamental policy of the Fund that it will not concentrate its
assets in the securities of issuers in the same industry. The Fund intends to
abide by the views of the SEC staff on what constitutes industry concentration.
Accordingly, the Fund will not make an investment if, immediately thereafter,
the Fund would hold more than 25% of its total assets in securities of issuers
in any one industry. This limitation does not apply to securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
The Fund has no present intention of borrowing money except on a temporary
basis, as may be needed, to cover redemptions of shares. Should this intention
change, the Prospectus will be amended.
NVEST EQUITY INCOME FUND
Nvest Equity Income Fund (the "Equity Income Fund") will not:
*(1) Purchase any security (other than U.S. Government securities) if, as a
result, more that 25% of the Fund's total assets (taken at current value)
would be invested in any one industry (in the utilities category, gas,
electric, water and telephone companies will be considered as being in
separate industries, and each foreign country's government (together with
subdivisions thereof) will be considered to be a separate industry);
(2) 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
considerations, 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. (For this purpose,
the deposit or payment by the Fund of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin);
*(3) Borrow money in excess of 25% of its total assets, and then only as a
temporary measure for extraordinary or emergency purposes;
(4) Pledge more than 25% of its total assets (taken at cost). (For the purpose
of this restriction, collateral arrangements with respect to options,
futures contracts, options on futures contracts and swap contracts and
with respect to initial and variation margin are not deemed to be a pledge
of assets);
*(5) Make loans, except by entering into repurchase agreements or by purchase
of bonds, debentures, commercial paper, corporate notes and similar
evidences of indebtedness, which are a part of an issue to the public or
to financial institutions, or through the lending of the Fund's portfolio
securities;
*(6) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
real estate or commodities or commodity contracts, except that the Fund
may buy and sell futures contracts, swap contracts and related options.
(This restriction does not prevent the Fund from purchasing securities of
companies investing in the foregoing);
*(7) 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 certain federal securities laws;
(8) 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 the Fund's adviser or subadviser or accounts
under its management to reduce brokerage commissions, to average prices
among them or to facilitate such transactions is not considered a trading
account in securities for purposes of this restriction);
(9) Write, purchase or sell options, except that the Fund may (a) write,
purchase and sell put and call options on securities, securities indexes
or futures contracts and (b) enter in to currency forward contracts;
+(10) Purchase any illiquid security if, as a result, more than 15% of its net
assets (taken at current value) would be invested in such securities
(excluding Rule 144A securities and certain Section 4(2) commercial paper
deemed to be liquid under guidelines established by Nvest Funds Trust
III's trustees);
*(11) Issue senior securities. (For the purpose of this restriction none of the
following is deemed to be a senior security: any pledge or other
encumbrance of assets permitted by restrictions (2) or (4) above; any
borrowing permitted by restriction (3) above; any collateral arrangements
with respect to forward contracts, options, futures contracts, swap
contracts and options on futures contracts or swap contracts and with
respect to initial and variation margin, the purchase or sale of options,
forward contracts, future contracts, swap contracts or options on futures
contracts or swap contracts; and the issuance of shares of beneficial
interest permitted from time to time by the provisions of the Nvest Funds
Trust III's Agreement and Declaration of Trust and by the 1940 Act, the
rules thereunder, or any exemption therefrom);
(12) With respect to 75% of its total assets, purchase any security (other than
U.S. Government securities) if, as a result, more than 5% of the Fund's
total assets (taken at current value) would then be invested in securities
of a single issuer; or
(13) Acquire more than 10% of any class of securities of an issuer (taking all
preferred stock issues of an issuer as a single class and all debt issues
of an issuer as a single class) or acquire more than 10% of the outstanding
voting securities of an issuer.
The staff of the SEC is currently of the view that repurchase agreements
maturing in more than seven days are illiquid and thus subject to
restriction (10) above.
NVEST BULLSEYE FUND
Nvest Bullseye Fund (the "Bullseye Fund") may not:
*(1) Invest more than 25% of the Fund's total assets in the securities of
issuers engaged in any one industry (except securities issued by the U.S.
Government, its agencies or instrumentalities);
(2) 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 it owns or, 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. (For this purpose, the deposit or payment by the Fund of
initial or variation margin in connection with futures contracts or
related options transactions is not considered the purchase of a security
on margin);
*(3) Borrow money in excess of 33 1/3% of its total assets;
*(4) Make loans, except by entering into repurchase agreements or by purchase
of bonds, debentures, commercial paper, corporate notes and similar
evidences of indebtedness, which are a part of an issue to the public or
to financial institutions, or through the lending of the Fund's portfolio
securities;
*(5) Buy or sell real estate or commodities or commodity contracts, except that
the Fund may buy and sell financial futures contracts and options, swap
contracts, currency forward contracts, structured notes and other similar
instruments. (This restriction does not prevent the Fund from purchasing
securities of issuers that invest in the foregoing);
*(6) 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 certain federal securities laws;
+(7) Purchase any illiquid security if, as a result, more than 15% of its net
assets (taken at current value) would be invested in such securities
(excluding Rule 144A securities and certain Section 4(2) commercial paper
deemed to be liquid under guidelines established by Nvest Fund Trust III's
trustees);
*(8) Issue senior securities, except as permitted by the 1940 Act or any
relevant exemption thereunder. (For the purpose of this restriction none
of the following is deemed to be a senior security: any pledge or other
encumbrance of assets; any borrowing permitted by restriction (3) above;
any collateral arrangements with respect to options or futures contracts,
and with respect to initial and variation margin; and the purchase or sale
of options, forward contracts, futures contracts, swap contracts and other
similar instruments)
Although the Fund is permitted to borrow money to a limited extent, it
does not currently intend to do so.
The staff of the SEC is currently of the view that repurchase agreements
maturing in more than seven days are illiquid and thus subject to
restriction (7) above.
- --------------------------------------------------------------------------------
FUND CHARGES AND EXPENSES
- --------------------------------------------------------------------------------
MANAGEMENT FEES
Pursuant to an advisory agreement dated August 30, 1996, as amended June 1,
1999, Capital Growth Management Limited Partnership ("CGM") has agreed to manage
the investment and reinvestment of the assets of the Growth Fund, subject to the
supervision of the Board of Trustees of Nvest Funds Trust I. Under the advisory
agreement, the Fund pays CGM an advisory fee at the annual rate of 0.75% of the
first $200 million of the Fund's average daily net assets, 0.70% of the next
$300 million of such assets, 0.65% of the next $1,500 million and 0.60% of such
assets in excess of $2 billion. Prior to June 1, 1999, CGM served as adviser to
the Growth Fund pursuant to an advisory agreement providing for an advisory fee
at the annual rate of 0.75% of the first $200 million of the Fund's average
daily net assets, 0.70% of the next $300 million of such assets and 0.65% of
such assets in excess of $500 million.
Pursuant to separate advisory agreements, each dated August 30, 1996 and
amended May 1, 1998 (dated March 16, 1998 in the case of Bullseye Fund), Nvest
Funds Management, L.P. ("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 the Capital Growth, Balanced,
International Equity, Growth and Income, Equity Income and Bullseye Funds and to
provide a range of administrative services to such Funds. For the services
described in the advisory agreements, each such Fund has agreed to pay Nvest
Management a gross management fee at the annual rate set forth in the following
table, reduced by the amount of any sub-advisory fees paid by the Fund to the
subadviser pursuant to any sub-advisory agreement:
Management fee payable by Fund to Nvest
Fund Management
(includes any subadviser fees paid)
(as a percentage of average daily net
assets of the Fund)
- -------------------------------- -----------------------------------------
Balanced Fund and 0.75% of the first $200 million
Capital Growth Fund 0.70% of the next $300 million
0.65% of amounts in excess of $500
million
Growth and Income Fund and 0.70% of the first $200 million
Equity Income Fund 0.65% of the next $300 million
0.60% of amounts in excess of $500
million
International Equity Fund 0.90% of the first $200 million
0.85% of the next $300 million
0.80% of amounts in excess of $500
million
Bullseye Fund 0.95% of the first $200 million
0.90% of the next $300 million
0.85% of amounts in excess of $500
million
The advisory agreements for the Capital Growth, Balanced, International
Equity, Growth and Income, Equity Income and Bullseye Funds each provide that
Nvest Management may delegate its responsibilities thereunder to other parties.
Pursuant to separate subadvisory agreements, each dated August 30, 1996 and
amended May 1, 1998 for Balanced and Growth and Income Funds, (February 14,
1997, and amended May 1, 1998 for International Equity Fund, March 16, 1998 for
Bullseye Fund, April 17, 1998 for Capital Growth Fund and July 27, 1999 for
Equity Income Fund, respectively), Nvest Management has delegated responsibility
for managing the investment and reinvestment of each of these Funds' assets to a
subadviser. The subadviser is Loomis, Sayles & Company, L.P. ("Loomis Sayles"),
in the case of the International Equity and Balanced Funds, Westpeak Investment
Advisors, L.P. ("Westpeak"), in the case of the Growth and Income and Capital
Growth Funds, Jurika & Voyles, L.P. ("Jurika & Voyles") in the case of the
Bullseye Fund and Vaughan, Nelson, Scarborough & McCullough ("VNSM") in the case
of the Equity Income Fund. For the services described in the subadvisory
agreements, each such Fund has agreed to pay its respective subadviser a
subadvisory fee at the annual rate set forth in the following table:
Subadvisory fee payable to subadviser
(as a percentage of average daily net
Fund Subadviser assets of the Fund)
- ------------------------- ---------- ------------------------------------
Balanced Fund Loomis 0.535% of the first $200 million
Sayles 0.350% of the next $300 million
0.300% of amounts in excess of $500
million
Capital Growth Fund Westpeak 0.40% of the first $200 million
0.35% of the next $300 million
0.30% of amounts in excess of $500
million
Growth and Income Fund Westpeak 0.50% of the first $25 million
0.40% of the next $75 million
0.35% of the next $100 million
0.30% of the next $200 million
International Equity Fund Loomis 0.40% of the first $200 million
Sayles 0.35% of amounts in excess of $200
million
Equity Income Fund VNSM 0.400% of the first $200 million
0.325% of the next $300 million
0.275% of amounts in excess of $500
million
Bullseye Fund Jurika & 0.57% of the first $200 million
Voyles 0.50% of the next $300 million
0.43% of amounts in excess of $500
million
From August 30, 1996 to January 30, 1998, Loomis Sayles served as
subadviser to the Capital Growth Fund pursuant to a subadvisory agreement
between Nvest Management and Loomis Sayles providing for the same subadvisory
fee as is currently payable by the Capital Growth Fund to Westpeak.
From December 29, 1995 until February 14, 1997, Draycott Partners, Ltd.
("Draycott") served as subadviser to the International Equity Fund pursuant to
successive subadvisory agreements providing for a subadvisory fee payable by
Nvest Management to Draycott at the annual rate of 0.54% of the first $200
million of the Fund's average daily net assets, 0.49% of the next $300 million
of such assets and 0.44% of such assets in excess of $500 million.
From May 1, 1998 to April 30, 2000, Nvest Management gave either a
voluntary or a binding undertaking to International Equity Fund to reduce its
fees and, if necessary, to bear certain expenses related to operating the Fund
in order to limit the Fund's expenses to an annual rate of 2.00% of the average
daily net assets of the Fund's Class A shares, 2.75% of the average daily net
assets of the Fund's Class B shares, 2.75% of the average daily net assets of
the Fund's Class C shares and 1.75% (prior to August 23, 1999, 1.40%) of the
average daily net assets of the Fund's Class Y shares. Loomis Sayles voluntarily
agreed to waive in its entirety its subadvisory fee for the International Equity
Fund from February 14, 1997 through February 13, 1998. From December 29, 1995
until April 30, 1998, Nvest Management had voluntarily agreed to reduce its fees
and if necessary, to bear certain operating expenses in order to limit the
Fund's expenses to an annual rate of 1.75% for Class A shares, 2.50% for Class B
shares and 2.50% for Class C shares and 1.15% for Class Y shares (prior to
December 31, 1996, 1.00%) of the Fund's average daily net assets.
From August 30, 1996 to May 31, 1999, Loomis Sayles served as subadviser to
the Equity Income Fund pursuant to a subadvisory agreement between Nvest
Management and Loomis Sayles providing for the same subadvisory fee as is
currently payable by the Equity Income Fund to VNSM. For the period June 1, 1999
to July 27, 1999, VNSM served as subadviser to the Equity Income Fund under an
interim subadvisory agreement dated June 1, 1999 providing for the same fee that
was paid to Loomis Sayles. VNSM agreed to voluntarily waive its subadvisory fee
under the interim agreement until June 30, 1999, and during this period, the
Equity Income Fund continued to pay Loomis Sayles the subadvisory fee it would
have earned if it had continued to manage the Fund's portfolio. From September
1, 1997 to June 30, 1999, Loomis Sayles voluntarily agreed to waive its entire
subadvisory fee for such Fund. Since the Fund's inception Nvest Management has
given either a voluntary or a binding undertaking to Equity Income Fund to
reduce its management fee and, if necessary, to bear certain expenses associated
with operating the Fund to the extent necessary to limit the Fund's expenses to
the annual rate of 1.50% of average daily net assets for Class A shares, 2.25%
for Class B shares and 2.25% for Class C shares ("Expense Caps"). Beginning July
1, 1999, VNSM and Nvest Management split any fee waivers required in proportion
to the subadvisory and management fees collected. Nvest Management also bears
any additional expense reimbursement above the fee waivers required for the Fund
to meet the relevant Expense Cap. This undertaking will be binding on Nvest
Management for the life of the Fund's current Prospectus (subject to the
obligation of the Fund to pay such deferred fees or expense reimbursement in
later periods to the extent that the Fund's expenses fall below the annual rate
of 1.50% of average daily net assets for Class A shares, 2.25% for Class B
shares and 2.25% for Class C shares; provided, however, that the Fund is not
obligated to pay any such deferred fees or expense reimbursement more than one
year after the end of the fiscal year in which the fee was deferred. The
recapture period for expenses incurred prior to December 31, 1998 is two years.)
Nvest Management has given either a voluntary or a binding undertaking to
Bullseye Fund to reduce its management fee and, if necessary, to bear certain
expenses associated with the Fund, to the extent necessary to limit the Fund's
expenses to the annual rate of 1.75% for Class A shares, 2.50% for Class B
shares and 2.50% for Class C shares. This undertaking will be binding on Nvest
Management for the life of the Fund's current Prospectus (subject to the
obligation of the Fund to pay Nvest Management such deferred fees or expense
reimbursement in later periods to the extent that the Fund's expenses fall below
the annual rate of 1.75% for Class A shares, 2.50% for Class B shares and 2.50%
for Class C shares; provided, however, that the Fund is not obligated to pay any
such deferred fees or expense reimbursement more than one year after the end of
the fiscal year in which the fee or expense was deferred. The recapture period
for expenses incurred prior to December 31, 1998 is two years.)
As of May 1, 1998, each subadvisory agreement between Nvest Management and
Loomis Sayles or Westpeak was amended to add the relevant Fund as a party and to
provide that the subadvisory fees payable under such agreement are payable by
the Fund rather than by Nvest Management. Also as of May 1, 1998, the advisory
agreement for each Fund, except the Growth Fund and the Bullseye Fund, was
amended to provide that the management fees payable by the Fund to Nvest
Management are reduced by the amounts of any subadvisory fees paid directly by
the Fund to its subadviser (the advisory agreement for the Bullseye Fund already
provided for such payment arrangements). These amendments to the Funds' advisory
and subadvisory agreements did not change the management and subadvisory fee
rates under the agreements, nor the services to be provided to the Funds by
Nvest Management and the subadvisers under the agreements. Furthermore, these
amendments did not change the overall level of fees payable by any Fund.
For the last three fiscal years (or for the period from March 31, 1998 to
December 31, 1998 and the fiscal year ending December 31, 1999 in the case of
the Bullseye Fund), the advisory or management fees payable by the Funds (before
any voluntary fee reductions and any reduction by the amount of any subadvisory
fees paid by the Fund to its subadviser) were as follows.
FUND 1997** 1998*** 1999****
-------------------- ------ ------- --------
Growth Fund $9,757,792 $11,260,645 $12,879,997
Capital Growth Fund $1,436,893 $ 1,546,360 $ 1,826,043
Balanced Fund $2,830,754 $ 2,876,837 $ 2,517,100
International Equity Fund* $1,241,968 $ 734,344 $ 634,275
Growth and Income Fund $1,809,523 $ 2,586,482 $ 3,843,930
Equity Income Fund***** $ 41,756 $ 248,935 $ 196,897
Bullseye Fund****** N/A $ 115,268 $ 183,892
* As a result of the voluntary expense limitation in effect, the International
Equity Fund paid $734,003, $460,772 and $450,637, respectively, in advisory
or management fees for the fiscal years ended December 31, 1997, 1998 and
1999.
** For the fiscal year ended December 31, 1997, Nvest Management paid
subadvisory fees of $1,735,375 and $1,020,031 to Loomis Sayles for the
Balanced and Capital Growth Funds, respectively. For the fiscal year ended
December 31, 1997, Nvest Management paid subadvisory fees of $0 to Loomis
Sayles (after the waiver) and $964,009 to Westpeak for the Equity Income and
Growth and Income Funds, respectively. For the period January 1 to February
13, 1997, Nvest Management paid subadvisory fees of $77,259 to Draycott for
the International Equity Fund, and for the period February 14 to December
31, 1997, no subadvisory fees were paid by Nvest Management to Loomis Sayles
as a result of the voluntary fee waiver by Loomis Sayles. Without the
voluntary fee waiver, Nvest Management would have paid Draycott a
subadvisory fee for the International Equity Fund of $128,701 for the period
January 1, to February 13, 1997 and a subadvisory fee of $347,719 to Loomis
Sayles for the period February 14 to December 31, 1997.
***For the period January 1 to April 30, 1998, Nvest Management paid
subadvisory fees of $595,881 and $262,382 to Loomis Sayles for the Balanced
and Capital Growth Funds, respectively. Also, for the period January 1 to
April 30, 1998, Nvest Management paid a subadvisory fee of $91,245 to
Westpeak for the Capital Growth Fund. For the period May 1 to December 31,
1998, the Balanced and Capital Growth Funds paid subadvisory fees to Loomis
Sayles of $1,064,192 and $0, respectively. Also, for the period May 1 to
December 31, 1998, Nvest Management paid a subadvisory fee of $555,010 to
Westpeak for the Capital Growth Fund. For the period January 1 to April 30,
1998, Nvest Management paid subadvisory fees of $0 to Loomis Sayles (after
the waiver) and $396,979 to Westpeak for the Equity Income and Growth and
Income Funds, respectively. For the period May 1 to December 31, 1998, the
Equity Income Fund and Growth and Income Fund paid $0 to Loomis Sayles
(after the waiver) and $2,189,503 to Westpeak, respectively. Without the
voluntary fee waiver, Nvest Management and the Equity Income Fund would have
paid Loomis Sayles a subadvisory fee of $43,015 and $99,239, respectively,
for such periods. For the period January 1 to February 14, 1998, no
subadvisory fees were paid by Nvest Management to Loomis Sayles for
International Equity Fund as a result of the voluntary fee waiver by Loomis
Sayles. For the period February 15, 1998 to April 30, 1998, Nvest Management
paid Loomis Sayles a subadvisory fee of $73,345. For the period May 1, 1998
to December 31, 1998, the International Equity Fund paid a subadvisory fee
of $143,678 to Loomis Sayles. Without a voluntary fee waiver by Loomis
Sayles, the amount of the subadvisory fee that the Fund would have paid to
Loomis Sayles for the period May 1, 1998 to December 31, 1998 would have
been $326,375.
****For the fiscal year ended December 31, 1999, the Balanced and International
Equity Funds paid subadvisory fees of $1,469,622 and $200,283, respectively,
to Loomis Sayles. Without a voluntary fee waiver by Loomis Sayles for the
International Equity Fund, the amount of the subadvisory fee that the Fund
would have paid to Loomis Sayles for this period would have been $281,900.
For the fiscal year ended December 31, 1999, the Growth and Income and
Capital Growth Funds paid subadvisory fees of $1,922,351 and $963,811,
respectively, to Westpeak.
*****As a result of the voluntary expense limitations in effect, the Equity
Income Fund paid no management fees to Nvest Management and Nvest Management
paid no subadvisory fees to Loomis Sayles for the fiscal year ended December
31, 1997, the Fund paid no management fees to Nvest Management for the
fiscal year ended December 31, 1998 or subadvisory fees to Loomis Sayles for
the period from May to December 31, 1998 and Nvest Management paid no
subadvisory fees to Loomis Sayles for the period January 1 to April 30,
1998. Without the voluntary fee waiver, Nvest Management would have paid
Loomis Sayles subadvisory fees of $23,861 and $43,010 for the fiscal year
ended December 31, 1997 and for the period from January 1 to April 30, 1998,
respectively, and the Fund would have paid Loomis Sayles a subadvisory fee
of $99,239 for the period from May 1 to December 31, 1998. As a result of
the voluntary expense limitations in effect, the Fund paid no subadvisory
fees to Loomis Sayles or VNSM for the fiscal year ended December 31, 1999.
As a result of the binding fee waiver, the Fund paid $22,316 to Nvest
Management in advisory fees for the fiscal year ended December 31, 1999.
Without the voluntary fee waiver, the Fund would have paid $51,737 and
$60,775 to Loomis Sayles and VNSM, respectively, in subadvisory fees.
******The Bullseye Fund commenced operations on March 31, 1998. As a result of
the voluntary or binding fee deferral and expense limitations in effect, the
Fund paid no management fees to Nvest Management and no subadvisory fees to
Jurika & Voyles for the fiscal period ending December 31, 1998 and the
fiscal year ended December 31, 1999, respectively. Without the voluntary or
binding fee deferral and expense limitation, the Fund would have paid Nvest
Management management fees of $46,107 and $73,557 for the fiscal year ended
December 31, 1998 and for the fiscal year ended December 31, 1999,
respectively and Jurika & Voyles subadvisory fees of $69,161 and $110,335,
for the fiscal year ended December 31, 1998 and the fiscal year ended
December 31, 1999, respectively.
For more information about the Funds' advisory and subadvisory agreements,
see "Management of the Trusts" in Part II of this Statement.
BROKERAGE COMMISSIONS
In 1997, 1998 and 1999 brokerage transactions for Growth Fund aggregating
$782,645,000, $839,415,762, and $1,012,285,354 respectively, were allocated to
brokers providing research services, and $782,645, $925,576 and $1,195,756,
respectively, in commissions were paid on these transactions in such years.
During 1997, 1998 and 1999 the Fund paid total brokerage commissions of
$6,669,194, $6,163,593 and $8,113,289, respectively.
In 1997, 1998 and 1999, brokerage transactions for Balanced Fund
aggregating $17,718,990, $68,151,350 and $61,715,360, respectively, were
allocated to brokers providing research services, and $24,900, $107,472 and
$81,418, respectively, in commissions were paid on these transactions in such
years. During 1997, 1998 and 1999, the Fund paid total brokerage commissions of
$376,805, $563,035 and $441,089, respectively.
In 1997, 1998 and 1999, brokerage transactions for Growth and Income Fund
aggregating $531,986,567, $365,997,958 and $228,379,147, respectively, were
allocated to brokers providing research services and $162,980, $154,557 and
$215,531, respectively, in commissions were paid on these transactions in such
years. During 1997, 1998 and 1999, the Fund paid total brokerage commissions of
$351,050, $619,719 and $952,681, respectively.
In 1997, 1998 and 1999, brokerage transactions for International Equity
Fund aggregating $462,898,584, $15,145, and $7,568,359, respectively, were
allocated to brokers providing research services and $0, $0 and $7,758,
respectively, in commissions were paid on these transactions in such years.
During 1997, 1998 and 1999, the Fund paid total brokerage commissions of
$1,222,767, $506,328 and $751,900, respectively.
In 1997, 1998 and 1999, brokerage transactions for Capital Growth Fund
aggregating $105,213,412, $179,733,449 and $115,631,790, respectively, were
allocated to brokers providing research services and $4,000, $63,846 and
$101,489 respectively, in commissions were paid on these transactions in such
years. During 1997, 1998 and 1999, the Fund paid total brokerage commissions of
$103,244, $366,221 and $421,774, respectively.
In 1997, 1998 and 1999, brokerage transactions for Equity Income Fund
aggregating $0, $44,172 and $13,398,277, respectively, were allocated to brokers
providing research services and $0, $2,508 and $22,238, respectively, in
commissions were paid on these transactions in such years. During 1997, 1998 and
1999, the Fund paid total brokerage commissions of $29,840, $69,295 and $40,928,
respectively.
For the period from March 31, 1998 to December 31, 1998 and the fiscal year
ended December 31, 1999, brokerage transactions for Bullseye Fund aggregating
$4,560,101 and $9,010,123, respectively, were allocated to brokers providing
research services, and $4,375 and $10,667, respectively, in commissions were
paid on these transactions. During 1998 and 1999, the Bullseye Fund paid total
brokerage commissions of $35,314 and $63,487, respectively.
For more information about the Funds' portfolio transactions, see
"Portfolio Transactions and Brokerage" in Part II of this Statement.
SALES CHARGES AND 12B-1 FEES
As explained in Part II of this Statement, the Class A, Class B and Class
C shares of each Fund pay Nvest Funds Distributor, L.P. (the "Distributor") fees
under plans adopted pursuant to Rule 12b-1 under the 1940 Act. The following
table shows the amounts of Rule 12b-1 fees paid by each Fund during the fiscal
years ended December 31, 1997, 1998 and 1999:
FUND 1997 1998 1999
-------- ---- ---- ----
Growth Fund* $3,600,444 $4,095,985 $4,507,150 (Class A)
$71,751 $398,656 $1,130,273 (Class B)
$3,017 $67,804 (Class C)
Balanced Fund $567,385 $574,918 $500,098 (Class A)
$680,895 $810,837 $784,237 (Class B)
$36,277 $54,042 $52,722 (Class C)
Growth and Income Fund $487,914 $645,966 $876,555 (Class A)
$626,147 $1,126,326 $1,953,852 (Class B)
$52,226 $115,169 $244,663 (Class C)
International Equity $197,567 $132,001 $110,048 (Class A)
Fund $347,996 $255,391 $185,331 (Class B)
$8,625 $10,161 $7,292 (Class C)
Capital Growth Fund $370,087 $390,354 $449,506 (Class A)
$426,954 $496,089 $640,502 (Class B)
$9,279 $10,563 $24,404 (Class C)
Equity Income Fund** $11,355 $46,136 $35,201 (Class A)
$12,154 $149,076 $122,010 (Class B)
$2,076 $20,584 $17,052 (Class C)
Bullseye Fund*** N/A $14,605 $22,304 (Class A)
N/A $45,443 $81,204 (Class B)
N/A $17,474 $23,148 (Class C)
* Class B shares were first offered on February 28, 1997. Class C shares
were first offered on September 1, 1998.
** Class B and C shares first became available on September 15, 1997.
*** The Bullseye Fund commenced operations on March 31, 1998, offering Class A,
Class B and Class C shares.
During the fiscal year ended December 31, 1999, the Distributor's expenses
relating to each Fund's 12b-1 plans were as follows (Class B compensation to
investment dealers excludes advanced commissions sold to a third party):
GROWTH FUND
(Class A shares)
Compensation to Investment Dealers $4,489,175
Compensation to Distributor's Sales Personnel and Other $1,217,743
Related Costs
TOTAL $5,706,918
(Class B shares)
Compensation to Investment Dealers $101,593
Compensation to Distributor's Sales Personnel and Other $669,935
Related Costs
TOTAL $771,528
(Class C shares)
Compensation to Investment Dealers $72,416
Compensation to Distributor's Sales Personnel and Other $70,940
Related Costs
TOTAL $143,356
BALANCED FUND
(Class A shares)
Compensation to Investment Dealers $499,251
Compensation to Distributor's Sales Personnel and Other $137,732
Related Costs
TOTAL $636,983
(Class B shares)
Compensation to Investment Dealers $144,472
Compensation to Distributor's Sales Personnel and Other $111,842
Related Costs
TOTAL $256,314
(Class C shares)
Compensation to Investment Dealers $41,891
Compensation to Distributor's Sales Personnel and Other $10,509
Related Costs
TOTAL $52,400
GROWTH AND INCOME FUND
(Class A shares)
Compensation to Investment Dealers $868,966
Compensation to Distributor's Sales Personnel and Other $913,010
Related Costs
TOTAL $1,781,976
(Class B shares)
Compensation to Investment Dealers $281,958
Compensation to Distributor's Sales Personnel and Other $763,995
Related Costs
TOTAL $1,045,953
(Class C shares)
Compensation to Investment Dealers $209,471
Compensation to Distributor's Sales Personnel and Other $144,056
Related Costs
TOTAL $353,527
INTERNATIONAL EQUITY FUND
(Class A shares)
Compensation to Investment Dealers $111,105
Compensation to Distributor's Sales Personnel and Other $32,071
Related Costs
TOTAL $143,176
(Class B shares)
Compensation to Investment Dealers $40,459
Compensation to Distributor's Sales Personnel and Other $17,402
Related Costs
TOTAL $57,861
(Class C shares)
Compensation to Investment Dealers $8,651
Compensation to Distributor's Sales Personnel and Other $5,725
Related Costs
TOTAL $14,376
CAPITAL GROWTH FUND
(Class A shares)
Compensation to Investment Dealers $449,957
Compensation to Distributor's Sales Personnel and Other $190,601
Related Costs
TOTAL $640,558
(Class B shares)
Compensation to Investment Dealers $111,505
Compensation to Distributor's Sales Personnel and Other $103,130
Related Costs
TOTAL $214,635
(Class C shares)
Compensation to Investment Dealers $25,191
Compensation to Distributor's Sales Personnel and Other $15,911
Related Costs
TOTAL $41,102
EQUITY INCOME FUND
(Class A shares)
Compensation to Investment Dealers $34,982
Compensation to Distributor's Sales Personnel and Other $11,348
Related Costs
$46,330
TOTAL
(Class B shares)
Compensation to Investment Dealers $22,141
Compensation to Distributor's Sales Personnel and Other $9,305
Related Costs
$31,446
TOTAL
(Class C shares)
Compensation to Investment Dealers $14,089
Compensation to Distributor's Sales Personnel and Other $1,464
Related Costs
$15,553
TOTAL
BULLSEYE FUND
(Class A shares)
Compensation to Investment Dealers $22,296
Compensation to Distributor's Sales Personnel and Other $16,028
Related Costs
$38,324
TOTAL
(Class B shares)
Compensation to Investment Dealers $8,003
Compensation to Distributor's Sales Personnel and Other $18,667
Related Costs
$26,670
TOTAL
(Class C shares)
Compensation to Investment Dealers $11,060
Compensation to Distributor's Sales Personnel and Other $1,459
Related Costs
$12,519
TOTAL
Of the amounts listed above as compensation to investment dealers, the
amounts shown on the table below were paid by the Distributor to New England
Securities Corporation ("New England Securities"), MetLife Securities, Inc.
("MetLife Securities") and Nathan & Lewis Securities, Inc. ("Nathan & Lewis),
broker-dealer affiliates of the Distributor. New England Securities, MetLife
Securities and Nathan & Lewis paid substantially all of the fees they received
from the Distributor (a) in commissions to its sales personnel and (b) to defray
sales-related overhead costs.
New England Securities
Class A Class B Class C
Growth Fund $3,157,838 $ 47,965 $13,681
Balanced Fund $ 372,523 $ 93,855 $13,170
Growth and Income Fund $ 364,884 $143,755 $61,374
International Equity $ 72,386 $ 22,824 $ 2,589
Fund
Capital Growth Fund $ 319,744 $ 76,185 $ 9,784
Equity Income Fund $ 24,747 $ 10,857 $ 5,520
Bullseye Fund $ 12,184 $ 2,920 $ 2,977
MetLife Securities
Class A Class B Class C
Growth Fund $ 26,974 $ 17,767 --
Balanced Fund $ 2,541 $ 4,577 --
Growth and Income Fund $ 14,705 $ 16,821 $ 492
International Equity $ 267 $ 255 --
Fund
Capital Growth Fund $ 2,647 $ 1,770 --
Equity Income Fund $ 321 $ 234 --
Bullseye Fund $ 803 $ 1,259 --
Nathan & Lewis
Class A Class B Class C
Growth Fund $23,908 $ 130 --
Balanced Fund $ 1,469 $ 625 $ 11
Growth and Income Fund $ 1,712 $ 289 $ 111
International Equity Fund $ 389 $ 238 $ 2
Capital Growth Fund $ 1,250 $ 838 $ 138
Equity Income Fund $ 10 $ 11 --
Bullseye Fund $ 73 $ 6 --
- --------------------------------------------------------------------------------
OWNERSHIP OF FUND SHARES
- --------------------------------------------------------------------------------
As of March 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 of the Funds set forth below.
OWNERSHIP
FUND SHAREHOLDER AND ADDRESS PERCENTAGE
---- ----------------------- ----------
CAPITAL GROWTH FUND
Class Y shares Diane Charpentier Milam
4578 Whimbel Place 99.83%
Winter Park, FL 32792-6358
GROWTH AND INCOME FUND
Class C Shares MLPF&S For the Sole Benefit of It's 11.75%
Customers
ATTN: Fund Administration ML#97UA2
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Forest County Potawatomi - Children 17.68%
P.O. Box 340
Crandon, WI 54520-0340
Class Y shares Metropolitan Life Insurance Company 5.24%
C/O MetLfie FBC/SFM
ATTN: Jay Langan
4100 W Boy Scout Blvd
Tampa, FL 33607-5793
Chase Manhattan Bank 52.77%
Directed Trustee for MetLife Defined
Contribution Group
770 Broadway - 10th Floor
New York, NY 10003-9522
Metropolitan Life Insurance 36.29%
GADC Dianne Lunny
501-6 Boylston Street
Boston, MA 02116-3706
INTERNATIONAL EQUITY FUND
Class C shares MLPF & S For the Sole Benefit of Its 20.84%
Customers
Attn Fund Administration ML#97UB0
4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246-6484
Class Y shares Metropolitan Life Insurance Company 38.90%
C/O GADC-Gerald Hart Agency
Operations NELICO
501 Boylston Street, 10th Floor
Boston, MA 02116-3706
Metropolitan Life Insurance Company 9.35%
C/O MetLife FBC/SFM
ATTN: Jay Langan
4100 Boy Scout Blvd.
Tampa, FL 33607-5793
Chase Manhattan Bank Directed 48.52%
Trustee for MetLife Defined
Contribution Group
770 Broadway, 10th Floor
New York, NY 10003-9522
EQUITY INCOME FUND
Class C shares
Dorothy N. & Ronald P. Frudden & 8.54%
Susan T. Gilles
Trustees
Frudden Exempt Tax Deferral Trust
202 Villa Drive
King City, CA 93930-3014
Wexford Clearing Services Corp FBO 13.30%
Prudential Securities C/F
Doris McGinnis Butler
IRA Rollover DTD 07/07/97
PO Box 84
Scott, AR 72142-0084
Painewebber for the benefit of 9.37%
Robert Adam, Brian King, Robert
Campagnone & Kathleen Lomeli
Willimanic PST DTD 5/1/73
PO Box 23
Willimanic, CT 06226-0023
BALANCED FUND
Class C shares CNA Trust Corp 10.80%
FBO Dimension One Spas Inc.
PSP DTD 1/13/87 A/C # 1050534884
PO Box 5024
Costa Mesa, CA 92628-5024
NFSC FEBO # 041-773786 9.41%
EL Moody, CW MOODY as co-trustee
Elizabeth L. and Charles W. Moody
UDT, U/A 5/6/93
6865 Pacific Drive
Stuart, FL 34997-8604
BALANCED FUND
Class Y shares New England Mutual Life Insurance 82.18%
Company
Separate Investment Accounting
ATTN Brenda Harmon
501 Boylston Street, 6th Floor
Boston, MA 02116-3706
Metropolitan Life Insurance Company 9.67%
C/O GADC-Gerald Hart Agency
Operations NELICO
501 Boylston Street, 10th Floor
Boston, MA 02116-3706
Chase Manhattan Bank 7.55%
Directed Trustee for MetLife Define
Contribution Group
770 Broadway, 10th Floor
New York, NY 10003-9522
GROWTH FUND
Class B shares MLPF&S for the Sole Benefit of It's 6.73%
Customers
ATTN Fund Administration ML # 97CH1
4800 Deer Lake Drive East, 2nd floor
Jacksonville, FL 32246-6484
GROWTH FUND
Class C shares MLPF&S for the Sole Benefit of It's 29.51%
Customers
ATTN Fund Administration ML # 97UR8
4800 Deer Lake Drive East, 2nd floor
Jacksonville, FL 32246-6484
GROWTH FUND
Class Y shares Chase Manhattan Bank 99.99%
Directed Trustee MetLife Defined
Contribution Group
4 New York Plaza, 2nd Floor
New York, NY 10004-2413
BULLSEYE FUND
Class C shares MLPF&S for the Sole Benefit of It's 5.43%
Customers
ATTN Fund Administration ML # 97UR8
4800 Deer Lake Drive East, 2nd floor
Jacksonville, FL 32246-6484
State Street Bank & Trust Company 9.33%
Cust for IRA of Norma J. Plonkey
38101 Afton Drive
Sterling Heights, MI 48310-3305
NFSC FEBO # CL5-424757 5.25%
NFSC/FMTC IRA Rollover
FBO Stephen McCarthy
57 Brooklawn Drive
East Widsor, NJ 08520-2234
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE OF THE FUNDS
- --------------------------------------------------------------------------------
PERFORMANCE RESULTS - PERCENT CHANGE*
For The Periods Ended 12/31/99
GROWTH FUND**
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Class A shares: As a % of 1 Year 5 Years 10 Years 5 Years 10 Years
- ---------------------------- ------ ------- -------- ------- --------
Net Asset Value 15.18 216.80 404.75 25.94 17.57
Maximum Offering Price 8.59 198.62 375.62 24.46 16.88
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class B shares: As a % of 1 Year 2/28/97*** 2/28/97***
- ------------------------- ------ ---------- ----------
Net Asset Value 14.37 73.22 21.36
Redemption at End of Period 9.59 70.66 20.72
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class B shares: As a % of 1 Year 9/1/98*** 9/1/98***
- ------------------------- ------ ---------- ----------
Net Asset Value 14.37 39.77 28.59
Redemption at End of Period 13.42 39.77 28.59
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Class Y shares: As a % of Since 6/30/99*** Since 6/30/99***
- ------------------------- ---------------- ----------------
Net Asset Value 9.67 9.67
BALANCED FUND
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Class A shares: As a % of 1 Year 5 Years 10 Years 5 Years 10 Years
- -------------------------- ------ ------- -------- ------- --------
Net Asset Value -3.75 81.04 164.77 12.60 10.23
Maximum Offering Price -9.26 70.59 149.49 11.27 9.57
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class B shares: As a % of 1 Year 5 Years 9/13/93** 5 Years 9/13/93***
- -------------------------- ------ ------- -------- ------- ---------
Net Asset Value -4.43 74.29 73.96 11.75 9.19
Redemption at End of Period -8.75 72.29 73.96 11.49 9.19
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class C shares: As a % of 1 Year 5 Years 12/30/94** 5 Years 12/30/94***
- -------------------------- ------ ------- -------- ------- ----------
Net Asset Value -4.45 74.01 74.01 11.72 11.71
Redemption at End of Period -5.31 74.01 74.01 11.72 11.71
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class Y shares: As a % of 1 Year 5 Years 3/8/94*** 5 Years 3/8/94***
- -------------------------- ------ ------- -------- ------- ----------
Net Asset Value -3.32 84.99 79.81 13.09 10.61
GROWTH AND INCOME FUND
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Class A shares: As a % of 1 Year 5 Years 10 Years 5 Years 10 Years
- -------------------------- ------ ------- -------- ------- ----------
Net Asset Value 9.45 186.60 326.98 23.44 15.62
Maximum Offering Price 3.16 170.07 302.56 21.98 14.94
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class B shares: As a % of 1 Year 5 Years 9/13/93*** 5 Years 9/13/93***
- -------------------------- ------ ------- -------- ------- ----------
Net Asset Value 8.62 176.73 179.93 22.58 17.75
Redemption at End of Period 4.03 174.73 179.93 22.40 17.75
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class C shares: As a % of 1 Year 5/1/95*** 5/1/95***
- -------------------------- ------ --------- ---------
Net Asset Value 8.63 147.43 21.42
Redemption at End of Period 7.71 147.43 21.42
Aggregate Annualized
Total Return Total Return
-------------------------- --------------------
Since Since
Class Y shares: As a % of 1 Year 11/18/98*** 11/18/98***
- -------------------------- ------ ----------- -----------
Net Asset Value 9.77 18.63 16.51
INTERNATIONAL EQUITY FUND
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class A shares: As a % of 1 Year 5 Years 5/21/92*** 5 Years 5/21/92***
- -------------------------- ------ ------- -------- ------- ---------
Net Asset Value 87.59 102.09 168.50 15.11 13.85
Maximum Offering Price 76.80 90.43 153.12 13.75 12.97
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class B shares: As a % of 1 Year 5 Years 9/13/93*** 5 Years 9/13/93***
- -------------------------- ------ ------- -------- ------- ---------
Net Asset Value 86.26 95.23 110.19 14.32 12.52
Redemption at End of Period 81.26 93.23 110.19 14.08 12.52
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class C shares: As a % of 1 Year 5 Years 12/30/94** 5 Years 12/30/94***
- -------------------------- ------ ------- -------- ------- ---------
Net Asset Value 86.23 95.70 95.70 14.37 14.36
Redemption at End of Period 85.23 95.70 95.70 14.37 14.36
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class Y shares: As a % of 1 Year 5 Years 9/9/93*** 5 Years 9/9/93***
- -------------------------- ------ ------- -------- ------- ---------
Net Asset Value 88.61 109.04 129.36 15.89 14.06
CAPITAL GROWTH FUND
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class A shares: As a % of 1 Year 5 Years 8/3/92*** 5 Years 8/3/92***
- -------------------------- ------ ------- -------- ------- ---------
Net Asset Value 24.74 188.88 252.28 23.64 18.52
Maximum Offering Price 17.57 172.20 232.09 22.17 17.58
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class B shares: As a % of 1 Year 5 Years 9/13/93*** 5 Years 9/13/93***
- -------------------------- ------ ------- -------- ------- ---------
Net Asset Value 23.81 176.81 180.20 22.58 17.77
Redemption at End of Period 18.81 174.81 180.20 22.41 17.77
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class C shares: As a % of 1 Year 5 Years 12/30/94** 5 Years 12/30/94***
- -------------------------- ------ ------- -------- ------- ---------
Net Asset Value 23.81 176.88 176.88 22.59 22.58
Redemption at End of Period 22.81 176.88 176.88 22.59 22.58
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class Y shares: As a % of 3/16/99*** 3/16/99***
- --------------------------- ---------- ----------
Net Asset Value 20.07 20.07
EQUITY INCOME FUND
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Since Since
Class A shares: As a % of 1 Year 11/28/95*** 11/28/95***
- -------------------------- ------ ----------- -----------
Net Asset Value -1.94 61.34 12.41
Maximum Offering Price -7.61 52.09 10.79
Aggregate Average Annual
Total Return Total Return
--------------------------- ------------------
Since Since
Class B shares: As a % of 1 Year 9/15/97*** 9/15/97***
- -------------------------- ------ ----------- -----------
Net Asset Value -2.66 2.93 1.27
Redemption at End of Period -7.51 -0.07 -0.03
Aggregate Average Annual
Total Return Total Return
--------------------------- ------------------
Since Since
Class C shares: As a % of 1 Year 9/15/97*** 9/15/97***
- -------------------------- ------ ----------- -----------
Net Asset Value -2.66 2.99 1.29
Redemption at End of Period -3.63 2.99 1.29
BULLSEYE FUND
Aggregate Average Annual
Total Return Total Return
--------------------------- ------------------
Since Since
Class A shares: As a % of 1 Year 3/31/98*** 3/31/98***
- -------------------------- ------ ----------- -----------
Net Asset Value 36.68 38.32 20.32
Maximum Offering Price 28.84 30.39 16.34
Aggregate Average Annual
Total Return Total Return
--------------------------- ------------------
Since Since
Class B shares: As a % of 1 Year 3/31/98*** 3/31/98***
- -------------------------- ------ ----------- -----------
Net Asset Value 35.71 36.80 19.57
Redemption at End of Period 30.71 32.80 17.56
Aggregate Average Annual
Total Return Total Return
--------------------------- ------------------
Since Since
Class C shares: As a % of 1 Year 3/31/98*** 3/31/98***
- -------------------------- ------ ----------- -----------
Net Asset Value 35.74 36.72 19.53
Redemption at End of Period 34.74 36.72 19.53
* Federal regulations require this example to be calculated using a $1,000
investment. The normal minimum initial investment in shares of the Funds is
$2,500, however.
** The numbers presented for Class A shares reflect the maximum front-end sales
charge currently in effect. Prior to March 3, 1997, a higher maximum
front-end sales charge was in effect, so that the total returns achieved by
investors may have been lower than those shown above.
*** Commencement of Fund operations or offering of specified class of shares.
The foregoing data represent past performance only and are not a
prediction as to the future returns of any Fund. The investment return and
principal value of an investment in any Fund will fluctuate so that the
investor's shares, when redeemed, may be worth more or less than their original
cost.
<PAGE>
NVESTFUNDS(SM)
Where The Best Minds Meet(R)
- -------------------------------------------------------------------------------
NVEST GOVERNMENT SECURITIES FUND
NVEST LIMITED TERM U.S. GOVERNMENT FUND
NVEST SHORT TERM CORPORATE INCOME FUND
NVEST STRATEGIC INCOME FUND
NVEST BOND INCOME FUND
NVEST HIGH INCOME FUND
NVEST MUNICIPAL INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION -- PART I
MAY 1, 2000
This Statement of Additional Information (the "Statement") contains
information which may be useful to investors but which is not included in the
Prospectus of the Nvest Funds listed above (the "Funds" and each a "Fund"). This
Statement is not a prospectus and is authorized for distribution only when
accompanied or preceded by the Prospectus of the Funds dated May 1, 2000 for
Class A, Class B or Class C shares, or the Prospectus of the Funds dated May 1,
2000 for Class Y shares (the "Prospectus" or "Prospectuses"). The Statement
should be read together with the Prospectus. Investors may obtain a free copy of
the Prospectus from Nvest Funds Distributor, L.P., Prospectus Fulfillment Desk,
399 Boylston Street, Boston, Massachusetts 02116, by calling Nvest Funds at
800-225-5478 or by placing an order online at www.nvestfunds.com. Part I of this
Statement contains specific information about the Funds. Part II includes
information about the Funds and other Nvest Funds. Nvest Government Securities
Fund, Nvest Strategic Income Fund, Nvest Bond Income Fund and Nvest Municipal
Income Fund are each a diversified fund of Nvest Funds Trust I, a registered
open-end management investment company that offers a total of twelve funds, and
Nvest Limited Term U.S. Government Fund, Nvest Short Term Corporate Income Fund
and Nvest High Income Fund are each a diversified fund of Nvest Funds Trust II,
a registered open-end management investment company that offers a total of six
funds. Nvest Funds Trust I, Nvest Funds Trust II and Nvest Funds Trust III is
collectively referred to in this Statement as the "Trusts" and are each referred
to as a "Trust." The Funds' financial statements and accompanying notes that
appear in the Fund's annual and semi-annual reports are incorporated by
reference into this Statement. Each Fund's annual and semiannual report contains
additional performance information and is available upon request and without
charge, by calling 800-225-5478.
T A B L E O F C O N T E N T S
PART I Page
Investment Restrictions ii
Fund Charges and Expenses x
Ownership of Fund Shares xvii
Investment Performance of the Funds xix
PART II
Miscellaneous Investment Practices 2
Management of the Trusts 22
Portfolio Transactions and Brokerage 36
Description of the Trusts and Ownership of Shares 43
How to Buy Shares 46
Net Asset Value and Public Offering Price 46
Reduced Sales Charges - Class A Shares Only 47
Shareholder Services 49
Redemptions 56
Standard Performance Measures 58
Income Dividends, Capital Gain Distributions and Tax Status 63
Financial Statements 65
Appendix A - Description of Bond Ratings 66
Appendix B - Publications That May Contain Fund Information 68
Appendix C - Advertising and Promotional Literature 71
Appendix D - Portfolio Composition of the High Income, Bond Income,
Strategic Income and Municipal Income Funds 75
<PAGE>
- -------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- -------------------------------------------------------------------------------
The following is a description of restrictions on the investments to be
made by the Funds. The restrictions marked with an asterisk (*) may not be
changed without the vote of a majority of the outstanding voting securities of
the relevant Fund (as defined in the Investment Company Act of 1940, as amended
(the "1940 Act")). Except in the case of those restrictions marked with a dagger
(+) below, the percentages set forth below and the percentage limitations set
forth in the Prospectus will apply at the time of the purchase of a security and
shall not be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of a purchase of such security.
NVEST GOVERNMENT SECURITIES FUND
Nvest Government Securities Fund (the "Government Securities Fund") will not:
*(1) Invest in any securities other than U.S. Government securities, put and
call options thereon, futures contracts, options on futures contracts and
repurchase agreements;
*(2) Purchase or sell commodities or commodity contracts, except that the Fund
may purchase and sell interest rate futures contracts and related options;
*(3) Purchase any security on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of portfolio securities. (For this purpose, the deposit or payment
by the Fund of initial or variation margin in connection with interest
rate futures contracts or related options transactions is not considered
the purchase of a security on margin);
*(4) Make short sales of securities or maintain a short position, unless at all
times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without payment
of any further consideration, for securities of the same issue as, and
equal in amount to, the securities sold short, and unless not more than
10% of the Fund's net assets (taken at market value) is held as collateral
for such sales at any one time. (It is the present intention of management
to make such sales only for the purpose of deferring realization of gain
or loss for federal income tax purposes; such sales would not be made with
respect to securities subject to outstanding options);
*(5) Make loans to other persons (except as provided in restriction (6) below);
provided that for purposes of this restriction the investment in
repurchase agreements shall not be deemed to be the making of a loan;
*(6) Lend its portfolio securities in excess of 15% of its total assets, taken
at market value;
*(7) Issue senior securities, borrow money or pledge its assets; provided,
however, that the Fund may borrow from a bank as a temporary measure for
extraordinary or emergency purposes or to meet redemptions, in amounts not
exceeding 10% (taken at the market value) of its total assets and pledge
its assets to secure such borrowings; and, provided, further, that the
Fund will not purchase any additional portfolio securities at any time
that its borrowings exceed 5% of its total net assets. (For the purpose of
this restriction, collateral arrangements with respect to the writing of
options, interest rate futures contracts, options on interest rate futures
contracts, and collateral arrangements with respect to initial and
variation margin are not deemed to be a pledge of assets and neither such
arrangements nor the purchase or sale of futures or related options are
deemed to be the issuance of a senior security);
*(8) Underwrite securities of other issuers except insofar as the Fund may be
deemed an underwriter under the Securities Act of 1933 in selling
portfolio securities;
*(9) Write, purchase or sell puts, calls or combinations thereof, except that
the Fund may write, purchase and sell puts, calls or combinations thereof
with respect to U.S. Government Securities and with respect to interest
rate futures contracts;
*(10) Invest in the securities of other investment companies, except by
purchases in the open market involving only customary brokers'
commissions, or in connection with a merger, consolidation or similar
transaction. Under the 1940 Act, the Fund may not (a) invest more than 10%
of its total assets (taken at current value) in such securities, (b) own
securities of any one investment company having a value in excess of 5% of
the Fund's total assets [taken at current value], or (c) own more than 3%
of the outstanding voting stock of any one investment company; or
+(11) Invest more than 15% of the Fund's total net assets in illiquid securities
(excluding Rule 144A securities and certain Section 4(2) commercial paper
deemed to be liquid under guidelines established by Nvest Funds Trust I's
trustees).
Although the Government Securities Fund may from time to time loan its
portfolio securities and issue senior securities, borrow money or pledge its
assets to the extent permitted by investment restrictions (5), (6) and (7)
above, the Fund has no current intention of engaging in such investment
techniques.
NVEST LIMITED TERM U.S. GOVERNMENT FUND
Nvest Limited Term U.S. Government Fund (the "Limited Term U.S. Government
Fund") will not:
*(1) Purchase any security on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of portfolio securities. (For this purpose, the deposit or payment
by the Fund of initial or variation margin in connection with futures
contracts or options transactions is not considered the purchase of a
security on margin);
*(2) Make short sales of securities unless at all times when a short position
is open it owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further
consideration, for securities of the same issue as, and equal in amount
to, the securities sold short, and unless not more than 10% of the Fund's
net assets (taken at current value) is held as collateral for such sales
at any one time;
*(3) Issue senior securities, borrow money or pledge its assets; provided,
however, that the Fund may borrow from a bank as a temporary measure for
extraordinary or emergency purposes or to meet redemptions, in amounts not
exceeding 10% (taken at the current value) of its total assets and pledge
its assets to secure such borrowings; and, provided, further, that the
Fund will not purchase any additional portfolio securities at any time
that its borrowings exceed 5% of its total net assets. (For the purpose of
this restriction, collateral arrangements with respect to the writing of
options, futures contracts and options on futures contracts, and
collateral arrangements with respect to initial and variation margin, are
not deemed to be a pledge of assets and neither such arrangements nor the
purchase or sale of futures or options are deemed to be the issuance of a
senior security);
*(4) Invest more than 25% of its total assets (taken at current value) in
securities of businesses in the same industry (for this purpose,
telephone, electric, water and gas utilities are considered separate
industries);
*(5) Make loans, except by the purchase of bonds, debentures, commercial paper,
corporate notes and similar evidences of indebtedness that are a part of
an issue to the public or to financial institutions, or by lending
portfolio securities to the extent set forth in Part II of this Statement
under "Miscellaneous Investment Practices -- Loans of Portfolio
Securities" provided that for purposes of this restriction, investment in
repurchase agreements shall not be deemed to be the making of a loan;
*(6) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
real estate or commodities or commodity contracts, except that the Fund
may purchase and sell financial futures contracts, currency futures
contracts and options related to such futures contracts. (This restriction
does not prevent the Fund from purchasing securities of companies
investing or dealing in the foregoing);
*(7) 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 certain federal securities laws;
*(8) Make investments for the purpose of exercising control or management;
*(9) Write, purchase or sell puts, calls or combinations thereof, except that
the Fund may write, purchase and sell puts, calls or combinations thereof
with respect to financial instruments or indices thereof and currencies
and with respect to futures contracts on financial instruments or indices
thereof; or
+(10) Invest more than 15% of the Fund's total net assets in illiquid securities
(excluding Rule 144A securities and certain Section 4(2) commercial paper
deemed to be liquid under guidelines established by Nvest Funds Trust II's
trustees).
Although the Fund may from time to time make short sales, issue senior
securities, borrow money or pledge its assets to the extent permitted by the
investment restrictions set forth above, the Fund has no current intention of
engaging in such investment techniques.
NVEST SHORT TERM CORPORATE INCOME FUND
Nvest Short Term Corporate Income Fund (the "Short Term Corporate Income Fund")
will not:
*(1) Purchase any security (other than U.S. Government securities) if, as a
result, more than 5% of the Fund's total assets (taken at current value)
would then be invested in securities of a single issuer or 25% of the
Fund's total assets (taken at current value) would be invested in any one
industry (in the utilities category, gas, electric, water and telephone
companies will be considered as being in separate industries);
*(2) Purchase any security on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of portfolio securities. (For this purpose, the deposit or payment
by the Fund of initial or variation margin in connection with interest
rate futures contracts or related options transactions is not considered
the purchase of a security on margin);
*(3) Make short sales of securities or maintain a short position, unless at all
times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without payment
of any further consideration, for securities of the same issue as, and
equal in amount to, the securities sold short, and unless not more than
10% of the Fund's net assets (taken at market value) is held as collateral
for such sales at any one time. (It is the current intention of the Fund,
which may change without shareholder approval, to make such sales only for
the purpose of deferring realization of gain or loss for federal income
tax purposes; such sales would not be made with respect to securities
covering outstanding options);
*(4) Acquire more than 10% of any class of securities of an issuer (taking all
preferred stock issues of an issuer as a single class and all debt issues
of an issuer as a single class) or acquire more than 10% of the
outstanding voting securities of an issuer;
*(5) Issue senior securities, borrow money or pledge its assets; provided,
however, that the Fund may borrow from a bank as a temporary measure for
extraordinary or emergency purposes or to meet redemptions, in amounts not
exceeding 10% (taken at the market value) of its total assets and pledge
its assets to secure such borrowings; and, provided, further, that the
Fund will not purchase any additional portfolio securities at any time
that its borrowings exceed 5% of its total net assets. (For the purpose of
this restriction, collateral arrangements with respect to the writing of
options, interest rate future contracts, and options on interest rate
futures contracts, collateral arrangements with respect to interest rate
caps, floors or swap arrangements, and collateral arrangements with
respect to initial and variation margin are not deemed to be a pledge of
assets and neither (i) such arrangements, (ii) the purchase or sale of
futures or related options, (iii) interest rate caps and floors nor (iv)
interest rate swap agreements, where assets are segregated to cover the
Fund's obligations thereunder, are deemed to be the issuance of a senior
security);
*(6) Invest more than 5% of its total assets (taken at current value) in
securities of businesses (including predecessors) less than three years
old;
*(7) Purchase or retain securities of any issuer if officers and trustees of
the Trust or officers and directors of the investment adviser of the Fund
who individually own more than 1/2 of 1% of the shares or securities of
that issuer, together own more than 5%;
*(8) Make loans, except by purchase of bonds, debentures, commercial paper,
corporate notes and similar evidences of indebtedness, that are a part of
an issue to the public or to financial institutions, or by lending
portfolio securities to the extent set forth under "Miscellaneous
Investment Practices Loans of Portfolio Securities" in Part II of this
Statement. (This restriction 8 does not limit the Fund's ability to engage
in repurchase agreement transactions);
*(9) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
real estate or commodities or commodity contracts, except that the Fund
may purchase and sell financial futures contracts, currency futures
contracts and options related to such futures contracts, and may purchase
interest rate caps and floors and enter into interest rate swap
agreements. (This restriction does not prevent the Fund from purchasing
securities of companies investing or dealing in the foregoing);
*(10) 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 certain federal securities laws;
*(11) Make investments for the purpose of exercising control or management;
*(12) Participate on a joint or joint and several basis in any trading account
in securities;
*(13) Write, purchase or sell puts, calls or combinations thereof, except that
the Fund may write, purchase and sell puts, calls or combinations thereof
with respect to fixed-income securities and currencies and with respect to
futures contracts on fixed-income securities or currencies;
*(14) Purchase any illiquid security, including securities that are not readily
marketable, if, as a result, more than 10% of the Fund's total net assets
(based on current value) would then be invested in such securities. (The
staff of the Securities and Exchange Commission (the "SEC") is presently
of the view that repurchase agreements maturing in more than seven days
are subject to this restriction. Until that position is revised, modified
or rescinded, the Fund will conduct its operations in a manner consistent
with this view); or
*(15) Invest in the securities of other investment companies, except by
purchases in the open market involving only customary brokers'
commissions, or in connection with a merger, consolidation or similar
transaction. Under the 1940 Act, the Fund may not (a) invest more than 10%
of its total assets (taken at current value) in such securities, (b) own
securities of any one investment company having a value in excess of 5% of
the Fund's total assets (taken at current value), or (c) own more than 3%
of the outstanding voting stock of any one investment company.
Although the Fund may loan its portfolio securities and issue senior
securities, borrow money, pledge its assets, and invest in the securities of
other investment companies to the extent permitted by investment restrictions
(5), (8) and (15) above, the Fund has no current intention of engaging in such
investment activities.
NVEST STRATEGIC INCOME FUND
Nvest Strategic Income Fund (the "Strategic Income Fund") will not:
*(1) Purchase any security (other than U.S. Government securities) if , as a
result, more than 25% of the Fund's total assets (taken at current value)
would be invested in any one industry (in the utilities category, gas,
electric, water and telephone companies will be considered as being in
separate industries, and each foreign country's government (together with
subdivisions thereof) will be considered to be a separate industry);
(2) 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. (For this purpose,
the deposit or payment by the Fund of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin);
(3) Acquire more than 10% of any class of securities of an issuer (other than
U.S. Government securities and taking all preferred stock issues of an
issuer as a single class and all debt issues of an issuer as a single
class) or acquire more than 10% of the outstanding voting securities of an
issuer (such percentage limitations apply to closed-end management
investment companies as well);
*(4) Borrow money in excess of 25% of its total assets, and then only as a
temporary measure for extraordinary or emergency purposes;
(5) Pledge more than 25% of its total assets (taken at cost). (For the purpose
of this restriction, collateral arrangements with respect to options,
futures contracts and options on futures contracts and with respect to
initial and variation margin are not deemed to be a pledge of assets);
*(6) Make loans, except by entering into repurchase agreements or by purchase
of bonds, debentures, commercial paper, corporate notes and similar
evidences of indebtedness, which are a part of an issue to the public or
to financial institutions, or through the lending of the Fund's portfolio
securities;
*(7) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
real estate or commodities or commodity contracts, except that the Fund
may buy and sell futures contracts and related options. (This restriction
does not prevent the Fund from purchasing securities of companies
investing in the foregoing);
*(8) 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 certain federal securities laws;
(9) Except to the extent permitted by rule or order of the SEC, 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 any investment adviser or subadviser of the Fund or accounts under
any such investment adviser's or subadviser's management to reduce
brokerage commissions, to average prices among them or to facilitate such
transactions is not considered a trading account in securities for
purposes of this restriction);
(10) Write, purchase or sell options, except that the Fund may (a) write,
purchase and sell put and call options on securities, securities indexes,
currencies, futures contracts, swap contracts and other similar
instruments and (b) enter into currency forward contracts;
+(11) Invest more than 15% of its net assets (taken at current value) in
illiquid securities (excluding Rule 144A securities and certain Section
4(2) commercial paper deemed to be liquid under guidelines established by
Nvest Funds Trust I's trustees);
*(12) Issue senior securities. (For the purpose of this restriction none of the
following is deemed to be a senior security: any pledge or other
encumbrance of assets permitted by restrictions (2) or (5) above; any
borrowing permitted by restriction (4) above; any collateral arrangements
with respect to forward contracts, options, futures contracts, swap
contracts or other similar contracts and options on futures contracts,
swap contracts or other similar contracts and with respect to initial and
variation margin; the purchase or sale of options, forward contracts,
futures contracts, swap contracts or other similar contracts or options on
futures contracts, swap contracts or other similar contracts; and the
issuance of shares of beneficial interest permitted from time to time by
the provisions of Nvest Funds Trust I's Agreement and Declaration of Trust
and by the 1940 Act, the rules thereunder, or any exemption therefrom.)
NVEST BOND INCOME FUND
Nvest Bond Income Fund (the "Bond Income Fund") will not:
*(1) Purchase any security (other than U.S. Government securities) if, as a
result, more than 5% of the Fund's total assets (taken at current value)
would then be invested in securities of a single issuer or 25% of the
Fund's total assets (taken at current value) would be invested in any one
industry (in the utilities category, gas, electric, water and telephone
companies will be considered as being in separate industries);
*(2) 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;
*(3) Acquire more than 10% of any class of securities of an issuer (taking all
preferred stock issues of an issuer as a single class and debt issues of
an issuer as a single class) or acquire more than 10% of the outstanding
voting securities of an issuer;
*(4) Borrow money, except as a temporary measure for extraordinary or emergency
purposes, up to an amount not in excess of 10% of its total assets (taken
at cost) or 5% of its total assets (taken at current value), whichever is
lower;
*(5) Pledge more than 15% of its total assets (taken at cost);
*(6) Invest more than 5% of its total assets (taken at current value) in
securities of businesses (including predecessors) less than three years
old;
*(7) Purchase or retain securities of any company if officers and trustees of
Nvest Funds Trust I or of any investment adviser or subadviser of the Bond
Income Fund who individually own more than 1/2 of 1% of the shares or
securities of that company, together own more than 5%;
*(8) Make loans, except by purchase of bonds, debentures, commercial paper,
corporate notes and similar evidences of indebtedness, which are part of
an issue to the public, or by lending portfolio securities to the extent
set forth under "Miscellaneous Investment Practices -- Loans of Portfolio
Securities" in Part II of this Statement;
*(9) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
commodities or commodity contracts or real estate (except that the Bond
Income Fund may buy and sell marketable securities of companies, including
real estate investment trusts, which may represent indirect interests in
real estate; may buy and sell futures contracts on securities or on
securities indexes and may write, purchase or sell put or call options on
such futures contracts or indexes; and may enter into currency forward
contracts);
*(10) Act as underwriter;
*(11) Make investments for the purpose of exercising control or management;
*(12) 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 any adviser or subadviser or accounts under its
management to reduce brokerage commissions, to average prices among them,
or to facilitate such transactions is not considered participating in a
trading account in securities);
*(13) Write, purchase or sell options or warrants, except that the Fund may (a)
acquire warrants or rights to subscribe to securities of companies issuing
such warrants or rights or of parents or subsidiaries of such companies,
provided that such warrants or other rights to subscribe are attached to,
or part of a unit offering involving, other securities, and (b) write,
purchase or sell put or call options on securities, securities indexes or
futures contracts; or
*(14) Invest in the securities of other investment companies, except by
purchases in the open market involving only customary brokers'
commissions, or in connection with a merger, consolidation or similar
transaction. (Under the 1940 Act, the Fund may not (a) invest more than
10% of its total assets [taken at current value] in such securities, (b)
own securities of any one investment company having a value in excess of
5% of the Fund's total assets [taken at current value], or (c) own more
than 3% of the outstanding voting stock of any one investment company);
*(15) Issue senior securities. For the purpose of this restriction, none of the
following is deemed to be a senior security: any borrowing permitted by
restriction (4) above; any pledge or other encumbrance of assets permitted
by restriction (5) above; any collateral arrangements with respect to
options, forward contracts, futures contracts, swap contracts and other
similar contracts and options on futures contracts and with respect to
initial and variation margin; the purchase or sale of options, forward
contracts, futures contracts, swap contracts and other similar contracts
or options on futures contracts; and the issuance of shares of beneficial
interest permitted from time to time by the provisions of Nvest Funds
Trust I's Agreement and Declaration of Trust and by the 1940 Act, the
rules thereunder, or any exemption therefrom; or
+(16) Invest more than 15% of the Fund's total net assets in illiquid securities
(excluding Rule 144A securities and certain Section 4(2) commercial paper
deemed to be liquid under guidelines established by Nvest Funds Trust I's
trustees.)
NVEST HIGH INCOME FUND
Nvest High Income Fund (the "High Income Fund") will not:
*(1) Buy more than 10% of the voting securities or more than 10% of all of the
securities of any issuer, or invest to control or manage any company;
*(2) Purchase securities on "margin," except for short-term credits as needed
to clear securities purchases;
*(3) Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition, or reorganization,
or by purchase in the open market of securities of closed-end investment
companies where no underwriter or dealer commission or profit, other than
a customary brokerage commission, is involved and only if immediately
thereafter not more than 10% of the value of its total assets would be
invested in such securities;
*(4) Purchase securities, other than shares of the Fund, from or sell portfolio
securities to its directors or officers, or firms they are affiliated with
as principals, except as permitted by the regulations of the SEC;
*(5) Purchase or sell commodities or commodity contracts, or write, purchase or
sell options, except that the Fund may (a) buy or sell futures contracts
on securities or on securities indexes and (b) write, purchase or sell put
or call options on securities, on securities indexes or on futures
contracts of the type referred to in clause (a) of this restriction;
*(6) Make loans, except loans of portfolio securities and except to the extent
that the purchase of notes, repurchase agreements, bonds, or other
evidences of indebtedness or deposits with banks or other financial
institutions may be considered loans;
*(7) Make short sales of securities or maintain a short position;
*(8) Purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or in securities
issued by companies which invest in real estate or interests therein;
*(9) Purchase or sell interests in oil and gas or other mineral exploration or
development programs, provided that the Fund may invest in securities
issued by companies which do invest in or sponsor such programs;
*(10) Underwrite the securities of other issuers;
*(11) Invest more than 10% of the value of its total assets, in the aggregate,
in repurchase agreements maturing in more than seven days and restricted
securities;
*(12) Purchase any security (other than U.S. Government securities) if, as a
result, more than 25% of the Fund's total assets (taken at current value)
would be invested in any one industry (in the utilities category, gas,
electric, water, and telephone companies will be considered as being in
separate industries);
*(13) Borrow money, except as a temporary measure for extraordinary or emergency
purposes, up to an amount not in excess of 33 1/3% of its total assets;
*(14) Issue senior securities. For the purpose of this restriction, none of the
following is deemed to be a senior security: any borrowing permitted by
restriction (13) above; any collateral arrangements with respect to
options, forward contracts, futures contracts, swap contracts and other
similar contracts and options on futures contracts and with respect to
initial and variation margin; the purchase or sale of options, forward
contracts, futures contracts, swap contracts or similar contracts or
options on futures contracts; and the issuance of shares of beneficial
interest permitted from time to time by the provisions of Nvest Funds
Trust II's Agreement and Declaration of Trust and by the 1940 Act, the
rules thereunder, or any exemption therefrom; or
+(15) Invest more than 15% of the Fund's total net assets in illiquid securities
(excluding Rule 144A securities and certain Section 4(2) commercial paper
deemed to be liquid under guidelines established by Nvest Funds Trust II's
trustees.)
NVEST MUNICIPAL INCOME FUND
Nvest Municipal Income Fund (the "Municipal Income Fund") will not:
*(1) Purchase any security if, as a result, more than 5% of the Fund's total
assets (taken at current value) would then be invested in securities of a
single issuer. This limitation does not apply to U.S. Government
securities. (The Fund will treat each state and each separate political
subdivision, agency, authority or instrumentality of such state, each
multistate agency or authority, and each guarantor, if any, as a separate
issuer);
(2) Invest more than 25% of its total assets (taken at current value) in
industrial development revenue bonds that 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. (For the purpose of
this restriction, "private activity bonds" under the Internal Revenue Code
of 1986, as amended [the "Code"], will be treated as industrial revenue
bonds.) (In the utilities category, gas, electric, water and telephone
companies will be considered as being in separate industries);
*(3) Purchase any security on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities, or make short sales. For this purpose, the deposit or
payment by the Fund of initial or variation margin in connection with
interest rate futures contracts or tax exempt bond index futures contracts
is not considered the purchase of a security on margin;
*(4) Purchase more than 10% of the total value of the outstanding securities of
an issuer;
*(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 10% of its total assets (taken at cost) or 5% of its total
assets (taken at current value), whichever is lower;
*(6) Pledge, mortgage or hypothecate more than 15% of its total assets (taken
at cost). In order to comply with certain state requirements, as a matter
of operating policy subject to change without shareholder approval, the
Fund will not pledge, mortgage or hypothecate more than 5% of such assets;
*(7) Invest more than 5% of its total assets (taken at current value) in
securities of businesses less than three years old and industrial
development revenue bonds where the private entity on whose credit the
security is based, directly or indirectly, is less than three years old
(including predecessor businesses and entities);
*(8) Purchase or retain securities of any issuer if, to the knowledge of the
Fund, officers and trustees of Nvest Funds Trust I or of any investment
adviser or subadviser 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% of such securities;
*(9) Make loans, except by purchase of debt obligations in which the Fund may
invest consistent with its investment policies. This limitation does not
apply to repurchase agreements;
*(10) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
commodities or real estate (except that the Fund may buy tax exempt bonds
or other permitted investment secured by real estate or an interest
therein);
*(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 certain federal securities laws;
*(12) Purchase voting securities or 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;
*(14) Write, purchase, or sell puts, calls or combinations thereof, except that
the Fund may write, purchase and sell puts, calls or combinations thereof
with regard to futures contracts;
*(15) Invest in the securities of other investment companies, except in
connection with a merger, consolidation or similar transaction. (Under the
1940 Act, the Fund may not (a) invest more than 10% of its total assets
(taken at current value) in such securities, (b) own securities of any one
investment company having a value in excess of 5% of the Fund's total
assets (taken at current value), or (c) own more than 3% of the
outstanding voting stock of any one investment company);
*(16) Issue senior securities. For the purpose of this restriction, none of the
following is deemed to be a senior security: any borrowing permitted by
restriction (5) above; any collateral arrangements with respect to forward
contracts, options, futures contracts, swap contracts and other similar
contracts and options on futures contracts and with respect to initial and
variation margin; the purchase or sale of options, forward contracts or
options on futures contracts; and the issuance of shares of beneficial
interest permitted from time to time by the provisions of Nvest Funds
Trust I's Agreement and Declaration of Trust and by the 1940 Act, the
rules thereunder, or any exemption therefrom; or
+(17) Invest more than 15% of the Fund's total net assets in illiquid securities
(excluding Rule 144A securities and certain Section 4(2) commercial paper
deemed to be liquid under guidelines established by Nvest Funds Trust I's
trustees.)
The Fund may invest more than 25% of its assets in industrial development
revenue bonds, subject to limitation (2) above.
- ------------------------------------------------------------------------------
FUND CHARGES AND EXPENSES
- -------------------------------------------------------------------------------
MANAGEMENT FEES
Pursuant to separate advisory agreements, each dated August 30, 1996 and
amended May 1, 1998, Nvest Funds Management, L.P. ("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 to each Fund. For the services
described in the advisory agreements, each Fund pays Nvest Management a gross
management fee at the annual rate set forth in the following table, reduced by
the amount of any subadvisory fees paid by the Fund to its subadviser pursuant
to any subadvisory agreement:
Management fee paid by Fund to Nvest
Management
(includes any subadvisory fees paid)
(as a percentage of average daily net
Fund assets of the Fund)
- ------------------------------------- ----------------------------------------
Short Term Corporate Income 0.55% of the first $200 million
0.51% of the next $300 million
0.47% of amounts in excess of
$500 million
Bond Income Fund and 0.50% of the first $100 million
Municipal Income Fund 0.375% of amounts in excess of
$100 million
Government Securities Fund and 0.65% of the first $200 million
Limited Term U.S. Government Fund 0.625% of the next $300 million
0.60% of amounts in excess of
$500 million
High Income Fund 0.70% of the first $200 million
0.65% of amounts in excess of
$200 million
Strategic Income Fund 0.65% of the first $200 million
0.60% of amounts in excess of
$200 million
Each advisory agreement provides that Nvest Management may delegate its
responsibilities thereunder to another party. Pursuant to separate subadvisory
agreements, each dated August 30, 1996 and amended May 1, 1998, Nvest Management
has delegated responsibility for managing the investment and reinvestment of the
Strategic Income Fund's and the High Income Fund's assets to Loomis Sayles &
Company, L.P. ("Loomis Sayles"), as subadviser. Pursuant to separate subadvisory
agreements, each dated August 30, 1996 and amended May 1, 1998, Nvest Management
has delegated responsibility for managing the investment and reinvestment of the
other Funds' assets to Back Bay Advisors, as subadviser. For the services
described in the subadvisory agreements, each Fund has agreed to pay its
respective subadviser a subadvisory fee at the annual rate set forth in the
following table:
<TABLE>
<CAPTION>
Subadvisory fee payable to subadviser
(as a percentage of average daily net
Fund Subadviser assets of the Fund)
- ------------------------------ ------------- ---------------------------------------
<S> <C> <C>
Short Term Corporate Income Fund Back Bay 0.275% of the first $200 million
Advisors 0.255% of the next $300 million
0.235% of amounts in excess of $500
million
Bond Income Fund and Back Bay 0.250% of the first $100 million
Municipal Income Fund Advisors of amounts in excess of $100
0.1875% million
Government Securities Fund and Back Bay 0.325% of the first $200 million
Limited Term U.S. Government Fund Advisors 0.3125% of the next $300 million
0.300% of amounts in excess of $500 million
High Income Fund and Loomis 0.350% of the first $200 million
Strategic Income Fund Sayles 0.300% of amounts in excess of $200 million
</TABLE>
Nvest Management has given either a voluntary or a binding undertaking to
Short Term Corporate Income Fund to reduce its fees and, if necessary, to bear
certain expenses related to operating the Fund in order to limit the Fund's
total operating expenses to an annual rate of 0.90%, 1.65%, 1.65% and 0.65% of
the average daily net assets of the Fund's Class A, Class B, Class C and Class Y
shares, respectively. The undertaking will be binding on Nvest Management for
the life of the Fund's current Prospectus (subject to the obligation of the Fund
to pay such deferred fees and expenses in later periods to the extent that the
Fund's expenses fall below the annual rate of 0.90% of average daily net assets
for Class A shares, 1.65% for Class B shares, 1.65% for Class C shares and 0.65%
for Class Y shares; provided, however, that the Fund is not obligated to pay any
such deferred fees or expense reimbursement more than one year after the end of
the fiscal year in which the fee was deferred. The recapture period for expenses
incurred peior to December 31, 1998 is two years.). Prior to May 1, 2000, these
limits were 0.70%, 1.45% 1.45% and 0.45% for the Fund's Class A, Class B, Class
C and Class Y shares, respectively.
As of May 1, 1998, each subadvisory agreement between Nvest Management and
Loomis Sayles or Back Bay Advisors was amended to add the relevant Fund as a
party and to provide that the subadvisory fees payable under such agreement are
payable by the Fund rather than by Nvest Management. Also as of May 1, 1998, the
advisory agreement for each Fund was amended to provide that the management fees
payable by the Fund to Nvest Management are reduced by the amounts of any
subadvisory fees paid directly by the Fund to its subadviser. These amendments
to the Funds' advisory and subadvisory agreements did not change the management
and subadvisory fee rates under the agreements, nor the services to be provided
to the Funds by Nvest Management and the subadvisers under the agreements.
Furthermore, these amendments did not change the overall level of fees payable
by any Fund.
For investment management services it rendered to the Short Term Corporate
Income Fund during the fiscal years ended December 31, 1997, 1998 and 1999,
Nvest Management was paid $604,848, $388,847 and $14,808, respectively, after
reduction pursuant to the expense limitation arrangements. For the fiscal year
ended December 31, 1997, and for the period January 1 through April 30, 1998,
Nvest Management paid Back Bay Advisors $302,424 and $86,263, respectively, for
subadvisory services it rendered to the Short Term Corporate Income Fund. For
the period May 1 through December 31, 1998 and the fiscal year ended December
31, 1999, the Short Term Corporate Income Fund paid Back Bay Advisors $78,161
and $14,808, respectively, for subadvisory services rendered to the Fund. Had
the voluntary or binding expense limitation not been in effect, Nvest Management
would have been paid $1,230,235, $1,013,997 and $236,447 for investment
management services rendered to the Short Term Corporate Income Fund during the
fiscal years ended December 31, 1997, 1998 and 1999, respectively. Had the
voluntary or binding expense limitation not been in effect, Back Bay Advisors
would have been paid $615,117, $506,998 and $236,446 for the fiscal years ended
December 31, 1997, 1998 and 1999.
For the fiscal years ended December 31, 1997, 1998 and 1999, the
Government Securities Fund paid management fees to Nvest Management of $784,478,
$728,262 and $347,031, respectively. For the fiscal year ended December 31,
1997, and for the period January 1 through April 30, 1998, Nvest Management paid
subadvisory fees of $392,239 and $121,305, respectively, to Back Bay Advisors
for the Fund. For the period May 1 through December 31, 1998 and the fiscal year
ended December 31, 1999, the Government Securities Fund paid Back Bay Advisors
$242,826 and $347,030, respectively, for subadvisory services rendered to the
Fund.
For the fiscal years ended December 31, 1997, 1998 and 1999, the Limited
Term U.S. Government Fund paid Nvest Management $1,802,343, $1,591,988 and
$675,744, respectively, in advisory fees. For the fiscal year ended December 31,
1997, and for the period January 1 through April 30, 1998, Nvest Management paid
subadvisory fees of $901,171 and $278,715, respectively, to Back Bay Advisors
for the Fund. For the period May 1 through December 31, 1998 and the fiscal year
ended December 31, 1999, the Limited Term U.S. Government Fund paid Back Bay
Advisors $517,279 and $675,744, respectively, for subadvisory services rendered
to the Fund.
For the fiscal years ended December 31, 1997, 1998 and 1999, the Bond
Income Fund paid management fees to Nvest Management of $971,242, $1,115,200 and
$677,178, respectively, and the Municipal Income Fund paid management fees to
Nvest Management of $832,144, $834,043 and $401,526, respectively. For the
fiscal year ended December 31, 1997, and for the period January 1 through April
30, 1998, Nvest Management paid subadvisory fees of $485,621 and $173,296,
respectively, to Back Bay Advisors for the Bond Income Fund. For the period May
1 through December 31, 1998 and the fiscal year ended December 31, 1999, the
Bond Income Fund paid Back Bay Advisors $384,304 and $677,178, respectively, for
subadvisory services rendered to the Fund. For the fiscal years ended December
31, 1997, and for the period January 1 through April 30, 1998, Nvest Management
paid subadvisory fees of $416,072 and $137,829, respectively, to Back Bay
Advisors for the Municipal Income Fund. For the period May 1 through December
31, 1998 and the fiscal year ended December 31, 1999, the Municipal Income Fund
paid Back Bay Advisors $279,193 and $401,525, respectively for subadvisory
services rendered to the Fund.
From July 1, 1996 to December 31, 1998, Nvest Management gave a binding
undertaking to High Income Fund to reduce its management fee and, if necessary,
to bear certain expenses related to operating the Fund in order to limit the
Fund's total operating expenses to an annual rate of 1.40% of the average daily
net assets attributable to its Class A shares, 2.15% of such assets attributable
to its Class B shares and 2.15% of such assets attributable to its Class C
shares. In addition, Loomis Sayles agreed to waive 50% of the subadvisory fee
payable by Nvest Management to Loomis Sayles for the High Income Fund for the
period from July 1, 1996 to June 30, 1997.
Nvest Management was paid $561,521, $899,082 and $542,562, respectively,
in management fees by the High Income Fund for the fiscal years ended December
31, 1997, 1998 and 1999, after reduction pursuant to the foregoing voluntary
expense limitations. Had the voluntary expense limitations not been in effect,
Nvest Management would have been paid $561,521 and $899,082, respectively, in
management fees by the High Income Fund for the fiscal years ended December 31,
1997 and 1998. For the fiscal year ended December 31, 1997, Nvest Management
paid subadvisory fees of $221,232 to Loomis Sayles for the High Income Fund,
after reduction pursuant to the voluntary fee waiver by Loomis Sayles described
above. Had this waiver not been in effect, Nvest Management would have paid
subadvisory fees of $280,760 to Loomis Sayles for the Fund for the fiscal year
ended December 31, 1997. For the period January 1 to April 30, 1998, Nvest
Management paid subadvisory fees of $233,046 to Loomis Sayles for the High
Income Fund and for the period May 1 to December 31, 1998 and the fiscal year
ended December 31, 1999, the Fund paid subadvisory fees of $216,495 and
$542,562, to Loomis Sayles.
Loomis Sayles voluntarily agreed, until December 31, 1996, to waive its
entire subadvisory fee for the Strategic Income Fund (which was paid by Nvest
Management), and Nvest Management agreed to reduce its management fee (which was
paid by the Fund) by an equal amount. In addition, under an expense deferral
arrangement, which was in effect until December 31, 1996, Nvest Management
agreed to defer its management fee (to the extent not waived as provided in the
preceding sentence) for the Strategic Income Fund, to the extent necessary to
limit the Fund's expenses to the annual rate of 1.40% for Class A shares, 2.15%
for Class B shares and 2.15% for Class C shares, subject to the obligation of
the Fund to pay Nvest Management such deferred fees in later periods to the
extent that the Fund's expenses fall below the annual rate of 1.40% for Class A
shares, 2.15% for Class B shares and 2.15% for Class C shares; provided,
however, that, the Fund is not obligated to pay any such deferred fees more than
two years after the end of the fiscal year in which such fee was deferred.
For the fiscal year ended December 31, 1997, Nvest Management received
from Strategic Income Fund $0 in management fees deferred from 1995, $0 in
management fees deferred from 1996 and $1,855,972 in 1997 management fees; Nvest
Management paid Loomis Sayles $974,943 in subadvisory fees for the fiscal period
ended December 31, 1997. In 1998, Nvest Management received from Strategic
Income Fund $1,021,343 in management fees; Nvest Management paid Loomis Sayles
$389,268 in subadvisory fees for the period January 1 to April 30, 1998, and the
Fund paid Loomis Sayles $732,075 in subadvisory fees for the period May 1 to
December 31, 1998. For the fiscal year ended December 31, 1999 the Fund paid
Nvest Management $903,681 in management fees and $1,003,685 to Loomis Sayles in
subadvisory fees.
BROKERAGE COMMISSIONS
In 1997, 1998 and 1999, Government Securities Fund paid total brokerage
commissions of $0, $1,655 and $0, respectively.
In 1997, 1998 and 1999, Limited Term U.S. Government Fund paid total
brokerage commissions of $0, $609,640 and $0, respectively.
In 1997, 1998 and 1999, Strategic Income Fund paid total brokerage
commissions of $0, $69,654 and $15,466, respectively.
In 1997, 1998 and 1999, Short Term Corporate Income Fund paid no
commissions on brokerage transactions.
In 1997, 1998 and 1999, Bond Income Fund paid no commissions on brokerage
transactions.
In 1997, 1998 and 1999, High Income Fund paid no commissions on brokerage
transactions.
In 1997, 1998 and 1999, Municipal Income Fund paid no commissions on
brokerage transactions.
For more information about the Funds' portfolio transactions, see
"Portfolio Transactions and Brokerage" in Part II of this Statement.
SALES CHARGES AND 12B-1 FEES
As explained in Part II of this Statement, the Class A, Class B and, in
the case of the Limited Term U.S. Government, Short Term Corporate Income, Bond
Income, High Income and Strategic Income Funds, Class C shares of each Fund pay
Nvest Funds Distributor, L.P. (the "Distributor") a fee pursuant to a plan
adopted pursuant to Rule 12b-1 under the 1940 Act. The following table shows the
amounts of Rule 12b-1 fees paid by the Funds during the fiscal years ended
December 31, 1997, 1998 and 1999:
FUND 1997 1998 1999
- ---------------------------------- ---- ---- ----
Government Securities Fund $272,781 $251,899 $234,846 (Class A)
$ 52,308 $ 70,781 $ 99,838 (Class B)
Limited Term U.S. Government Fund $851,990 $727,464 $605,537 (Class A)
$170,466 $167,187 $164,763 (Class B)
$146,913 $157,691 $112,910 (Class C)
Short Term Corporate Income Fund* $556,721 $444,423 $204,810 (Class A)
$ 28,482 $ 31,994 $ 36,457 (Class B)
N/A $ 100 $ 4,278 (Class C)
Bond Income Fund $467,790 $508,997 $560,299 (Class A)
$329,490 $471,018 $804,437 (Class B)
$30,386 $69,702 $124,521 (Class C)
High Income Fund** $127,503 $179,477 $191,143 (Class A)
$292,153 $533,715 $689,945 (Class B)
N/A $ 32,113 $ 95,684 (Class C)
Municipal Income Fund $439,054 $436,749 $411,552 (Class A)
$129,507 $143,798 $161,938 (Class B)
Strategic Income Fund $ 305,860 $ 354,155 $ 318,145 (Class A)
$1,241,850 $1,458,910 $1,313,549 (Class B)
$ 451,186 $ 528,954 $ 426,145 (Class C)
* The Short Term Corporate Income Fund first offered Class C shares on
December 7, 1998.
** The High Income Fund first offered Class C shares on March 2, 1998.
During the fiscal year ended December 31, 1999, the Distributor's expenses
relating to each Fund's 12b-1 plans were as follows (Class B compensation to
investment dealers exclude advanced commissions sold to a third party):
GOVERNMENT SECURITIES FUND
(Class A shares)
Compensation to Investment Dealers $234,228
Compensation to Distributor's Sales Personnel and Other
Related Costs $172,645
--------
TOTAL 406,873
(Class B shares)
Compensation to Investment Dealers $ 14,275
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 34,130
--------
TOTAL $ 48,405
LIMITED TERM U.S. GOVERNMENT FUND
(Class A shares)
Compensation to Investment Dealers $431,843
Compensation to Distributor's Sales Personnel and Other
Related Costs $211,848
--------
TOTAL $643,691
(Class B shares)
Compensation to Investment Dealers $ 34,007
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 15,696
--------
TOTAL $ 49,703
(Class C shares)
Compensation to Investment Dealers $104,269
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 22,093
--------
TOTAL $126,362
SHORT TERM CORPORATE INCOME FUND
(Class A shares)
Compensation to Investment Dealers $204,516
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 88,548
--------
TOTAL $293,064
(Class B shares)
Compensation to Investment Dealers $ 6,934
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 8,378
--------
TOTAL $ 15,312
(Class C shares)
Compensation to Investment Dealers $ 7,778
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 8,372
--------
TOTAL $ 16,150
STRATEGIC INCOME FUND
(Class A shares)
Compensation to Investment Dealers $317,555
Compensation to Distributor's Sales Personnel and Other
Related Costs $160,595
--------
TOTAL $478,150
(Class B shares)
Compensation to Investment Dealers $246,657
Compensation to Distributor's Sales Personnel and Other
Related Costs $161,103
--------
TOTAL $407,760
(Class C shares)
Compensation to Investment Dealers $367,815
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 55,051
--------
TOTAL $422,866
BOND INCOME FUND
(Class A shares)
Compensation to Investment Dealers $ 558,019
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 643,613
----------
TOTAL $1,201,632
(Class B shares)
Compensation to Investment Dealers $ 98,600
Compensation to Distributor's Sales Personnel and Other
Related Costs $474,586
--------
TOTAL $573,186
(Class C shares)
Compensation to Investment Dealers $143,368
Compensation to Distributor's Sales Personnel and Other
Related Costs $109,503
--------
TOTAL $252,871
HIGH INCOME FUND
(Class A shares)
Compensation to Investment Dealers $187,573
Compensation to Distributor's Sales Personnel and Other
Related Costs $203,806
--------
TOTAL $391,379
(Class B shares)
Compensation to Investment Dealers $ 99,530
Compensation to Distributor's Sales Personnel and Other
Related Costs $250,517
--------
TOTAL $350,047
(Class C shares)
Compensation to Investment Dealers $ 65,252
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 38,387
--------
TOTAL $103,639
MUNICIPAL INCOME FUND
(Class A shares)
Compensation to Investment Dealers $411,387
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 99,982
--------
TOTAL $511,369
(Class B shares)
Compensation to Investment Dealers $ 31,275
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 32,436
--------
TOTAL $ 63,711
Of the amounts listed above as compensation to investment dealers, the
following amounts shown in the table below were paid by the Distributor to New
England Securities Corporation ("New England Securities"), MetLife Securities,
Inc. ("MetLife Securities") and Nathan & Lewis Securities, Inc. ("Nathan &
Lewis"), broker-dealer affiliates of the Distributor. New England Securities,
MetLife Securities and Nathan & Lewis paid substantially all of the fees they
received from the Distributor (a) in commissions to its sales personnel and (b)
to defray sales-related overhead costs.
New England Securities
Class A Class B Class C
Government Securities Fund $169,017 $ 7,081 --
Short Term Corporate Income Fund $ 84,793 $ 3,566 $ 5,051
Bond Income Fund $311,691 $48,619 $47,432
High Income Fund $ 81,864 $20,038 $18,139
Municipal Income Fund $297,602 $12,608 --
Limited Term U.S. Government Fund $269,183 $18,411 $ 9,612
Strategic Income Fund $179,784 $72,577 $43,968
MetLife Securities
Class A Class B Class C
Government Securities Fund $ 4,022 $ 1,068 --
Short Term Corporate Income Fund $ 1,236 $ 426 --
Bond Income Fund $ 9,636 $11,440 $ 330
High Income Fund $ 6,857 $ 5,020 --
Municipal Income Fund $ 4,885 $ 3,512 --
Limited Term U.S. Government Fund $ 1,820 $ 395 --
Strategic Income Fund $ 4,525 $ 9,268 $ 1,000
Nathan & Lewis
Class A Class B Class C
Government Securities Fund $ 183 $ 100 --
Short Term Corporate Income Fund $ 963 $ 8 --
Bond Income Fund $ 1,769 $ 59 --
High Income Fund $ 115 $ 22 --
Municipal Income Fund $ 1,159 -- --
Limited Term U.S. Government Fund $ 707 $ 7 --
Strategic Income Fund $ 1,000 $ 362 $ 61
- -------------------------------------------------------------------------------
OWNERSHIP OF FUND SHARES
- -------------------------------------------------------------------------------
As of March 31, 2000, to the Trusts' knowledge, the following persons
owned of record or beneficially 5% or more of the indicated classes set forth
below.
FUND SHAREHOLDER AND ADDRESS OWNERSHIP
---- ----------------------- ---------
PERCENTAGE
GOVERNMENT SECURITIES FUND
Class A shares Netivation Inc. 5.14%
Attn Anthony J. Paquin
806 W. Clearwater Loop Suite N
Post Falls, ID 83854-6937
Class B Shares MLPF & S For the Sole Benefit of Its 7.07%
Customers
Attn Fund Administration ML#97CH8
4800 Deer Lake Drive East - 2nd Fl
Jacksonville, FL 32246-6484
Class Y shares New England Mutual Life Insurance Co. 100.0%
Separate Investment Accounting
Attn: Brenda Harmon
501 Boylston Street - 6th Floor
Boston, MA 02116-3706
LIMITED TERM U.S. GOVERNMENT
FUND
Class C shares The Bank of New York as Funds 6.26%
Custodian for the City of Forsyth
Georgia
100 Ashford Center N Ste 520
Atlanta, GA 30338-4865
US Clearing Corp 6.01%
FBO 230-13062-19
26 Broadway
New York, NY 10004-1703
Class Y shares Chase Manhattan Bank 33.05%
Directed Trustee for MetLife Defined
Contribution Group
770 Broadway -- 10th Floor
New York, NY 10003-9522
New England Mutual Life Insurance Co. 53.36%
Separate Investment Accounting
Attn: Brenda Harmon
501 Boylston Street - 6th Floor
Boston, MA 02116-3706
New England Life Insurance Company 13.58%
C/o Mary Beth Klein
Insurance Accounting, 6th Floor
501 Boylston Street
Boston, MA 02116-3738
SHORT TERM CORPORATE INCOME
FUND
Class A shares National Auto Dealers Association 9.42%
8400 Westpark Drive
Mclean, VA 22102-3522
Treasurer, County of Lakeport 8.82%
255 No Forbes Street Rm 215
Lakeport, CA 95453
County of San Benito 6.27%
Mary Lou Andrade
County Treasurer
440 Fifth Street Room 107
Hollister, CA 95023-3843
JC Bradford & Co. Cust. FBO 5.39%
The Cato Corporation
330 Commerce Street
Nashville, TN 37201-1805
Class B shares MLPF & S For the Sole Benefit of Its 6.59%
Customers
Attn Fund Administration ML#97CH6
4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246-6484
Class C shares Salomon Smith Barney Inc. 43.13%
333 West 34th Street - 3rd Floor
New York, NY 10001
Cheryl Nichols 42.35%
5545 Country Country Club Lane
Hamburg, NY 14075-5867
STRATEGIC INCOME FUND
Class B shares MLPF & S For the Sole Benefit of Its 5.64%
Customers
Attn Fund Administration ML#97GM8
4800 Deer lake Drive East - 2nd Floor
Jacksonville, FL 32246-6484
Class C shares South Trust Bank of Georgia NA 7.08%
Attn Trust Department FBO
Atlanta Regional Commission
Retirement Plan
79 West Paces Ferry Road
Atlanta, GA 30305-1350
Class Y shares MetLife Insurance Company 99.99%
Attn Adrienne Lavis
2 Montgomery Street, 3rd Floor
Jersey City, NJ 07302-3802
BOND INCOME FUND
Class B shares MLPF & S For the Sole Benefit of Its 10.93%
Customers
Attn Fund Administration ML #97CJ0
4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246-6484
Class C shares MLPF & S For the Sole Benefit of Its 20.20%
Customers
Attn Fund Administration ML #97UO1
4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246-6484
South Trust Bank of Georgia NA 7.32%
Attn Trust Department FAO
Atlanta Regional Commission
Retirement Plan
79 West Paces Ferry Road
Atlanta, GA 30305-1350
Class Y shares Chase Manhattan Bank 36.58%
Directed Trustee for MetLife Defined
Contribution Group
770 Broadway -- 10th Floor
New York, NY 10003-9522
Metropolitan Life Insurance Co. 15.58%
c/o GADC - Gerald Hart - Agency
Operations NELICO
501 Boylston Street - 10th Floor
Boston, MA 02116-3706
Parbanc Co. 15.28%
514 Market Street
Parkersburgh, WV 26101-5144
MetLife Insurance Company 7.46%
Attn: Adrienne Lavis
2 Montgomery Street, 3rd Floor
Jersey City, NJ 07302-3802
New England Life Insurance Co. 16.91%
c/o Mary Beth Klein
Insurance Accounting. - 6th Floor
501 Boylston Street
Boston, MA 02116-3706
MLPF & S for the Sole Benefit of Its 6.85%
Customers
Attn Fund Administration ML#97PN8 4800
Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246-6484
HIGH INCOME FUND
Class B shares MLPF & S for the Sole Benefit of 9.22%
Its Customers
Attn Fund Administration ML#97CJ3
4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246-6484
Class C shares MLPF & S for the Sole Benefit of Its 10.22%
Customers
Attn Fund Administration ML#97UA1
4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246-6484
South Trust Bank of Georgia NA 14.30%
Attn Trust Department FAO
Atlanta Regional Commission
Retirement Plan
79 West Paces Ferry Road
Atlanta, GA 30305-1350
<PAGE>
- -------------------------------------------------------------------------------
INVESTMENT PERFORMANCE OF THE FUNDS
- -------------------------------------------------------------------------------
PERFORMANCE RESULTS - PERCENT CHANGE
For the Periods Ended 12/31/99*
<TABLE>
GOVERNMENT SECURITIES FUND
<CAPTION>
Aggregate Average Annual
Total Return Total Return
------------------------- ------------------
Class A shares: As a % of 1 Year 5 Years 10 Years 5 Years 10 Years
- -------------------------- ------ ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value -6.42 36.16 81.85 6.37 6.16
Maximum Offering Price -10.63 30.05 73.60 5.40 5.67
<CAPTION>
Aggregate Average Annual
Total Return Total Return
------------------------- ------------------
Since Since
Class B shares: As a % of 1 Year 5 Years 9/23/93** 5 Years 9/23/93**
- -------------------------- ------ ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value -7.13 31.13 21.79 5.57 3.19
Redemption at End of Period -11.53 29.13 21.79 5.25 3.19
<CAPTION>
Aggregate Average Annual
Total Return Total Return
------------------------- ------------------
Since Since
Class Y shares: As a % of 1 Year 5 Years 3/31/94** 5 Years 3/31/94**
- -------------------------- ------ ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value -6.28 37.75 34.98 6.62 5.35
LIMITED TERM U.S. GOVERNMENT
FUND
<CAPTION>
Aggregate Average Annual
Total Return Total Return
--------------------------------- ------------------------
Since Since
Class A shares: As a % of 1 Year 5 Years 10 years 1/3/89** 5 Years 10 Years 1/3/89**
- -------------------------- ------ ------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value -0.67 31.27 83.27 102.32 5.59 6.25 6.62
Maximum Offering Price -3.64 27.27 77.73 96.19 4.94 5.92 6.32
<CAPTION>
Aggregate Average Annual
Total Return Total Return
--------------------------- -------------------
Since Since
Class B shares: As a % of 1 Year 5 Years 9/27/93** 5 Years 9/27/93**
- -------------------------- ------ ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value -1.41 27.00 22.37 4.90 3.28
Redemption at End of Period -6.09 25.09 22.37 4.58 3.28
<CAPTION>
Aggregate Annualized
Total Return Total Return
----------------------------- -------------------
Since Since
Class C shares: As a % of 1 Year 5 Years 12/30/94** 5 Years 12/30/94**
- -------------------------- ------ -------------------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value -1.40 25.96 25.96 4.72 4.72
Redemption at End of Period -2.34 25.96 25.96 4.72 4.72
<CAPTION>
Aggregate Average Annual
Total Return Total Return
--------------------------- ----------------------
Since Since
Class Y shares: As a % of 1 Year 5 Years 3/31/94** 5 Years 3/31/94**
- -------------------------- ------ ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value -0.32 33.46 33.16 5.94 5.10
SHORT TERM CORPORATE INCOME
FUND***
<CAPTION>
Aggregate Average Annual
Total Return Total Return
------------------------- -------------------
Since Since
Class A shares: As a % of 1 Year 5 Years 10/18/91** 5 Years 10/18/91**
- -------------------------- ------ ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value 1.87 29.35 44.07 5.28 4.55
Maximum Offering Price -1.24 25.51 39.78 4.65 4.17
<CAPTION>
Aggregate Average Annual
Total Return Total Return
--------------------------- ---------------------
Since Since
Class B shares: As a % of 1 Year 5 Years 9/13/93** 5 Years 9/13/93**
- -------------------------- ------ ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value 1.12 24.64 24.68 4.50 3.56
Redemption at End of Period -3.69 22.69 24.68 4.18 3.56
<CAPTION>
Aggregate Average Annual
Total Return Total Return
-------------------- ---------------
Since Since
Class C shares: As a % of 1 Year 12/1/98** 12/1/98**
- -------------------------- -------- --------- ---------
<S> <C> <C> <C>
Net Asset Value 1.2 1.47 1.38
Redemption at End of Period 0.24 1.47 1.38
STRATEGIC INCOME FUND
<CAPTION>
Aggregate Annualized
Total Return Total Return
-------------------- --------------
Since Since
Class A shares: As a % of 1 Year 5/1/95** 5/1/95**
- -------------------------- ------ -------- --------
<S> <C> <C> <C>
Net Asset Value 12.17 52.29 9.43
Maximum Offering Price 7.08 45.42 8.35
<CAPTION>
Aggregate Annualized
Total Return Total Return
-------------------- --------------
Since Since
Class B shares: As a % of 1 Year 5/1/95** 5/1/95**
- -------------------------- ------ -------- --------
<S> <C> <C> <C>
Net Asset Value 11.33 46.89 8.58
Redemption at End of Period 6.33 45.02 8.29
<CAPTION>
Aggregate Annualized
Total Return Total Return
-------------------- --------------
Since Since
Class C shares: As a % of 1 Year 5/1/95** 5/1/95**
- -------------------------- ------ -------- --------
<S> <C> <C> <C>
Net Asset Value 11.34 46.56 8.53
Redemption at End of Period 10.34 46.56 8.53
<CAPTION>
Aggregate Average Annual
Total Return Total Return
-------------------- --------------
Since Since
Class Y shares: As a % of 12/1/99** 12/1/99**
- -------------------------- --------- ---------
<S> <C> <C>
Net Asset Value 2.65 2.65
BOND INCOME FUND
<CAPTION>
Aggregate Average Annual
Total Return Total Return
-------------------------- --------------------
Class A shares: As a % of 1 Year 5 Years 10 Years 5 Years 10 Years
- -------------------------- ------ ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value -0.34 51.03 121.18 8.60 8.26
Maximum Offering Price -4.81 44.18 111.21 7.59 7.76
<CAPTION>
Aggregate Average Annual
Total Return Total Return
--------------------------- ---------------------
Since Since
Class B shares: As a % of 1 Year 5 Years 9/13/93** 5 Years 9/13/93**
- -------------------------- ------ ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value -1.09 45.49 37.24 7.79 5.15
Redemption at End of Period -5.74 43.49 37.24 7.49 5.15
<CAPTION>
Aggregate Annualized
Total Return Total Return
--------------------------- ----------------------
Since Since
Class C shares: As a % of 1 Year 5 Years 12/30/94** 5 Years 12/30/94**
- -------------------------- ------ ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value -1.09 43.52 43.52 7.49 7.49
Redemption at End of Period -2.02 43.52 43.52 7.49 7.49
<CAPTION>
Aggregate Average Annual
Total Return Total Return
---------------------------- --------------------
Since Since
Class Y shares: As a % of 1 Year 5 Years 12/30/94** 5 Years 12/30/94**
- -------------------------- ------ ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value -0.01 52.23 52.23 8.77 8.76
HIGH INCOME FUND
<CAPTION>
Aggregate Average Annual
Total Return Total Return
--------------------------- ------------------
Class A shares: As a % of 1 Year 5 Years 10 Years 5 Years 10 Years
- -------------------------- ------ ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value 4.00 51.48 134.09 8.66 8.88
Maximum Offering Price -0.71 44.64 123.64 7.66 8.38
<CAPTION>
Aggregate Average Annual
Total Return Total Return
--------------------------- ------------------
Since Since
Class B shares: As a % of 1 Year 5 Years 9/20/93** 5 Years 9/20/93**
- -------------------------- ------ ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value 3.34 46.33 46.51 7.91 6.27
Redemption at End of Period -1.35 44.46 46.51 7.63 6.27
<CAPTION>
Aggregate Average Annual
Total Return Total Return
--------------------- ----------------
Since Since
Class C shares: As a % of 1 Year 3/2/98** 3/2/98**
- -------------------------- ------ -------- --------
<S> <C> <C> <C>
Net Asset Value 3.34 -0.73 -0.40
Redemption at End of Period 2.40 -0.73 -0.40
MUNICIPAL INCOME FUND
Aggregate Average Annual
Total Return Total Return
-------------------------- ----------------------
Class A shares: As a % of 1 Year 5 Years 10 Years 5 Years 10 Years
- -------------------------- ------ ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value -2.75 36.42 80.17 6.41 6.06
Maximum Offering Price -7.17 30.34 72.15 5.44 5.58
<CAPTION>
Aggregate Average Annual
Total Return Total Return
--------------------------- ---------------------
Since Since
Class B shares: As a % of 1 Year 5 Years 9/13/93** 5 Years 9/13/93**
- -------------------------- ------ ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value -3.48 31.35 21.12 5.61 3.09
Redemption at End of Period -8.10 29.35 21.12 5.28 3.09
<PAGE>
* Federal regulations require this example to be calculated using a $1,000
investment. The normal minimum initial investment in shares of the Funds
is $2,500, however.
** Commencement of Fund operations or offering of the indicated class of shares.
*** The Fund (formerly New England Adjustable Rate U.S. Government Fund) changed
its name, investment policies and comparative indices on December 7, 1998.
</TABLE>
YIELD FOR THE 30-DAY PERIOD
ENDED 12/31/99*
FUND CLASS A CLASS B CLASS C CLASS Y
- ---------------------------------- ------- ------- ------- -------
Government Securities Fund ............. 4.99 4.51 -- 5.48
Limited Term U.S. Government Fund ...... 5.39 4.91 4.91 5.90
Short Term Corporate Income Fund ....... 6.05 5.49 5.49 --
Strategic Income Fund .................. 8.99 8.66 8.67 NA
Bond Income Fund ....................... 6.69 6.25 6.24 7.25
High Income Fund ....................... 12.52 12.33 12.35 --
Municipal Income Fund .................. 5.14 4.65 -- --
* Yields for the Class A shares of the Funds are based on the public
offering price of a Class A share of the Funds and yields for the Class
B, Class C and Class Y shares are based on the net asset value of a
share of the Funds.
Distribution Rate. The Government Securities, Limited Term U.S.
Government, Short Term Corporate Income, Bond Income and High Income Funds may
include in their written sales material distribution rates based on the Funds'
distributions from net investment income and short-term capital gains for a
recent 30 day, three month or one year period.
Distributions of less than one year are annualized by multiplying by the
factor necessary to produce twelve months of distributions. The distribution
rates are determined by dividing the amount of the particular Fund's
distributions per share over the relevant period by either the maximum offering
price or the net asset value of a share of the Fund on the last day of the
period.
DISTRIBUTION RATES
FOR PERIODS ENDING 12/31/99
AS A % OF 1 MONTH
----------------------------------- -------
GOVERNMENT SECURITIES FUND
(Class A shares)
Net Asset Value 6.19%
Maximum Offering Price 5.91%
(Class B shares)
Net Asset Value 5.38%
(Class Y shares)
Net Asset Value 6.47%
LIMITED TERM U.S. GOVERNMENT FUND
(Class A shares)
Net Asset Value 6.07%
Maximum Offering Price 5.88%
(Class B shares)
Net Asset Value 5.39%
(Class C shares)
Net Asset Value 5.38%
(Class Y shares)
Net Asset Value 6.42%
SHORT TERM CORPORATE INCOME FUND
(Class A shares)
Net Asset Value 6.16%
Maximum Offering Price 5.97%
(Class B shares)
Net Asset Value 5.37%
(Class C shares)
Net Asset Value 5.37%
STRATEGIC INCOME FUND
(Class A shares)
Net Asset Value 9.12%
Maximum Offering Price 8.69%
(Class B shares)
Net Asset Value 8.31%
(Class C shares)
Net Asset Value 8.32%
(Class Y shares)
Net Asset Value 9.38%
BOND INCOME FUND
(Class A shares)
Net Asset Value 7.76%
Maximum Offering Price 7.40%
(Class B shares)
Net Asset Value 6.96%
(Class C shares)
Net Asset Value 6.96%
(Class Y shares)
Net Asset Value 8.02%
HIGH INCOME FUND
(Class A shares)
Net Asset Value 12.52%
Maximum Offering Price 11.93%
(Class B shares)
Net Asset Value 11.67%
(Class C shares)
Net Asset Value 11.69%
MUNICIPAL INCOME FUND
(Class A shares)
Net Asset Value 4.79%
Maximum Offering Price 4.57%
(Class B shares)
Net Asset Value 3.99%
The foregoing data represent past performance only, and are not a
representation as to the future results of any Fund. The investment return and
principal value of an investment in any Fund will fluctuate so that the
investor's shares, when redeemed, may be worth more or less than their original
cost.
<PAGE>
NVESTFUNDS(SM)
Where The Best Minds Meet(R)
- -------------------------------------------------------------------------------
NVEST STAR ADVISERS FUND
NVEST STAR WORLDWIDE FUND
NVEST STAR SMALL CAP FUND
NVEST STAR VALUE FUND
STATEMENT OF ADDITIONAL INFORMATION -- PART I
MAY 1, 2000
This Statement of Additional Information (the "Statement") contains
information which may be useful to investors but which is not included in the
Prospectus of the Nvest Funds listed above (the "Funds" and each a "Fund"). This
Statement is not a prospectus and is only authorized for distribution when
accompanied or preceded by the Prospectus of the Funds dated May 1, 2000 for
Class A, Class B and Class C shares or the Prospectus dated May 1, 2000 for
Class Y shares (the "Prospectus" or "Prospectuses"). The Statement should be
read together with the Prospectus. Investors may obtain a free copy of the
Prospectus from Nvest Funds Distributor, L.P., Prospectus Fulfillment Desk, 399
Boylston Street, Boston, Massachusetts 02116, by calling Nvest Funds at
800-225-5478 or by placing an order online at www.nvestfunds.com.
Part I of this Statement contains specific information about the Funds.
Part II includes information about the Funds and other Nvest Funds. The Funds
are each a diversified fund of Nvest Funds Trust I (the "Trust"), a registered
open-end management investment company that offers a total of twelve funds.
The Funds' financial statements and accompanying notes that appear in the
Funds' annual and semi-annual reports are incorporated by reference into this
Statement. Each Fund's annual and semiannual report contains additional
performance information and is available upon request and without charge, by
calling 800-225-5478.
T A B L E O F C O N T E N T S
Page
PART I
Investment Restrictions ii
Fund Charges and Expenses vi
Ownership of Fund Shares x
Investment Performance of the Funds xi
PART II
Miscellaneous Investment Practices 2
Management of the Trusts 22
Portfolio Transactions and Brokerage 36
Description of the Trusts and Ownership of Shares 43
How to Buy Shares 46
Net Asset Value and Public Offering Price 46
Reduced Sales Charges - Class A Shares Only 47
Shareholder Services 49
Redemptions 56
Standard Performance Measures 58
Income Dividends, Capital Gain Distributions and Tax Status 63
Financial Statements 65
Appendix A - Description of Bond Ratings 66
Appendix B - Publications That May Contain Fund Information 68
Appendix C - Advertising and Promotional Literature 71
Appendix D - Portfolio Composition of the High Income,
Bond Income, Strategic Income and Municipal
Income Funds 75
<PAGE>
- -------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- -------------------------------------------------------------------------------
The following is a description of restrictions on the investments to be
made by the Funds. The restrictions marked with an asterisk (*) may not be
changed without the vote of a majority of the outstanding voting securities of
the relevant Fund (as defined in the Investment Company Act of 1940, as amended
the "1940 Act"). Except in the case of restrictions marked with a dagger (+)
below, the percentages set forth below and the percentage limitations set forth
in the Prospectus will apply at the time of the purchase of a security and shall
not be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of a purchase of such security.
NVEST STAR ADVISERS FUND
Nvest Star Advisers Fund (the "Star Advisers Fund") may not:
*(1) With respect to 75% of its total assets, invest in the securities of any
one issuer (other than the U.S. Government and its agencies and
instrumentalities) if, immediately after and as a result of such
investment, more than 5% of the total assets of the Fund would be invested
in such issuer;
*(2) Purchase any security (other than U.S. Government securities) if, as a
result, more than 25% of the Fund's total assets (taken at current value)
would be invested in any one industry (in the utilities category, gas,
electric, water and telephone companies will be considered as being in
separate industries, and each foreign country's government (together with
subdivisions thereof) will be considered to be a separate industry);
(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 when, 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. (For this purpose,
the deposit or payment by the Fund of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin);
(4) Acquire more than 10% of any class of securities of an issuer (other than
U.S. Government securities and taking all preferred stock issues of an
issuer as a single class and all debt issues of an issuer as a single
class) or acquire more than 10% of the outstanding voting securities of an
issuer;
*(5) Borrow money in excess of 25% of its total assets, and then only as a
temporary measure for extraordinary or emergency purposes;
(6) Pledge more than 25% of its total assets (taken at cost). (For the purpose
of this restriction, collateral arrangements with respect to options,
futures contracts and options on futures contracts and with respect to
initial and variation margin are not deemed to be a pledge of assets);
*(7) Make loans, except by entering into repurchase agreements or by purchase
of bonds, debentures, commercial paper, corporate notes and similar
evidences of indebtedness, which are a part of an issue to the public or
to financial institutions, or through the lending of the Fund's portfolio
securities;
*(8) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
real estate or commodities or commodity contracts, except that the Fund
may buy and sell futures contracts and related options. (This restriction
does not prevent the Fund from purchasing securities of companies
investing in the foregoing);
*(9) 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 certain federal securities laws;
(10) Except to the extent permitted by rule or order of the Securities and
Exchange Commission (the "SEC"), 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 any
investment adviser or subadviser of the Fund or accounts under any such
investment adviser's or subadviser's management to reduce brokerage
commissions to average prices among them or to facilitate such
transactions is not considered a trading account in securities for
purposes of this restriction);
(11) Write, purchase or sell options, except that the Fund may (a) write,
purchase and sell put and call options on securities, securities indexes,
currencies, futures contracts, swap contracts and other similar
instruments and (b) enter into currency forward contracts;
+(12) Purchase any illiquid security if, as a result, more than 15% of its net
assets (taken at current value) would be invested in such securities
(excluding Rule 144A securities and certain Section 4(2) commercial paper
deemed to be liquid under guidelines established by the Trust's trustees);
or
*(13) Issue senior securities; (For the purpose of this restriction none of the
following is deemed to be a senior security: any pledge or other
encumbrance of assets permitted by restrictions (3) or (6) above; any
borrowing permitted by restriction (4) above; any collateral arrangements
with respect to forward contracts, options, futures contracts and options
on futures contracts and with respect to initial and variation margin; the
purchase or sale of options, forward contracts, futures contracts or
options on futures contracts; and the issuance of shares of beneficial
interest permitted from time to time by the provisions of the Trust's
Agreement and Declaration of Trust and by the 1940 Act, the rules
thereunder, or any exemption therefrom.)
The staff of the SEC is currently of the view that repurchase agreements
maturing in more than seven days are illiquid and thus subject to
restriction (12) above.
NVEST STAR WORLDWIDE FUND
Nvest Star Worldwide Fund (the "Star Worldwide Fund") may not:
(1) With respect to 75% of its total assets, invest in the securities of any
one issuer (other than the U.S. Government and its agencies and
instrumentalities) if, immediately after and as a result of such
investment, more than 5% of the total assets of the Fund would be invested
in such issuer;
*(2) Purchase any security (other than U.S. Government securities) if, as a
result, more than 25% of the Fund's total assets (taken at current value)
would be invested in any one industry (in the utilities category, gas,
electric, water and telephone companies will be considered as being in
separate industries, and each foreign country's government (together with
all subdivisions thereof) will be considered to be a separate industry);
(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 when it owns or, 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. (For this purpose, the deposit or payment by the Fund of
initial or variation margin in connection with futures contracts or
related options transactions is not considered the purchase of a security
on margin);
(4) Acquire more than 10% of any class of securities of an issuer (other than
U.S. Government securities and taking all preferred stock issues of an
issuer as a single class and all debt issues of an issuer as a single
class) or with respect to 75% of its total assets, acquire more than 10%
of the outstanding voting securities of an issuer;
*(5) Borrow money in excess of 33 1/3% of its total assets, and then only as a
temporary measure for extraordinary or emergency purposes;
(6) Pledge more than 33 1/3% of its total assets (taken at cost). (For the
purpose of this restriction, reverse repurchase agreements, collateral
arrangements with respect to options, futures contracts, options on
futures contracts, forward contracts, swap contracts and other similar
instruments and with respect to initial and variation margin are not
deemed to be a pledge of assets);
*(7) Make loans, except by entering into repurchase agreements or by purchase
of bonds, debentures, commercial paper, corporate notes and similar
evidences of indebtedness, which are a part of an issue to the public or
to financial institutions, or through the lending of the Fund's portfolio
securities;
*(8) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
real estate or commodities or commodity contracts, except that the Fund
may buy and sell futures contracts and related options, swap contracts,
currency forward contracts, structured notes and other similar
instruments. (This restriction does not prevent the Fund from purchasing
securities of companies investing in the foregoing);
*(9) 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 certain federal securities laws;
(10) Except to the extent permitted by rule or order of the SEC, 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 any investment adviser or subadviser of the Fund or accounts under
any such investment adviser's or subadviser's management to reduce
brokerage commissions to average prices among them or to facilitate such
transactions is not considered a trading account in securities for
purposes of this restriction);
(11) Write, purchase or sell options, except that the Fund may (a) write,
purchase and sell put and call options on securities, securities indexes,
currencies, futures contracts, swap contracts and other similar
instruments, (b) enter into currency forward contracts and (c) invest in
structured notes;
+(12) Purchase any illiquid security if, as a result, more than 15% of its net
assets (taken at current value) would be invested in such securities
(excluding Rule 144A securities and certain Section 4(2) commercial paper
deemed to be liquid under guidelines established by the Trust's trustees);
or
*(13) Issue senior securities; For the purpose of this restriction none of the
following is deemed to be a senior security: any pledge or other
encumbrance of assets permitted by restriction (6) above; any borrowing
permitted by restriction (5) above; any collateral arrangements with
respect to options or futures contracts, and with respect to initial and
variation margin; the purchase or sale of options, forward contracts,
futures contracts, swap contracts or other similar instruments; and the
issuance of shares of beneficial interest permitted from time to time by
the provisions of the Trust's Agreement and Declaration of Trust and by
the 1940 Act, the rules thereunder, or any exemption therefrom. (The Fund
is required, under regulatory provisions applicable to it as interpreted
by the staff of the SEC, to set aside in a segregated account with its
custodian bank liquid assets in amounts sufficient at all times to satisfy
its obligations under options, futures contracts, forward contracts, swap
contracts and other similar instruments).
The staff of the SEC is currently of the view that repurchase agreements
maturing in more than seven days are illiquid and thus subject to
restriction (12) above.
NVEST STAR SMALL CAP FUND
Nvest Star Small Cap Fund (the "Star Small Cap Fund") may not:
(1) With respect to 75% of its total assets, invest in the securities of any
one issuer (other than the U.S. Government and its agencies and
instrumentalities) if, immediately after and as a result of such
investment, more than 5% of the total assets of the Fund would be invested
in such issuer;
*(2) Purchase any security (other than U.S. Government securities) if, as a
result, more than 25% of the Fund's total assets (taken at current value)
would be invested in any one industry (in the utilities category, gas,
electric, water and telephone companies will be considered as being in
separate industries, and each foreign country's government (together with
all subdivisions thereof) will be considered to be a separate industry);
(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); (for this purpose, the deposit or payment by the Fund of
initial or variation margin in connection with futures contracts or
related options transactions is not considered the purchase of a security
on margin);
(4) Acquire more than 10% of any class of securities of an issuer (other than
U.S. Government securities and taking all preferred stock issues of an
issuer as a single class and all debt issues of an issuer as a single
class) or, with respect to 75% of its total assets, acquire more than 10%
of the outstanding voting securities of an issuer;
*(5) Borrow money in excess of 33 1/3% of its total assets, and then only as a
temporary measure for extraordinary or emergency purposes;
(6) Pledge more than 33 1/3% of its total assets (taken at cost); (for the
purpose of this restriction, reverse repurchase agreements, collateral
arrangements with respect to options, futures contracts, options on
futures contracts, forward contracts, swap contracts, short sales and
other similar instruments and with respect to initial and variation margin
are not deemed to be a pledge of assets);
*(7) Make loans, except by entering into repurchase agreements or by purchase
of bonds, debentures, commercial paper, corporate notes and similar
evidences of indebtedness, which are a part of an issue to the public or
to financial institutions, or through the lending of the Fund's portfolio
securities;
*(8) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
real estate or commodities or commodity contracts, except that the Fund
may buy and sell futures contracts and related options, swap contracts,
currency forward contracts, structured notes and other similar
instruments. (This restriction does not prevent the Fund from purchasing
securities of companies investing in the foregoing);
*(9) 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 certain federal securities laws;
(10) Except to the extent permitted by rule or order of the SEC, 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 any investment adviser or subadviser of the Fund or accounts under
any such investment adviser's or subadviser's management to reduce
brokerage commissions to average prices among them or to facilitate such
transactions is not considered a trading account in securities for
purposes of this restriction);
+(11) Purchase any illiquid security if, as a result, more than 15% of its
net assets (taken at current value) would be invested in such securities
(excluding Rule 144A securities and certain Section 4(2) commercial paper
deemed to be liquid under guidelines established by the Trust's trustees);
or
*(12) Issue senior securities. For the purpose of this restriction none of the
following is deemed to be a senior security: any pledge or other
encumbrance of assets permitted by restriction (6) above; any borrowing
permitted by restriction (5) above; any collateral arrangements with
respect to options or futures contracts, and with respect to initial and
variation margin; the purchase or sale of options, forward contracts,
futures contracts, swap contracts or other similar instruments; and the
issuance of shares of beneficial interest permitted from time to time by
the provisions of the Trust's Agreement and Declaration of Trust and by
the 1940 Act, the rules thereunder, or any exemption therefrom. (The Fund
is required, under regulatory provisions applicable to it as interpreted
by the staff of the SEC, to set aside in a segregated account with its
custodian bank liquid assets in amounts sufficient at all times to satisfy
its obligations under options, futures contracts, forward contracts, swap
contracts and other similar instruments).
The staff of the SEC is currently of the view that repurchase agreements
maturing in more than seven days are illiquid and thus subject to
restriction (11) above.
NVEST STAR VALUE FUND
Nvest Star Value Fund (the "Star Value Fund") may not:
*(1) Purchase any security (other than U.S. Government securities) if, as a
result, more than 5% of the Fund's total assets (taken at current value)
would then be invested in securities of a single issuer or 25% of the
Fund's total assets (taken at current value) would be invested in any one
industry;
*(2) 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 when, 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;
*(3) Acquire more than 10% of any class of securities of an issuer (taking all
preferred stock issues of an issuer as a single class and all debt issues
of an issuer as a single class) or acquire more than 10% of the
outstanding voting securities of an issuer;
*(4) Borrow money in excess of 10% of its total assets (taken at cost) or 5% of
its total assets (taken at current value), whichever is lower, and then
only as a temporary measure for extraordinary or emergency purposes;
*(5) Pledge more than 15% of its total assets (taken at cost);
*(6) Invest more than 5% of its total assets (taken at current value) in
securities of businesses (including predecessors) less than three years
old;
*(7) Purchase or retain securities of any issuer if officers and trustees of
New England Funds Trust I or of the investment adviser of the Fund who
individually own more than 1/2 of 1% of the shares or securities of that
issuer together own more than 5%;
*(8) Make loans, except by purchase of bonds, debentures, commercial paper,
corporate notes and similar evidences of indebtedness, which are a part of
an issue to the public or to financial institutions;
*(9) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
real estate or commodities or commodity contracts. Also, the Fund will not
buy or sell real estate or interests in real estate which are not readily
marketable. (This restriction does not prevent the Fund from purchasing
securities of companies investing in the foregoing);
*(10) 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 certain federal securities laws;
*(11) Make investments for the purpose of exercising control or management;
*(12) Participate on a joint or joint and several basis in any trading account
in securities;
*(13) Purchase options or warrants if, as a result, more than 1% of its total
assets (taken at current value) would be invested in such securities;
*(14) Write options or warrants;
*(15) Invest in the securities of other investment companies, except by
purchases in the open market involving only customary brokers'
commissions. (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 total assets of such Fund taken at current value, or (c) own more than
3% of the outstanding voting stock of any one investment company);
*(16) Issue senior securities. For the purpose of this restriction, none of the
following is deemed to be a senior security: any borrowing permitted by
restriction (4) above; any pledge or other encumbrance of assets permitted
by restriction (5) above; any collateral arrangements with respect to
options, forward contracts, futures contracts, swap contracts and other
similar contracts and options on futures contracts and with respect to
initial and variation margin; the purchase or sale of options, forward
contracts, futures contracts, swap contracts and other similar contracts
or options on futures contracts; and the issuance of shares of beneficial
interest permitted from time to time by the provisions of New England
Funds Trust I's Agreement and Declaration of Trust and by the 1940 Act,
the rules thereunder, or any exemption therefrom; or
+(17) Invest more than 15% of the Fund's total net assets in illiquid securities
(excluding Rule 144A securities and certain Section 4(2) commercial paper
deemed to be liquid under guidelines established by the Trust's trustees.)
The staff of the SEC is currently of the view that repurchase agreements
maturing in more than seven days are illiquid and thus subject to
restriction (17) above.
- -------------------------------------------------------------------------------
FUND CHARGES AND EXPENSES
- -------------------------------------------------------------------------------
MANAGEMENT FEES
Pursuant to separate advisory agreements, each dated August 30, 1996 and
amended May 1, 1998 for the Star Advisers, Star Worldwide and Star Value Funds
and dated December 31, 1996 and amended May 1, 1998, for the Star Small Cap
Fund, Nvest Funds Management, L.P. ("Nvest Management") has agreed, subject to
the supervision of the Board of Trustees of the Trust, to manage the investment
and reinvestment of the assets of each Fund and to provide a range of
administrative services to each Fund. For the services described in the advisory
agreements, the Star Worldwide and Star Small Cap Funds have each agreed to pay
Nvest Management a gross management fee at the annual rate of 1.05% of the
Fund's average daily net assets, including any amount of any subsidiary fees
paid by the Fund to its subadvisers pursuant to any subadvisory agreement; the
Star Advisers Fund has agreed to pay Nvest Management a gross management fee at
the annual rate of 1.05% of the first $1 billion of the Fund's average daily net
assets and 1.00% of such assets in excess of $1 billion, including any the
amount of any subadvisory fees paid by the Fund to its subadvisers pursuant to
any subadvisory agreement; and Star Value Fund has agreed to pay Nvest
Management a gross management fee at the annual rate of 0.75% of the first $200
million of the Fund's average daily net assets, 0.70% of the next $300 million
of the Fund's average daily net assets and 0.65% of amounts in excess of $500
million of the Fund's average daily net assets, including any amount of any
sub-advisory fees paid by the Fund to its subadvisers pursuant to any
subadvisory agreement. Prior to May 9, 1997, the management fee rate payable by
the Star Advisers Fund to Nvest Management was 1.05% of the Fund's average daily
net assets.
As explained in the Prospectus, the Star Advisers , Star Small Cap , Star
Worldwide and Star Value Funds' portfolios are each divided into four segments.
Pursuant to separate subadvisory agreements, Nvest Management has
delegated responsibility for the investment and reinvestment of assets of the
segments of the Star Advisers Fund's portfolio to four different subadvisers:
Kobrick Funds LLC ("Kobrick"), Janus Capital Corporation ("Janus Capital"),
Loomis, Sayles & Company, L.P. ("Loomis Sayles") and Harris Associates L.P.
("Harris Associates"). The subadvisory agreement with Janus Capital is dated
August 30, 1996. The subadvisory agreements with Loomis Sayles and Harris
Associates are both dated October 17, 1997 and amended May 1, 1998. The
subadvisory agreement with Kobrick is dated October 29, 1999. For providing
subadvisory services to its segment of Star Advisers Fund, Nvest Management pays
Janus Capital a subadvisory fee at the annual rate of 0.55% of the first $50
million of the average net assets of the segment that Janus Capital manages and
0.50% of such assets in excess of $50 million. The Star Advisers Fund pays
Harris Associates, for providing subadvisory services to a segment of the Fund,
a subadvisory fee at the annual rate of 0.65% of the first $50 million of the
average net assets it manages in its segment, 0.60% of the next $50 million of
such assets and 0.55% of such assets in excess of $100 million. The Star
Advisers Fund pays Loomis Sayles and Kobrick a subadvisory fee at the annual
rate of 0.55% of the first $50 million of the average daily net assets of the
segment that each manages, 0.50% of the next $200 million of such assets and
0.475% of such assets in excess of $250 million. Prior to August 23, 1999,
Founders Asset Management LLC ("Founders") served as subadviser to the segment
of the Star Advisers Fund now managed by Kobrick, pursuant to a subadvisory
agreement providing for a subadvisory fee to be paid by Nvest Management to
Founders at the same rates as those currently paid by the Fund to Kobrick. Prior
to October 17, 1997, Nvest Management paid each of Founders and Loomis Sayles a
subadvisory fee for managing their respective segment of the Fund at the same
rate payable to Janus Capital for managing its segment of the Fund; however,
from May 9 to October 16, 1997, Founders and Loomis Sayles each voluntarily
agreed to waive a portion of their respective subadvisory fees equal to 0.025%,
annually, of the excess, if any, of the average net assets of the segment of the
Star Advisers Fund managed by each subadviser in excess of $250 million. Prior
to July 25, 1997, Berger Associates, Inc. ("Berger") served as subadviser to the
segment of the Star Advisers Fund now managed by Harris Associates, pursuant to
a subadvisory agreement providing for a subadvisory fee at the annual rate of
0.55% of the first $50 million of the average daily net assets of the segment
and 0.50% of such assets in excess of $50 million. From July 25, 1997 to October
16, 1997, Harris Associates served as the subadviser to the segment of the Star
Advisers Fund that it currently manages pursuant to a subadvisory agreement
providing for a subadvisory fee at the same rate that was payable to Berger for
managing such segment. Harris Associates voluntarily agreed to waive its entire
subadvisory fee from July 25, 1997 to August 31, 1997. This waiver by Harris
Associates did not reduce the management fee paid by the Star Advisers Fund to
Nvest Management during this period. Nvest Management paid the waived fees to
Berger.
Pursuant to separate subadvisory agreements, Nvest Management has
delegated responsibility for the investment and reinvestment of the assets of
the segments of the Star Worldwide Fund's portfolio to four different
subadvisers. The subadvisers of the Star Worldwide Fund are Harris Associates,
which manages two of the four segments, Loomis Sayles and Montgomery Asset
Management, L.L.C. ("Montgomery"), each of which manages one of the four
segments. The subadvisory agreement with Harris Associates is dated August 30,
1996 and amended May 1, 1998; the subadvisory agreement with Loomis Sayles is
dated April 14, 2000; and the subadvisory agreement with Montgomery is dated
August 3, 1998. Prior to August 23, 1999, Founders served as a subadviser to a
segment of the Star Worldwide Fund. Following Founders' departure, the assets of
the segment it had managed were reallocated to the remaining subadvisers. The
Fund pays Harris Associates and Loomis Sayles a subadvisory fee for managing
their respective segments of the portfolio at the annual rate of 0.65% of the
average daily net assets of each such segment up to $50 million, 0.60% of the
next $50 million of such assets and 0.55% of such assets in excess of $100
million. Prior to February 28, 2000, Janus Capital served as subadviser to the
segment of the Star Worldwide Fund now managed by Loomis Sayles, pursuant to a
subadvisory agreement providing for a subadvisory fee to be paid by Nvest
Management to Janus Capital at the same rates as those currently paid by the
Fund to Loomis Sayles. Nvest Management pays Montgomery a subadvisory fee at the
annual rate of 0.85% of the average daily net assets of its segment of the Fund
up to $25 million, 0.65% of the next $25 million of such assets and 0.55% of
such assets in excess of $50 million. Prior to August 3, 1998, Montgomery's
subadvisory fee was at the annual rate of 0.90% of the average daily net assets
of its segment of the portfolio up to $25 million, 0.70% of the next $25 million
of such assets and 0.55% of such assets in excess of $50 million. Montgomery
agreed to waive 0.15% of its subadvisory fee from December 29, 1995 through June
30, 1996.
Pursuant to separate subadvisory agreements, Nvest Management has
delegated responsibility for the investment and reinvestment of the assets of
the Star Small Cap Fund's portfolio to four different subadvisers. The
subadvisers of the Star Small Cap Fund are Montgomery, RS Investment Management,
L.P. ("RS Investment Management"), Loomis Sayles and Harris Associates, each of
which manage one of the four segments. The subadvisory agreements with Loomis
Sayles and Harris Associates are each dated December 31, 1996 and amended May 1,
1998; the subadvisory agreement with Montgomery is dated July 31, 1997; and the
subadvisory agreement with RS Investment Management is dated October 1, 1997.
The Fund pays Loomis Sayles and Nvest Management pays RS Investment Management a
subadvisory fee at an annual rate of 0.55% of the first $50 million of the
average daily net assets of the segment of the Fund that such subadviser manages
and 0.50% of such assets in excess of $50 million. Nvest Management pays
Montgomery a subadvisory fee at an annual rate of 0.65% of the first $50 million
of the average daily net assets of the segment that Montgomery manages and 0.50%
of such assets in excess of $50 million. The Fund pays Harris Associates a
subadvisory fee at the annual rate of 0.70% of the average daily net assets of
the segment of the Fund that Harris Associates manages.
Pursuant to separate subadvisory agreements each dated April 19, 2000,
Nvest Management has delegated responsibility for the investment and
reinvestment of assets of the Star Value Fund's portfolio to four different
subadvisers. The subadvisers of Star Value Fund are Loomis Sayles, Harris
Associates, Vaughan, Nelson Scarborough & McCullough, L.P. ("Vaughn Nelson") and
Westpeak Investment Advisors, L.P. ("Westpeak"), each of which manages one of
the four segments. The Fund pays to Loomis Sayles a subadvisory fee at an annual
rate of 0.535% of the first $200 million of its segment of the Fund's average
daily net assets, 0.350% of the next $300 million of such assets and 0.300% of
such assets in excess of $500 million. The Fund pays to Vaughan Nelson a
subadvisory fee at an annual rate of 0.500% of the first $25 million of its
segment of the Fund's average daily net assets, 0.400% of the next $175 million
of such assets, 0.325% of the next $300 million of such assets and 0.275% of
such assets in excess of $500 million. The Fund pays to Harris Associates a
subadvisory fee at an annual rate of 0.500% of the first $100 million of its
segment of the Fund's average daily net assets and 0.475% of such assets in
excess of $100 million. The Fund pays to Westpeak a sub-advisory fee at an
annual rate of 0.50% of the first $25 million of such assets, 0.40% of the next
$75 million of such assets, 0.35% of the next $100 million of such assets and
0.30% of such assets in excess of $200 million. Beginning on February 28, 2000
through April 18, 2000, the Fund paid subadvisory fees under this arrangement to
each of the above-referenced subadvisers under separate interim subadvisory
agreements. These agreements were superseded by the subadvisory agreements
approved by Star Value Fund's shareholders at a special shareholder meeting on
April 19, 2000.
Prior to February 28, 2000, the Star Value Fund had a single subadviser
structure with Loomis Sayles acting as subadviser pursuant to a subadvisory
agreement dated August 30, 1996 and amended May 1, 1998. The subadvisory fee
payable by the Fund to Loomis Sayles was 0.535% of the first $200 million of the
Fund's average daily net assets, 0.350% of the next $300 million of the Fund's
average daily net assets and 0.300% of the Fund's average daily net assets in
excess of $500 million.
As of May 1, 1998, each subadvisory agreement between Nvest Management and
Loomis Sayles or Harris Associates was amended to add the relevant Fund as a
party and to provide that the subadvisory fees payable under such agreement are
payable by the Fund rather than by Nvest Management. Also as of May 1, 1998, the
advisory agreement for each such Fund was amended to provide that the management
fees payable by the Fund to Nvest Management are reduced by the amounts of any
subadvisory fees paid directly by the Fund to its subadvisers. These amendments
to the Funds' advisory and subadvisory agreements did not change the management
and subadvisory fee rates under the agreements, nor the services to be provided
to the Funds by Nvest Management and the subadvisers under the agreements.
Furthermore, these amendments did not change the overall level of fees payable
by any Fund.
Management fees for the Star Advisers Fund for the fiscal years ended
December 31, 1997, 1998 and 1999 were $9,732,113, $10,961,734 and $12,591,170,
respectively. The Fund commenced operations on July 7, 1994.
Management fees for the Star Worldwide Fund for the fiscal years ended
December 31, 1997, 1998 and 1999 were $2,442,270, $2,758,173 and $2,625,697,
respectively. The Fund commenced operations on December 29, 1995.
Management fees for the Star Small Cap Fund for the fiscal years ended
December 31, 1997, 1998 and 1999 were $745,638, $1,304,538 and $1,492,557,
respectively. The Fund commenced operations on December 31, 1996.
Management fees for the Star Value Fund for the fiscal years ended
December 31, 1997, 1998 and 1999 were $3,030,220, $3,260,867 and $2,627,025
respectively. The Star Value Fund assumed a multi-manager structure on February
28, 2000. The Fund commenced operations on June 5, 1970.
For the Star Advisers Fund, the Fund paid Kobrick $403,591 in subadvisory
fees for the period October 20 through December 31, 1999. Nvest Management paid
$1,263,834, $1,313,190 and $1,301,880 in subadvisory fees to Founders (or its
predecessor) for the fiscal years ending December 31, 1997 and 1998, and for the
period January 1 through October 19, 1999, respectively. Nvest Management paid
Berger $704,081 in subadvisory fees for the period January 31 through August 1,
1997. Nvest Management paid $1,108,613, $1,358,439 and $2,213,726 in subadvisory
fees to Janus Capital for the fiscal years ending December 31, 1997, 1998 and
1999, respectively. The Fund paid Loomis Sayles $839,505 and $1,143,365 in
subadvisory fees for the period May 1 through December 31, 1998 and the fiscal
year ended December 31, 1999, respectively. Nvest Management paid Loomis Sayles
$1,263,657 and $473,685 in subadvisory fees for the fiscal year ended December
31, 1997 and for the period January 1 to April 30, 1998, respectively. The Fund
paid Harris Associates $882,519 and $1,213,904 in subadvisory fees for the
period May 1through December 31, 1998 and for the fiscal year ended December 31,
1999, respectively. Nvest Management paid Harris Associates $431,615 and
$467,681 in subadvisory fees for the periods September 1 through December 31,
1997 and January 1 to April 30, 1998, respectively.
For the Star Worldwide Fund, Nvest Management paid $291,060, $345,986 and
$248,981; $321,893, $428,211 and $480,249; and $353,540, $278,706 and $264,825;
in subadvisory fees to Founders, Janus Capital and Montgomery, or their
respective predecessors, respectively, for the fiscal years ended December 31,
1997, 1998 and 1999 (for the period January 1 through October 19, 1999 for
Founders). Nvest Management paid $611,766 and $252,350 in subadvisory fees to
Harris Associates for the fiscal year ending December 31, 1997 and for the
period January 1 to April 30, 1998, respectively. The Fund paid Harris
Associates $445,724 and $663,004; and in subadvisory fees for the period May 1
to December 31, 1998 and the fiscal year ending December 31, 1999, respectively.
For the Star Small Cap Fund, Nvest Management paid $112,593, $186,559 and
$170,613; and $100,286, $185,912 and $275,662 in subadvisory fees to Montgomery
(or its predecessor) and RS Investment Management (or its predecessor),
respectively, for the fiscal years ended December 31, 1997, 1998 and 1999. Nvest
Management paid $130,052 and $75,229; and $92,832 and $56,037 in subadvisory
fees to Harris Associates and Loomis Sayles, respectively, for the fiscal year
ended December 31, 1997 and for the period January 1 to April 30, 1998. The Fund
paid $140,461 and $176,418, and $114,053 and $220,509 to Harris Associates and
Loomis Sayles, respectively, for the period May 1 to December 31, 1998 and the
fiscal year ended December 31, 1999.
For the Star Value Fund, Nvest Management paid $1,835,110 and $673,095 in
subadvisory fees to Loomis Sayles for the fiscal year ended December 31, 1997
and the period January 1 to April 30, 1998, respectively. The Fund paid
$1,277,533 and $1,634,514 in subadvisory fees to Loomis Sayles for the period
May 1 to December 31, 1998 and the fiscal year ended December 31, 1999,
respectively.
Prior to July 31, 1997, Montgomery Asset Management, L.P., the predecessor
to Montgomery, served as subadviser to the segments of the Star Worldwide and
Star Small Cap Funds currently managed by Montgomery, pursuant to separate
subadvisory agreements providing for the same subadvisory fees as are currently
in effect in the subadvisory agreements with Montgomery.
Prior to October 1, 1997, RS Investment Management served as subadviser to
the segments of the Star Worldwide and Star Small Cap Funds that it currently
manages, pursuant to separate subadvisory agreements providing for the same
subadvisory fees as are currently in effect for such segment in the subadvisory
agreements.
BROKERAGE COMMISSIONS
For the fiscal years ended December 31, 1997 , 1998 and 1999, brokerage
transactions for the Star Advisers Fund aggregating $1,985,896,882 ,
$150,204,537 and $597,331,571, respectively, were allocated to brokers providing
research services, and $406,641, $164,649 and $653,867, respectively, in
commissions were paid on these transactions. For the fiscal year ended December
31, 1997, 1998 and 1999, the Fund paid total brokerage commissions of
$2,844,608, $2,180,020 and $3,184,677, respectively. For the fiscal years ending
December 31, 1997, 1998 and 1999, the Fund paid $207,494, $39,570 and $106,400
in brokerage commissions to Harris Associates Securities L.P. ("HASLP"), a
registered broker-dealer and an affiliate of Harris Associates. For the fiscal
year ended December 31, 1999, the Fund paid 3.3% of its total brokerage
commissions to HASLP and effected 2.8% of its total brokerage transactions
through HASLP.
For the fiscal years ending December 31, 1997 , 1998 and 1999, brokerage
transactions for the Star Worldwide Fund aggregating $127,118,826, $73,990,355
and $162,179,150 respectively, were allocated to brokers providing research
services, and $79,513, $84,070 and $323,884, respectively, in commissions were
paid on these transactions. For the fiscal years ending December 31, 1997, 1998
and 1999, the Fund paid total brokerage commissions of $1,046,316, $887,495 and
$837,557, respectively. For the fiscal years ending December 31, 1997, 1998 and
1999, the Fund paid $21,298, $16,316 and $35,398 in brokerage commissions to
HASLP. For the fiscal year ended December 31, 1999, the Fund paid 4.23% of its
total brokerage commissions to HASLP and effected 5.7% of its total brokerage
transactions through HASLP.
For the period December 31, 1996 (commencement of operations) to December
31, 1997 and for the fiscal years ended December 31, 1998 and 1999, brokerage
transactions for the Star Small Cap Fund aggregating $26,084,510, $21,619,565
and $39,905,597 were allocated to brokers providing research services, and
$34,323, $48,385 and $112,113 in commissions were paid on these transactions.
For the period December 31, 1996 to December 31, 1997 and for the fiscal years
ended December 31, 1998 and 1999, the Fund paid total brokerage commissions of
$298,987, $476,149 and $514,974. For the fiscal years ending December 31, 1997,
1998 and 1999, the Fund paid $24,483, $10,110 and $18,631 in brokerage
commissions to HASLP. For the fiscal year ended December 31, 1999, the Fund paid
3.6% of its total brokerage commissions to HASLP and effected 4.0% of its total
brokerage transactions through HASLP.
In 1997, 1998 and 1999 brokerage transactions for Star Value Fund
aggregating $19,208,488, $77,873,944 and $223,245,053, respectively, were
allocated to brokers providing research services, and $29,690, $119,738, and
$297,149, respectively, in commissions were paid on these transactions in such
years. During 1997, 1998, and 1999 the Fund paid total brokerage commissions of
$618,342, $967,035 and $810,251, respectively.
For more information about the Funds' portfolio transactions, see
"Portfolio Transactions and Brokerage" in Part II of this Statement.
SALES CHARGES AND 12B-1 FEES
As explained in Part II of this Statement, the Class A, Class B and Class
C shares of each Fund pay Nvest Funds Distributor, L.P. (the "Distributor"),
fees under plans adopted pursuant to Rule 12b-1 under the 1940 Act. The
following table shows the amounts of Rule 12b-1 fees paid by the Funds during
the fiscal years ended December 31, 1997, 1998 and 1999:
FUND 1997 1998 1999
- ------------------------- ---- ---- ----
Star Advisers Fund $ 967,853 $1,072,116 $1,212,508 (Class A)
$4,220,821 $4,826,734 $5,635,995 (Class B)
$ 875,440 $ 958,464 $1,075,550 (Class C)
Star Worldwide Fund $ 261,744 $ 285,578 $ 270,924 (Class A)
$1,037,171 $1,235,217 $1,181,955 (Class B)
$ 241,823 $ 249,303 $ 235,012 (Class C)
Star Small Cap Fund $ 79,699 $ 132,793 $ 147,871 (Class A)
$ 304,812 $ 569,200 $ 668,816 (Class B)
$ 86,522 $ 142,047 $ 161,139 (Class C)
Star Value Fund $ 819,873 $ 840,948 $ 674,343 (Class A)
$ 661,091 $ 840,370 $ 740,246 (Class B)
$ 52,413 $ 70,069 $ 49,847 (Class C)
During the fiscal year ended December 31, 1999, the Distributor's expenses
relating to each Fund's 12b-1 plans were as follows (Class B compensation to
investment dealers excludes advanced commissions sold to a third party):
STAR ADVISERS FUND
(Class A shares)
Compensation to Investment Dealers $1,207,997
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 778,810
TOTAL $1,986,807
(Class B shares)
Compensation to Investment Dealers $1,139,823
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 911,105
TOTAL $2,050,928
(Class C shares)
Compensation to Investment Dealers $1,031,730
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 220,442
TOTAL $1,252,172
STAR WORLDWIDE FUND
(Class A shares)
Compensation to Investment Dealers $ 270,732
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 417,436
TOTAL $ 688,168
(Class B shares)
Compensation to Investment Dealers $ 261,975
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 131,305
TOTAL $ 393,280
(Class C shares)
Compensation to Investment Dealers $ 237,535
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 41,948
TOTAL $ 279,483
STAR SMALL CAP FUND
(Class A shares)
Compensation to Investment Dealers $ 148,001
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 259,299
TOTAL $ 407,300
(Class B shares)
Compensation to Investment Dealers $ 128,638
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 138,699
TOTAL $ 267,337
(Class C shares)
Compensation to Investment Dealers $ 166,846
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 74,353
TOTAL $ 241,199
STAR VALUE FUND
(Class A Shares)
Compensation to Investment Dealers $ 671,145
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 189,394
TOTAL $ 860,539
(Class B Shares)
Compensation to Investment Dealers $ 138,078
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 90,760
TOTAL $ 228,838
(Class C Shares)
Compensation to Investment Dealers $ 42,002
Compensation to Distributor's Sales Personnel and Other
Related Costs $ 9,097
TOTAL $ 51,099
Of the amounts listed above as compensation to investment dealers, the
following amounts were paid by the Distributor to New England Securities
Corporation ("New England Securities"), MetLife Securities, Inc. ("MetLife
Securities") and Nathan & Lewis Securities, Inc. ("Nathan & Lewis"),
broker-dealer affiliates of the Distributor. New England Securities, MetLife
Securities and Nathan & Lewis paid substantially all of the fees they received
from the Distributor (a) in commissions to its sales personnel and (b) to defray
sales-related overhead costs.
New England Securities
Class A Class B Class C
------- ------- -------
Star Advisers $704,375 $443,823 $129,678
Star Worldwide $152,537 $ 94,045 $ 27,808
Star Small Cap $ 80,962 $ 48,423 $ 28,593
Star Value $496,805 $ 90,836 $ 11,983
MetLife Securities
Class A Class B Class C
------- ------- -------
Star Advisers $ 22,016 $ 34,623 $ 7,375
Star Worldwide $ 3,466 $ 7,132 $ 62
Star Small Cap $ 2,369 $ 3,550 --
Star Value $ 4,054 $ 3,932 --
Nathan & Lewis
Class A Class B Class C
------- ------- -------
Star Advisers $ 4,709 $ 1,114 $ 4,057
Star Worldwide $ 845 $ 470 $ 578
Star Small Cap $ 393 $ 257 --
Star Value $ 2,762 $ 422 $ 208
- -------------------------------------------------------------------------------
OWNERSHIP OF FUND SHARES
- -------------------------------------------------------------------------------
As of March 31, 2000, to the Trust's knowledge, the following persons
owned of record or beneficially 5% or more of the outstanding shares of the
indicated classes set forth below.
FUND SHAREHOLDER AND ADDRESS OWNERSHIP PERCENTAGE
- ---- ----------------------- --------------------
Star Advisers Fund
Class C shares
MPLF & S For the Sole Benefit of 6.82%
Its Customers
Attn Fund Administration ML#97VA7
4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246-6484
Class Y shares
New England Mutual Life Insurance Co. 54.03%
Separate Investment Accounting
Attn Brenda Harmon
501 Boylston Street - 6th Floor
Boston, MA 02116-3706
New England Life Insurance Co. 14.24%
Insurance Accounting 6th Floor
501 Boylston Street
Boston, MA 02116-3706
New England Life Insurance Co. 10.37%
C/o Mary Beth Klein
Insurance Accounting 6th Fl.
501 Boylston St.
Boston, MA 02116-3706
Metropolitan Life Insurance Co. 18.17%
C/o Mary Beth Klein
Insurance Accounting 6th Fl.
501 Boylston Street
Boston, MA 02116-3706
Star Small Cap
Class B shares MLPF & S for the Sole Benefitof 6.43%
Its Customers
Attn Fund Administration ML #97MR9
4800 Deer Lake Dr. East - 2nd Fl.
Jacksonville, FL 32246-6484
Class C shares MLPF & S for the Sole Benefitof 13.74%
Its Customers
Attn Fund Administration ML#97UA9
4800 Deer Lake Dr. East -2nd Fl.
Jacksonville, FL 32246-6484
Star Value Fund
Class Y shares Metropolitan Life Insurance Co. Issuer 74.92%
501 Boylston Street - 6th Fl.
Boston, MA 02116-3706
New England Life Insurance Co. 23.34%
C/o Mary Beth Klein
Insurance Accounting 6th Fl.
501 Boylston St.
Boston, MA 02116-3706
- -------------------------------------------------------------------------------
INVESTMENT PERFORMANCE OF THE FUNDS
- -------------------------------------------------------------------------------
PERFORMANCE RESULTS - PERCENT CHANGE*
FOR THE PERIODS ENDED 12/31/99
STAR ADVISERS FUND
Aggregate Average Annual
Total Return Total Return
-------------------------- ------------------
Since Since
Class A shares: As a % of 1 Year 5 Years 7/7/94** 5 Years 7/7/94**
- -------------------------- ------ -------- -------- ------- --------
Net Asset Value 46.44 235.49 256.89 27.39 26.11
Maximum Offering Price 38.03 216.16 236.43 25.89 24.76
Aggregate Average Annual
Total Return Total Return
-------------------------- ------------------
Since Since
Class B shares: As a % of 1 Year 5 Years 7/7/94** 5 Years 7/7/94**
- -------------------------- ------ ------- -------- ------- --------
Net Asset Value 45.36 223.44 242.82 26.46 25.18
Redemption at End of Period 40.36 221.44 241.82 26.30 25.12
Aggregate Average Annual
Total Return Total Return
-------------------------- ------------------
Since Since
Class C shares: As a % of 1 Year 5 Years 7/7/94** 5 Years 7/7/94**
- -------------------------- ------ ------- -------- ------- --------
Net Asset Value 45.31 223.35 242.89 26.45 25.19
Redemption at End of Period 44.31 223.35 242.89 26.45 25.19
Aggregate Average Annual
Total Return Total Return
-------------------------- ------------------
Since Since
Class Y shares: As a % of 1 Year 5 Years 11/15/94** 5 Years 11/15/94**
- -------------------------- ------ ------- ---------- ------- ---------
Net Asset Value 46.78 241.02 233.69 27.81 26.50
STAR WORLDWIDE FUND
Aggregate Average Annual
Total Return Total Return
-------------------------- ------------------
Since Since
Class A shares: As a % of 1 Year 12/29/95** 12/29/95**
- -------------------------- ------ ---------- ----------
Net Asset Value 37.63 88.19 17.10
Maximum Offering Price 29.72 77.40 15.39
Aggregate Average Annual
Total Return Total Return
-------------------------- ------------------
Since Since
Class B shares: As a % of 1 Year 12/29/95** 12/29/95**
- -------------------------- ------ ---------- ----------
Net Asset Value 36.62 82.86 16.26
Redemption at End of Period 31.62 80.86 15.94
Aggregate Annualized
Total Return Total Return
-------------------------- ------------------
Since Since
Class C shares: As a % of 1 Year 12/29/95** 12/29/95**
- -------------------------- ------ ---------- ----------
Net Asset Value 36.50 82.94 16.28
Redemption at End of Period 35.50 82.94 16.28
Aggregate Average Annual
Total Return Total Return
-------------------------- ------------------
Since Since
Class Y shares: As a % of 1 Year inception** inception**
- -------------------------- ------ ----------- -----------
Net Asset Value N\A N\A N\A
STAR SMALL CAP FUND
Aggregate Average Annual
Total Return Total Return
-------------------------- ------------------
Since Since
Class A shares: As a % of 1 Year 12/31/96** 12/31/96**
- -------------------------- ------ ---------- ----------
Net Asset Value 65.38 114.29 28.92
Maximum Offering Price 55.82 102.01 26.41
Aggregate Average Annual
Total Return Total Return
----------------------------- --------------------
Since Since
Class B shares: As a % of 1 Year 12/31/96** 12/31/96**
- -------------------------- ------ ---------- ----------
Net Asset Value 64.14 109.61 27.98
Redemption at End of Period 59.14 109.61 27.37
Aggregate Annualized
Total Return Total Return
-------------------------- ------------------
Since Since
Class C shares: As a % of 1 Year 12/31/96** 12/31/96**
- -------------------------- ------ ---------- ----------
Net Asset Value 64.14 109.61 27.98
Redemption at End of Period 63.14 109.61 27.98
Aggregate Average Annual
Total Return Total Return
-------------------------- ------------------
Since Since
Class Y shares: As a % of 1 Year inception** inception**
- -------------------------- ------ ----------- ----------
Net Asset Value N/A N/A N/A
STAR VALUE FUND
Aggregate Average Annual
Total Return Total Return
-------------------------- ------------------
Class A shares: As a % of 1 Year 5 Years 10 Years 5 Years 10 Years
- -------------------------- ------ ------- -------- ------- --------
Net Asset Value -6.92 101.45 197.56 15.04 11.52
Maximum Offering Price -12.27 89.96 180.33 13.69 10.86
Aggregate Average Annual
Total Return Total Return
-------------------------- ------------------
Since Since
Class B shares: As a % of 1 Year 5 Years 9/13/93** 5 Years 9/13/93**
- -------------------------- ------ ------- --------- ------- ---------
Net Asset Value -7.61 93.36 102.08 14.17 11.82
Redemption at End of Period -11.41 91.99 102.08 13.93 11.82
Aggregate Average Annual
Total Return Total Return
-------------------------- ------------------
Since Since
Class C shares: As a % of 1 Year 5 Years 12/30/94** 5 Years 12/30/94**
- -------------------------- ------ ------- ---------- ------- ----------
Net Asset Value -7.60 94.16 94.16 14.19 14.18
Redemption at End of Period -8.36 94.16 94.16 14.19 14.18
Aggregate Average Annual
Total Return Total Return
-------------------------- ------------------
Since Since
Class Y shares: As a % of 1 Year 5 Years 3/31/94** 5 Years 3/31/94**
- -------------------------- ------ ------- --------- ------- ---------
Net Asset Value -6.72 103.99 108.85 15.32 13.66
* Federal regulations require this example to be calculated using a $1,000
investment. The normal minimum initial investment in shares of the Funds is
$2,500, however.
** Commencement of Fund operations or offering of the specified class of shares.
The foregoing data represent past performance only and are not a
prediction as to the future returns of any Fund. The investment return and
principal value of an investment in any Fund will fluctuate so that the
investor's shares, when redeemed, may be worth more or less than their original
cost.
<PAGE>
[LOGO]
NVEST FUNDS(SM)
Where The Best Minds Meet(R)
- -------------------------------------------------------------------------------
NVEST FUNDS TRUST I
NVEST FUNDS TRUST II
NVEST FUNDS TRUST III
STATEMENT OF ADDITIONAL INFORMATION -- PART II
MAY 1, 2000
The following information applies generally to the funds listed below (the
"Funds" and each a "Fund"). The Funds constitute all of the series of Nvest
Funds Trust I, Nvest Funds Trust II and Nvest Funds Trust III (the "Trusts" and
each a "Trust), except for Nvest Access Shares (Nvest Core Equity Fund, Nvest
Select Fund, Nvest Stock and Bond Fund, Nvest Small Cap Value Fund, Nvest Small
Cap Growth Fund and Nvest Total Return Bond Fund), which are not currently being
offered to the public. In certain cases, the discussion applies to some but not
all of the Funds. Certain data applicable to particular Funds is found in Part I
of this Statement of Additional Information (the "Statement") as well as in the
Prospectuses of the Funds dated May 1, 2000 (the "Prospectus" or
"Prospectuses"). The following Funds are described in this Statement:
<TABLE>
SERIES OF NVEST FUNDS TRUST I
- -----------------------------
<S> <C>
Nvest Strategic Income Fund (the "Strategic Income Fund")
Nvest Bond Income Fund (the "Bond Income Fund")
Nvest Municipal Income Fund (the "Municipal Income Fund")
Nvest Government Securities Fund (the "Government Securities Fund")
Nvest International Equity Fund (the "International Equity Fund")
Nvest Growth Fund (the "Growth Fund")
Nvest Capital Growth Fund (the "Capital Growth Fund")
Nvest Balanced Fund (the "Balanced Fund")
Nvest Star Advisers Fund (the "Star Advisers Fund")
Nvest Star Worldwide Fund (the "Star Worldwide Fund")
Nvest Star Small Cap Fund (the "Star Small Cap Fund")
Nvest Star Value Fund (the "Star Value Fund")
SERIES OF NVEST FUNDS TRUST II
- ------------------------------
Nvest High Income Fund (the "High Income Fund")
Nvest Short Term Corporate Income Fund (the "Short Term Corporate Income
Fund")
Nvest Limited Term U.S. Government Fund (the "Limited Term U.S.
Government Fund")
Nvest Massachusetts Tax Free Income Fund (the "Massachusetts Fund")
Nvest Intermediate Term Tax Free Fund of California (the "California Fund")
Nvest Growth and Income Fund (the "Growth and Income Fund")
SERIES OF NVEST FUNDS TRUST III
- -------------------------------
Nvest Bullseye Fund (the "Bullseye Fund")
Nvest Equity Income Fund (the "Equity Income Fund")
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
MISCELLANEOUS INVESTMENT PRACTICES
- -------------------------------------------------------------------------------
The following is a list of certain investment practices in which a Fund
may engage as SECONDARY investment strategies. A Fund's primary strategies are
detailed in its Prospectus.
<TABLE>
<S> <C> <C>
HIGH INCOME FUND STRATEGIC INCOME FUND BOND INCOME FUND
- ---------------- --------------------- ----------------
Various Equity Securities Various Equity Securities Various Equity Securities
U.S. Government Securities IPOs Asset-backed Securities
Mortgage-backed Securities When-issued Securities Collateralized Mortgage Obligations
Asset-backed Securities Asset-backed Securities When-issued Securities
Collateralized Mortgage Obligations Collateralized Mortgage Obligations Convertible Securities
Stripped Securities Repurchase Agreements Illiquid Securities
Repurchase Agreements Foreign Currency Hedging Loans of Portfolio Securities
When-issued Securities Transactions Short-term Investments
Convertible Securities Investments in Closed-end Investment Money Market Instruments
Foreign Currency Hedging Transactions Companies Repurchase Agreements
Illiquid Securities Futures, Options and Swap Contracts Structured Notes
Loans of Portfolio Securities Short Sales Against the Box Futures, Options and Swap Contracts
Short-term Investments Illiquid Securities Depositary Receipts
Money Market Instruments Rule 144A Securities (liquidity Pay-in-kind Securities
Structured Notes determination required) Stripped Securities
Step Coupon Bonds Loans of Portfolio Securities Zero Coupon Securities
Borrowing/Reverse Repurchase Agreements
Short-term Investments
Money Market Instruments
Step Coupon Bonds
MUNICIPAL INCOME FUND SHORT TERM CORPORATE INCOME FUND LIMITED TERM U.S. GOVERNMENT FUND
- --------------------- -------------------------------- ---------------------------------
Repurchase Agreements Convertible Bonds Mortgage-backed Securities
Stripped Securities Stripped Securities Collateralized Mortgage Obligations
When-issued Securities Repurchase Agreements Stripped Securities
Futures and Options When-issued Securities Repurchase Agreements
Short-term Investments Futures, Options and Swap Contracts When-issued Securities
Money Market Instruments Illiquid Securities Foreign Equity Securities
U.S. Government Securities Short-term Investments Foreign Currency Hedging Transactions
Rule 144A Securities (liquidity Money Market Instruments Futures and Options
determination required) Zero Coupon Securities Illiquid Securities
Structured Notes Rule 144A Securities (liquidity
Non-Convertible Preferred Stocks, determination required)
Notes or Bonds Loans of Portfolio Securities
Step Coupon Bonds Short-term Investments
Loans of Portfolio Securities Money Market Instruments
Foreign Bonds
GOVERNMENT SECURITIES FUND MASSACHUSETTS FUND CALIFORNIA FUND
Repurchase Agreements U.S. Government Securities U.S. Government Securities
When-issued Securities Mortgage-related Securities Mortgage-related Securities
Futures and Options Stripped Securities Stripped Securities
Money Market Instruments Repurchase Agreements Repurchase Agreements
When-issued Securities When-issued Securities
Futures and Options Futures and Options
Illiquid Securities Illiquid Securities
Rule 144A Securities (liquidity Rule 144A Securities (liquidity
Determination required) determination required)
Money Market Instruments Money Market Instruments
Pay-in-kind Securities Pay-in-kind Securities
Borrowing/Reverse Repurchase Borrowing/Reverse Repurchase
Agreements Agreements
BULLSEYE FUND INTERNATIONAL EQUITY FUND GROWTH FUND
- ------------- ------------------------- -----------
Various Equity Securities Various Foreign Equity Securities Various Equity Securities
IPOs Foreign IPOs IPOs
U.S. Government Securities Lower-quality Foreign Fixed Income Corporate Fixed Income Securities
Repurchase Agreements Securities (investment grade)
When-issued Securities Repurchase Agreements U.S. Government Securities
Foreign Securities (Equity Securities, Zero Coupon Securities Repurchase Agreements
Supranational Agencies) When-issued Securities Zero Coupon Securities
Securities of Emerging Markets Foreign Currency Hedging Transactions Convertible Securities
Foreign Currency Hedging Transactions Foreign Corporate Bonds Futures, Options and Swap Contracts
Futures, Options and Swap Contracts Foreign Convertible Bonds Short Sales Against the Box
Short Sales Against the Box Foreign Government Bonds Illiquid Securities
Illiquid Securities Supranational Agencies Rule 144A Securities (liquidity
Rule 144A Securities (liquidity Foreign Warrants determination required)
determination required) Investments in Other Investment Borrowing/Reverse Repurchase Agreements
Loans of Portfolio Securities Companies Short-term Investments
Borrowing/Reverse Repurchase Agreements Futures, Options and Swap Contracts Money Market Instruments
Short-term Investments Short Sales Against the Box
Money Market Instruments Illiquid Securities
Foreign Bonds Rule 144A Securities (liquidity
determination required)
Loans of Portfolio Securities
Borrowing/Reverse Repurchase Agreements
Short-term Investments
Money Market Instruments
GROWTH AND INCOME FUND CAPITAL GROWTH FUND BALANCED FUND
- ---------------------- ------------------- -------------
Various Equity Securities Various Equity Securities Various Equity Securities
IPOs IPOs IPOs
Corporate Fixed Income Securities Corporate Fixed Income Securities Non-Non-Convertible Preferred Stock
(investment grade) (investment grade) Lower Quality Corporate Fixed
U.S. Government Securities U.S. Government Securities Income Securities
Zero Coupon Securities Repurchase Agreements Repurchase Agreements
Repurchase Agreements Zero Coupon Securities Investments in Other Investment
Convertible Securities Convertible Securities Companies
Foreign Securities (Foreign Equity Foreign Securities (Foreign Equity Futures, Options and Swap
Securities, Supranational Agencies, Securities, Supranational Agencies, Contracts
Depositary Receipts) Depositary Receipts) Short Sales Against the Box
Foreign Currency Hedging Transactions Foreign Currency Hedging Transactions Illiquid Securities
Investments in Other Investment Investments in Other Investment Borrowing/Reverse Repurchase
Companies Companies Agreements
Futures, Options and Swap Contracts Futures, Options and Swap Contracts Short-term Investments
Illiquid Securities Rule 144A Short Sales Against the Box Money Market Instruments
Securities (liquidity determination Illiquid Securities Rule 144A Securities of Emerging Markets
required) Securities (liquidity determination
Borrowing required)
Short-term Investments Loans of Portfolio
Money Market Instruments Securities
Foreign Bonds Borrowing/Reverse Repurchase
Agreements
Short-term Investments
Money Market Instruments
Foreign Bonds
EQUITY INCOME FUND
- ------------------
Various Equity Securities
Lower Quality Corporate Fixed
Income Securities
U.S. Government Securities
Repurchase Agreements
Zero Coupon Securities
Securities of Emerging Markets
Foreign Currency Hedging Transactions
Investments in Other Investment
Companies
Futures, Options and Swap Contracts
Short Sales Against the Box
Illiquid Securities
Rule 144A Securities (liquidity
determination required)
Loans of Portfolio Securities
Borrowing/Reverse Repurchase Agreements
Short-term Investments
Money Market Instruments
Foreign Bonds
When-issued Securities
</TABLE>
The following is a list of some of the investment practices employed by the
various subadvisers of Nvest Star Funds as SECONDARY strategies. Due to the
multi-subadviser approach of Nvest Star Funds, investing in a certain security
may be a primary strategy for one segment of the Fund and a SECONDARY strategy
for another segment of such Fund.
<TABLE>
<S> <C> <C>
STAR ADVISERS FUND STAR WORLDWIDE FUND STAR SMALL CAP FUND
- ------------------ ------------------- -------------------
Various Equity Securities Various Equity Securities Various Equity Securities
IPOs IPOs IPOs
U.S. Government Securities U.S. Government Securities U.S. Government Securities
Repurchase Agreements Repurchase Agreements Repurchase Agreements
Structured Notes Structured Notes Structured Notes
Zero Coupon; Pay-in Kind; Zero Coupon and Strips When-issued Securities
Step Coupon and Strips When-issued Securities Foreign Currency Hedging Transactions
When-issued Securities Foreign Currency Hedging Transactions Privatizations
Foreign Currency Hedging Transactions Privatizations Investments in Other Investment
Privatizations Investments in Other Investment Companies
Investments in Other Investment Companies Futures, Options and Swap Contracts
Companies Futures, Options and Swap Contracts Short Sales Against the Box
Futures, Options and Swap Short Sales Against the Box Illiquid Securities Rule 144A
Contracts Illiquid Securities Rule 144A Securities (liquidity determination
Short Sales Against the Box Securities (liquidity determination required)
Illiquid Securities Rule 144A required) Borrowing/Reverse Repurchase
Securities (liquidity determination Borrowing/Reverse Repurchase Agreements
required) Agreements Short-term Investments
Borrowing/Reverse Repurchase Short-term Investments Money Market Instruments
Agreements Money Market Instruments Mortgage- and Asset-backed Securities
Short-term Investments Loans of Portfolio Securities Loans of Portfolio Securities
Money Market Instruments Mortgage- and Asset-backed Securities Foreign Bonds
Loans of Portfolio Securities Foreign Bonds Collateralized Mortgage Obligations
Mortgage- and Asset backed Securities Step Coupon Bonds Step Coupon Bonds
Foreign Bonds Pay-in-kind Securities Pay-in-kind Securities
Collateralized Mortgage Obligations Foreign Currency Speculation Foreign Currency Speculation Transaction
Foreign Securities (Equity Securities, Transactions Zero Coupon Securities
Supranational Agencies) Collateralized Mortgage Obligations Stripped Securities
Securities of Emerging Markets Foreign Securities (Supranational Convertible Bonds
Foreign Depositary Receipts Agencies, Emerging Markets) Foreign Securities (Equity Securities,
Foreign Currency Speculation Convertible Preferred Stocks Emerging Markets, Depositary Receipts,
Transactions Supranational Agencies)
STAR VALUE FUND
- ---------------
Various Equity Securities
IPOs
Corporate Fixed Income Securities
(investment grade)
U.S. Government Securities
Repurchase Agreements
Zero Coupon Securities
When-issued Securities
Convertible Securities
Foreign Currency Hedging Transactions
Foreign Securities (Depositary Receipts)
Investments in Other Investment
Companies
Futures, Options and Swap Contracts
Short Sales Against the Box
Illiquid Securities Rule 144A
Securities (liquidity determination
required)
Borrowing/Reverse Repurchase Agreements
Short-term Investments
Money Market Instruments
Foreign Bonds
Lower Quality Fixed-Income Securities
</TABLE>
The following is a description of the various investment practices in
which a Fund may engage, whether as a primary or secondary strategy:
Equity Securities Equity securities are securities that represent an ownership
interest (or the right to acquire such an interest) in a company and include
common and preferred stocks and securities exercisable for, or convertible into,
common or preferred stocks (such as warrants, convertible debt securities and
convertible preferred stock). While offering greater potential for long-term
growth, equity securities are more volatile and more risky than some other forms
of investment. Therefore, the value of your investment in a Fund may sometimes
decrease instead of increase. A Fund may invest in equity securities of
companies with relatively small market capitalization. Securities of such
companies may be more volatile than the securities of larger, more established
companies and the broad equity market indices. See "Small Companies" below. A
Fund's investments may include securities traded "over-the-counter" as well as
those traded on a securities exchange. Some over-the-counter securities may be
more difficult to sell under some market conditions.
O Small Companies - A Fund may invest in companies with relatively small
capitalization. Such investments may involve greater risk than is usually
associated with more established companies. These companies often have sales
and earnings growth rates which exceed those of companies with larger
capitalization. Such growth rates may in turn be reflected in more rapid
share price appreciation. However, companies with smaller capitalization
often have limited product lines, markets or financial resources and may be
dependent upon a relatively small management group. The securities may have
limited marketability and may be subject to more abrupt or erratic movements
in price than securities of companies with larger capitalization or market
averages in general. The net asset value of Funds that invest in companies
with smaller capitalization therefore may fluctuate more widely than market
averages.
O Warrants - A Fund may invest in warrants. A warrant is an instrument that
gives the holder a right to purchase a given number of shares of a particular
security at a specified price until a stated expiration date. Buying a
warrant generally can provide a greater potential for profit or loss than an
investment of equivalent amounts in the underlying common stock. The market
value of a warrant does not necessarily move with the value of the underlying
securities. If a holder does not sell the warrant, it risks the loss of its
entire investment if the market price of the underlying security does not,
before the expiration date, exceed the exercise price of the warrant plus the
cost thereof. Investment in warrants is a speculative activity. Warrants pay
no dividends and confer no rights (other than the right to purchase the
underlying securities) with respect to the assets of the issuer.
O Real estate investment trusts (REITs) - Certain Funds may invest in REITs.
REITs are pooled investment vehicles that invest primarily in either real
estate or real estate related loans. The value of a REIT is affected by
changes in the value of the properties owned by the REIT or securing mortgage
loans held by the REIT. REITs are dependent upon cash flow from their
investments to repay financing costs and the ability of the REITs' managers.
REITs are also subject to risks generally associated with the investments in
real estate. A Fund will indirectly bear its proportionate share of expenses,
including management fees, paid by each REIT in which it invests.
Initial Public Offerings Funds may purchase securities of companies that are
offered pursuant to an initial public offering ("IPO"). An IPO is a company's
first offering of stock to the public in the primary market, typically to raise
additional capital. The Funds may purchase a "hot" IPO (also known as a "hot
issue"), which is an IPO that is oversubscribed and, as a result, is an
investment opportunity of limited availability. As a consequence, the price at
which these IPO shares open in the secondary market may be significantly higher
than the original IPO price. IPO securities tend to involve greater risk due, in
part, to public perception and the lack of publicly available information and
trading history. There is the possibility of losses resulting from the
difference between the issue price and potential diminished value of the stock
once traded in the secondary market. Although the Funds will make diligent
efforts to research a company prior to purchasing IPO securities, including
reviewing the company's prospectus, there is no guarantee against significant
losses. The Funds' investment in IPO securities may have a significant impact on
a Fund's performance and may result in significant capital gains.
Fixed-income Securities A Fund may invest in fixed-income securities. Because
interest rates vary, it is impossible to predict the income of a Fund for any
particular period. The net asset value of your shares will vary as a result of
changes in the value of the bonds and other securities in a Fund's portfolio.
Fixed-income securities include a broad array of short, medium and long term
obligations issued by the U.S. or foreign governments, government or
international agencies and instrumentalities, and corporate issuers of various
types. Some fixed-income securities represent uncollateralized obligations of
their issuers; in other cases, the securities may be backed by specific assets
(such as mortgages or other receivables) that have been set aside as collateral
for the issuer's obligation. Fixed-income securities generally involve an
obligation of the issuer to pay interest or dividends on either a current basis
or at the maturity of the securities, as well as the obligation to repay the
principal amount of the security at maturity.
Fixed-income securities are subject to market and credit risk. Credit risk
relates to the ability of the issuer to make payments of principal and interest
and includes the risk of default. In the case of municipal bonds, the issuer may
make these payments from money raised through a variety of sources, including
(1) the issuer's general taxing power, (2) a specific type of tax such as a
property tax, or (3) a particular facility or project such as a highway. The
ability of an issuer of municipal bonds to make these payments could be affected
by litigation, legislation or other political events, or the bankruptcy of the
issuer. U.S. government securities do not involve the credit risks associated
with other types of fixed-income securities; as a result, the yields available
from U.S. government securities are generally lower than the yields available
from corporate fixed-income securities. Market risk is the risk that the value
of the security will fall because of changes in market rates of interest.
(Generally, the value of fixed-income securities falls when market rates of
interest are rising.) Some fixed-income securities also involve prepayment or
call risk. This is the risk that the issuer will repay a Fund the principal on
the security before it is due, thus depriving the Fund of a favorable stream of
future interest payments.
Because interest rates vary, it is impossible to predict the income of a fund
that invests in fixed-income securities for any particular period. Fluctuations
in the value of a Fund's investments in fixed-income securities will cause the
Fund's net asset value to increase or decrease.
Lower Quality Fixed-income Securities Fixed-income securities rated BB or lower
by Standard & Poor's Ratings Group ("Standard & Poor's" or "S&P") or Ba or lower
by Moody's Investor's Service, Inc. ("Moody's") (and comparable unrated
securities) are of below "investment grade" quality. Lower quality fixed-income
securities generally provide higher yields, but are subject to greater credit
and market risk, than higher quality fixed-income securities, including U.S.
government and many foreign government securities. Lower quality fixed-income
securities are considered predominantly speculative with respect to the ability
of the issuer to meet principal and interest payments. Achievement of the
investment objective of a mutual fund investing in lower quality fixed-income
securities may be more dependent on the Fund's adviser's or subadviser's own
credit analysis than for a fund investing in higher quality bonds. The market
for lower quality fixed-income securities may be more severely affected than
some other financial markets by economic recession or substantial interest rate
increases, by changing public perceptions of this market or by legislation that
limits the ability of certain categories of financial institutions to invest in
these securities. In addition, the secondary market may be less liquid for lower
rated fixed-income securities. This lack of liquidity at certain times may
affect the valuation of these securities and may make the valuation and sale of
these securities more difficult. Securities of below investment grade quality
are considered high yield, high risk securities and are commonly known as "junk
bonds." For more information, including a detailed description of the ratings
assigned by S&P and Moody's, please refer to the Statement's "Appendix A --
Description of Bond Ratings" and "Appendix D - Average Monthly Portfolio
Composition Tables."
Structured Notes Certain Funds may invest in a broad category of instruments
known as "structured notes." These instruments are debt obligations issued by
industrial corporations, financial institutions or governmental or international
agencies. Traditional debt obligations typically obligate the issuer to repay
the principal plus a specified rate of interest. Structured notes, by contrast,
obligate the issuer to pay amounts of principal or interest that are determined
by reference to changes in some external factor or factors. For example, the
issuer's obligations could be determined by reference to changes in the value of
a commodity (such as gold or oil), a foreign currency, an index of securities
(such as the Standard & Poor's Composite Index of 500 Stocks ("S&P 500")) or an
interest rate (such as the U.S. Treasury bill rate). In some cases, the issuer's
obligations are determined by reference to changes over time in the difference
(or "spread") between two or more external factors (such as the U.S. prime
lending rate and the total return of the stock market in a particular country,
as measured by a stock index). In some cases, the issuer's obligations may
fluctuate inversely with changes in an external factor or factors (for example,
if the U.S. prime lending rate goes up, the issuer's interest payment
obligations are reduced). In some cases, the issuer's obligations may be
determined by some multiple of the change in an external factor or factors (for
example, three times the change in the U.S. Treasury bill rate). In some cases,
the issuer's obligations remain fixed (as with a traditional debt instrument) so
long as an external factor or factors do not change by more than the specified
amount (for example, if the value of a stock index does not exceed some
specified maximum), but if the external factor or factors change by more than
the specified amount, the issuer's obligations may be sharply reduced.
Structured notes can serve many different purposes in the management of a mutual
fund. For example, they can be used to increase the fund's exposure to changes
in the value of assets that the fund would not ordinarily purchase directly
(such as stocks traded in a market that is not open to U.S. investors). They can
also be used to hedge the risks associated with other investments the fund
holds. For example, if a structured note has an interest rate that fluctuates
inversely with general changes in a country's stock market index, the value of
the structured note would generally move in the opposite direction to the value
of holdings of stocks in that market, thus moderating the effect of stock market
movements on the value of the fund's portfolio as a whole.
Structured notes involve special risks. As with any debt obligation, structured
notes involve the risk that the issuer will become insolvent or otherwise
default on its payment obligations. This risk is in addition to the risk that
the issuer's obligations (and thus the value of the Fund's investment) will be
reduced because of adverse changes in the external factor or factors to which
the obligations are linked. The value of structured notes will in many cases be
more volatile (that is, will change more rapidly or severely) than the value of
traditional debt instruments. Volatility will be especially high if the issuer's
obligations are determined by reference to some multiple of the change in the
external factor or factors. Many structured notes have limited or no liquidity,
so that the Fund would be unable to dispose of the investment prior to maturity.
(The Funds are not permitted to invest more than 15% of their net assets in
illiquid investments.) As with all investments, successful use of structured
notes depends in significant part on the accuracy of the relevant adviser's or
subadviser's analysis of the issuer's creditworthiness and financial prospects,
and of the adviser's or subadviser's forecast as to changes in relevant economic
and financial market conditions and factors. In instances where the issuer of a
structured note is a foreign entity, the usual risks associated with investments
in foreign securities (described below) apply.
U.S. Government Securities Certain Funds may invest in some or all of the
following U.S. government securities:
O U.S. Treasury Bills - Direct obligations of the United States Treasury which
are issued in maturities of one year or less. No interest is paid on Treasury
bills; instead, they are issued at a discount and repaid at full face value
when they mature. They are backed by the full faith and credit of the United
States government.
O U.S. Treasury Notes and Bonds - Direct obligations of the United States
Treasury issued in maturities that vary between one and 40 years, with
interest normally payable every six months. These obligations are backed by
the full faith and credit of the United States government.
O "Ginnie Maes" - Debt securities issued by a mortgage banker or other
mortgagee which represent an interest in a pool of mortgages insured by the
Federal Housing Administration or the Farmer's Home Administration or
guaranteed by the Veterans Administration. The Government National Mortgage
Association ("GNMA") guarantees the timely payment of principal and interest
when such payments are due, whether or not these amounts are collected by the
issuer of these certificates on the underlying mortgages. An assistant
attorney general of the United States has rendered an opinion that the
guarantee by GNMA is a general obligation of the United States backed by its
full faith and credit. Mortgages included in single, family or multi-family
residential mortgage pools backing an issue of Ginnie Maes have a maximum
maturity of up to 30 years. Scheduled payments of principal and interest are
made to the registered holders of Ginnie Maes (such as the Fund) each month.
Unscheduled prepayments may be made by homeowners, or as a result of a
default. Prepayments are passed through to the registered holder (such as the
Fund, which reinvests any prepayments) of Ginnie Maes along with regular
monthly payments of principal and interest.
O "Fannie Maes" - The Federal National Mortgage Association ("FNMA") is a
government-sponsored corporation owned entirely by private stockholders that
purchases residential mortgages from a list of approved seller/servicers.
Fannie Maes are pass-through securities issued by FNMA that are guaranteed as
to timely payment of principal and interest by FNMA but are not backed by the
full faith and credit of the United States government.
O "Freddie Macs" - The Federal Home Loan Mortgage Corporation ("FHLMC") is a
corporate instrumentality of the United States government. Freddie Macs are
participation certificates issued by FHLMC that represent an interest in
residential mortgages from FHLMC's National Portfolio. FHLMC guarantees the
timely payment of interest and ultimate collection of principal, but Freddie
Macs are not backed by the full faith and credit of the United States
government.
U.S. government securities generally do not involve the credit risks
associated with investments in other types of fixed-income securities, although,
as a result, the yields available from U.S. government securities are generally
lower than the yields available from corporate fixed-income securities. Like
other fixed-income securities, however, the values of U.S. government securities
change as interest rates fluctuate. Fluctuations in the value of portfolio
securities will not affect interest income on existing portfolio securities but
will be reflected in the Fund's net asset value. Since the magnitude of these
fluctuations will generally be greater at times when the Fund's average maturity
is longer, under certain market conditions the Fund may, for temporary defensive
purposes, accept lower current income from short-term investments rather than
investing in higher yielding long-term securities.
Tax Exempt Bonds Certain Funds may invest in tax exempt bonds. Tax exempt bonds
include debt obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as bridges,
highways, hospitals, housing, mass transportation, schools, streets, and water
and sewer works. Other public purposes for which tax exempt bonds may be issued
include the refunding of outstanding obligations, obtaining funds for general
operating expenses, and obtaining funds to lend to other public institutions and
facilities. In addition, 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 obtain funds to provide privately operated
housing facilities, sports facilities, convention or trade show facilities,
airport, mass transit, port or parking facilities, air or water pollution
control facilities and certain local facilities for water supply, gas,
electricity, or sewage or solid waste disposal. Such obligations are included
within the term "tax exempt bonds" if the interest paid thereon is, in the
opinion of bond counsel, exempt from federal income tax. Interest on certain
industrial development bonds used to fund the construction, equipment, repair or
improvement of privately operated industrial or commercial facilities may also
be exempt from federal income tax. The Tax Reform Act of 1986 eliminated some
types of tax exempt industrial revenues bonds but retains others under the
general category of "private activity bonds." The interest on so-called "private
activity bonds" is exempt from ordinary federal income taxation but is treated
as a tax preference item in computing a shareholder's alternative minimum tax
liability, as noted in relevant Prospectuses.
These Funds may not be a desirable investment for "substantial users" of
facilities financed by industrial development bonds or for "related persons" of
substantial users.
The two principal classifications of tax exempt bonds are general
obligation bonds and limited obligation (or revenue) bonds. General obligation
bonds are obligations involving the credit of an issuer possessing taxing power
and are payable from the issuer's general unrestricted revenues and not 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 characteristics and methods of general obligation bonds
vary according to the law applicable to the particular issuer. Limited
obligation bonds are payable only from the revenues derived from a particular
facility or class of facilities, or in some cases from the proceeds of a special
excise or other specific revenue source such as the user of the facility. Tax
exempt industrial development bonds and private activity bonds are in most cases
revenue bonds and generally are not payable from the unrestricted revenues of
the issuer. The credit and quality of such bonds is usually directly related to
the credit standing of the corporate user of the facilities. Principal and
interest on such bonds is the responsibility of the corporate user (and any
guarantor).
Prices and yields on tax exempt bonds are dependent on a variety of
factors, including general money market conditions, the financial condition of
the issuer, general conditions of the tax exempt bond market, the size of a
particular offering, the maturity of the obligation and the rating of the issue.
A number of these factors, including the ratings of particular issues, are
subject to change from time to time. Information about the financial condition
of an issuer of tax exempt bonds may not be as extensive as that made available
by corporations whose securities are publicly traded.
The ratings of Moody's and S&P represent their opinions and are not
absolute standards of quality. Tax exempt bonds with the same maturity, interest
rate and rating may have different yields while tax exempt bonds of the same
maturity and interest rate with different ratings may have the same yield.
Although the yield of a tax-exempt Fund generally will be lower than that
of a taxable income Fund, the net after-tax return to investors may be greater.
The table below illustrates what tax-free investing can mean. It shows what you
must earn from a taxable investment to equal a tax-free yield ranging from 4% to
8%, under current federal tax rates. You can see that as your tax rate goes up,
so do the benefits of tax-free income. For example, a married couple with a
taxable income of $40,000 filing a joint return would have to earn a taxable
yield of 7.06% to equal a tax-free yield of 6.0%. This example and the following
table do not take into account the effect of state or local income taxes, if
any, or federal income taxes on social security benefits which may arise as a
result of receiving tax-exempt income, or the federal alternative minimum tax
that may be payable to the extent that Fund dividends are derived from interest
on "private activity" bonds (see the section entitled "Income Dividends, Capital
Gains Distributions and Tax Status"). Also, a portion of the Fund's
distributions may consist of ordinary income or short-term or long-term capital
gains and will be taxable to you as such.
<TABLE>
TAXABLE EQUIVALENT YIELDS - MUNICIPAL INCOME FUND
<CAPTION>
TAXABLE INCOME* IF TAX EXEMPT YIELD IS
- ----------------------------------- FEDERAL -------------------------------------------
MARGINAL 4.0% 5.0% 6.0% 7.0% 8.0%
SINGLE RETURN($) JOINT RETURN($) TAX RATE** THEN THE EQUIVALENT TAXABLE YIELD WOULD BE:
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0 - 26,250 0 - 43,850 15.00% 4.71% 5.88% 7.06% 8.24% 9.41%
26,251 - 43,851 - 28.00% 5.56% 6.94% 8.33% 9.72% 11.11%
63,550 105,950
63,551 - 105,951 - 31.00% 5.80% 7.25% 8.70% 10.14% 11.59%
132,600 161,450
132,601 - 161,451 - 36.00% 6.25% 7.81% 9.38% 10.94% 12.50%
288,350 288,350
288,351 and 288,351 and 39.60% 6.62% 8.28% 9.93% 11.59% 13.25%
over over
* This amount represents taxable income as defined in the Internal Revenue Code of 1986, as
amended (the "Code").
** These rates do not reflect any potential state income tax.
</TABLE>
Obligations of issuers of tax exempt bonds are subject to the provisions
of bankruptcy, insolvency and other laws, such as the Bankruptcy Reform Act of
1978, affecting the rights and remedies of creditors. Congress or state
legislatures may seek to extend the time for payment of principal or interest,
or both, or to impose other constraints upon enforcement of such obligations.
There is also the possibility that, as a result of litigation or other
conditions, the power or ability of issuers to meet their obligations for the
payment of interest and principal on their tax exempt bonds may be materially
affected, or their obligations may be found to be invalid or unenforceable. Such
litigation or conditions may from time to time have the effect of introducing
uncertainties in the market for tax exempt bonds or certain segments thereof, or
materially affecting the credit risk with respect to particular bonds. Adverse
economic, business, legal or political developments might affect all or a
substantial portion of the Fund's tax exempt bonds in the same manner.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on debt obligations issued by states and their political subdivisions
and similar proposals may well be introduced in the future. If such a proposal
were enacted, the availability of tax exempt securities for investment by the
Fund and the value of the Fund's portfolio could be materially affected, in
which event the Fund would reevaluate its investment objective and policies and
consider changes in the structure of the Fund or dissolution.
All debt securities, including tax exempt bonds, are subject to credit and
market risk. Generally, for any given change in the level of interest rates,
prices for longer maturity issues tend to fluctuate more than prices for shorter
maturity issues. The ability of the Fund to invest in securities other than tax
exempt bonds is limited by a requirement of the Code that at least 50% of the
Fund's total assets be invested in tax exempt bonds at the end of each calendar
quarter.
State Tax Exempt Securities Certain Funds may invest in "State Tax Exempt
Securities" which term refers to debt securities the interest from which is, in
the opinion of bond counsel, exempt from federal income tax and state personal
income taxes (other than the possible incidence of any alternative minimum
taxes). State Tax Exempt Securities consist primarily of bonds of the Fund's
named state, their political subdivisions (for example, counties, cities, towns,
villages and school districts) and authorities issued to obtain funds for
various public purposes, including the construction of a wide range of public
facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which certain State Tax Exempt Securities may be issued include the
refunding of outstanding obligations, obtaining funds for general operating
expenses, or obtaining funds to lend to public or private institutions for the
construction of facilities such as educational, hospital and housing facilities.
In addition, certain types of industrial development bonds and private activity
bonds have been or may be issued by public authorities or on behalf of state or
local governmental units to finance privately operated housing facilities,
sports facilities, convention or trade facilities, air or water pollution
control facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal. Other types of industrial
development and private activity bonds are used to finance the construction,
equipment, repair or improvement of privately operated industrial or commercial
facilities. Industrial development bonds and private activity bonds are included
within the term "State Tax Exempt Securities" if the interest paid thereon is,
in the opinion of bond counsel, exempt from federal income tax and State
personal income taxes (other than the possible incidence of any alternative
minimum taxes). The Fund may invest more than 25% of the value of its total
assets in such bonds, but not more than 25% in bonds backed by non-governmental
users in any one industry (see "Investment Restrictions" in Part I of this
Statement). However, as described in the Fund's Prospectus, the income from
certain private activity bonds is an item of tax preference for purposes of the
federal alternative minimum tax, and it is a fundamental policy of the Fund that
distributions from interest income on such private activity bonds, together with
distributions of interest income on investments other than State Tax Exempt
Securities, will normally not exceed 10% of the total amount of the Fund's
income distributions.
In addition, the term "State Tax Exempt Securities" includes debt
obligations issued by other governmental entities (for example, U.S.
territories) if such debt obligations generate interest income which is exempt
from federal income tax and State personal income taxes (other than any
alternative minimum taxes).
There are, of course, variations in the quality of State Tax Exempt
Securities, both within a particular classification and between classifications,
depending on numerous factors (see Appendix A).
The yields on State Tax Exempt Securities are dependent on a variety of
factors, including general money market conditions, the financial condition of
the issuer, general conditions of the State Tax Exempt Securities market, the
size of a particular offering, the maturity of the obligation and the rating of
the issue. The ratings of Moody's and S&P represent their opinions as to the
quality of the State Tax Exempt Securities which they undertake to rate. It
should be emphasized, however, that ratings are general and are not absolute
standards of quality. Consequently, State Tax Exempt Securities with the same
maturity, interest rate and rating may have different yields while State Tax
Exempt Securities of the same maturity and interest rates with different ratings
may have the same yield. Subsequent to its purchase by the Fund, an issue of
State Tax Exempt Securities or other investments may cease to be rated or the
rating may be reduced below the minimum rating required for purchase by the
Fund. Neither event will require the elimination of an investment from the
Fund's portfolio, but the Fund's subadviser will consider such an event as part
of its normal, ongoing review of all the Fund's portfolio securities.
Although the yield of a tax exempt Fund generally will be lower than that
of a taxable income Fund, the net after-tax return to investors may be greater.
The tables below illustrate what tax-free investing can mean for you. It does
not take into account the effect of income taxes on social security benefits
which may arise as a result of receiving tax-exempt income, or any alternative
minimum tax. Also, a portion of the Funds' distributions may consist of ordinary
income, short-term capital gain or long-term capital gain and will be taxable to
you as such. The tables show, for different assumed levels of taxable income and
marginal tax rates, the equivalent taxable yield that would be required to
achieve certain levels of tax exempt yield. Yields shown do not represent actual
yields achieved by the Fund and are not intended as a prediction of future
yields.
<TABLE>
TAX FREE INVESTING
<CAPTION>
MASSACHUSETTS FUND 2000
COMBINED
TAXABLE INCOME* MA AND IF TAX EXEMPT YIELD IS
- ------------------------------------ FEDERAL --------------------------------------------
SINGLE JOINT TAX 4.00% 5.00% 6.00% 7.00% 8.00%
RETURN ($) RETURN($) BRACKET** THEN THE EQUIVALENT TAXABLE YIELD WOULD BE:
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0 - 26,250 0 - 43,850 20.06% 5.00% 6.25% 7.50% 8.75% 10.00%
26,251 - 43,851 - 32.28% 5.90% 7.38% 8.85% 10.33% 11.80%
63,550 105,950
63,551 - 132,600 105,951 - 35.11% 6.16% 7.71% 9.24% 10.78% 12.31%
161,450
132,601 - 161,451 - 39.81% 6.64% 8.30% 9.96% 11.62% 13.28%
288,350 288,350
288,351 and over 288,351 and over 43.19% 7.03% 8.79% 10.55% 12.31% 14.07%
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA FUND 2000
COMBINED
TAXABLE INCOME* FEDERAL AND IF TAX EXEMPT YIELD IS
- ------------------------------------ CALIFORNIA --------------------------------------------
SINGLE JOINT MARGINAL 4.00% 5.00% 6.00% 7.00 % 8.00%
RETURN ($) RETURN ($) TAX RATE** THEN THE EQUIVALENT TAXABLE YIELD WOULD BE:
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0-5,264 0-10,528 15.85% 4.75% 5.94% 7.13% 8.32% 9.51%
5,265-12,477 10,529-24,954 16.70% 4.80% 6.00% 7.20% 8.40% 9.60%
12,478-19,692 24,955-39,384 18.40% 4.90% 6.13% 7.35% 8.58% 9.80%
19,693-25,750 39,385-43,050 20.10% 5.01% 6.26% 7.51% 8.76% 10.01%
25,751-27,337 43,051-54,674 32.32% 5.91% 7.39% 8.87% 10.34% 11.82%
27,338-34,548 54,675-69,096 33.76% 6.04% 7.55% 9.06% 10.57% 12.08%
34,549-62,450 69,097-104,050 34.70% 6.13% 7.66% 9.19% 10.72% 12.25%
62,451-130,250 104,051-158,550 37.42% 6.39% 7.99% 9.59% 11.19% 12.78%
130,251-283,150 158,551-283,150 41.95% 6.89% 8.61% 10.34% 12.06% 13.78%
283,151 and 283,151 and 45.22% 7.30% 9.13% 10.95% 12.78% 14.60%
over over
* This amount represents taxable income as defined in the Code and the Massachusetts and
California tax law. Note that Massachusetts and California taxable income and federal
taxable income may differ due to differences in exemptions, itemized deductions, and other
items.
** For federal tax purposes, these combined rates reflect the applicable marginal rates for
1999. These rates include the effect of deducting state taxes on a federal return.
</TABLE>
These Funds do not currently intend to invest in so-called "moral
obligation" bonds, in which repayment is backed by a moral commitment of an
entity other than the issuer, unless the credit of the issuer itself, without
regard to the "moral obligation," meets the investment criteria established for
investments by the Fund.
Securities in which the Fund may invest, including State Tax Exempt
Securities, are subject to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors, such as the federal
Bankruptcy Code, and laws, if any, which may be enacted by Congress or the state
legislatures extending the time for payment of principal or interest, or both,
or imposing other constraints upon enforcement of such obligations. There is
also the possibility that as a result of litigation or other conditions the
power or ability of issuers to meet their obligations for the payment of
interest and principal on their State Tax Exempt Securities may be materially
affected or that their obligations may be found to be invalid and unenforceable.
The Fund's named state and certain of its cities and towns and public
bodies have from time to time encountered financial difficulties which have
adversely affected their respective credit standings and borrowing abilities.
Such difficulties could, of course, affect outstanding obligations of such
entities, including obligations held by the Fund.
Mortgage-related Securities Mortgage-related securities, such as GNMA or FNMA
certificates, differ from traditional debt securities. Among the major
differences are that interest and principal payments are made more frequently,
usually monthly, and that principal may be prepaid at any time because the
underlying mortgage loans generally may be prepaid at any time. As a result, if
a Fund purchases these assets at a premium, a faster-than-expected prepayment
rate will reduce yield to maturity, and a slower-than-expected prepayment rate
will have the opposite effect of increasing yield to maturity. If a Fund
purchases mortgage-related securities at a discount, faster-than-expected
prepayments will increase, and slower-than-expected prepayments will reduce,
yield to maturity. Prepayments, and resulting amounts available for reinvestment
by the Fund, are likely to be greater during a period of declining interest
rates and, as a result, are likely to be reinvested at lower interest rates.
Accelerated prepayments on securities purchased at a premium may result in a
loss of principal if the premium has not been fully amortized at the time of
prepayment. Although these securities will decrease in value as a result of
increases in interest rates generally, they are likely to appreciate less than
other fixed-income securities when interest rates decline because of the risk of
prepayments. In addition, an increase in interest rates would also increase the
inherent volatility of the Fund by increasing the average life of the Fund's
portfolio securities.
An Adjustable Rate Mortgage security ("ARM"), like a traditional mortgage
security, is an interest in a pool of mortgage loans that provides investors
with payments consisting of both principal and interest as mortgage loans in the
underlying mortgage pool are paid off by the borrowers. ARMs have interest rates
that are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate. Although the rate adjustment feature may act as a
buffer to reduce sharp changes in the value of adjustable rate securities, these
securities are still subject to changes in value based on changes in market
interest rates or changes in the issuer's creditworthiness. Because the interest
rates are reset only periodically, changes in the interest rate on ARMs may lag
changes in prevailing market interest rates. Also, some ARMs (or the underlying
mortgages) are subject to caps or floors that limit the maximum change in
interest rate during a specified period or over the life of the security. As a
result, changes in the interest rate on an ARM may not fully reflect changes in
prevailing market interest rates during certain periods. Because of the
resetting of interest rates, ARMs are less likely than non-adjustable rate
securities of comparable quality and maturity to increase significantly in value
when market interest rates fall.
Asset-backed Securities The securitization techniques used to develop mortgage
securities are also being applied to a broad range of other assets. Through the
use of trusts and special purpose corporations, assets such as automobile and
credit card receivables are being securitized in pass- through structures
similar to mortgage pass-through structures or in a pay-through structure
similar to a Collateralized Mortgage Obligation structure. Generally the issuers
of asset-backed bonds, notes or pass-through certificates are special purpose
entities and do not have any significant assets other than the receivables
securing such obligations. In general, the collateral supporting asset-backed
securities is of shorter maturity than mortgage loans. Instruments backed by
pools of receivables are similar to mortgage-backed securities in that they are
subject to unscheduled prepayments of principal prior to maturity. When the
obligations are pre-paid, the Fund will ordinarily reinvest the prepaid amounts
in securities the yields of which reflect interest rates prevailing at the time.
Therefore, the Fund's ability to maintain a portfolio which includes
high-yielding asset-backed securities will be adversely affected to the extent
that prepayments of principal must be reinvested in securities which have lower
yields than the prepaid obligations. Moreover, prepayments of securities
purchased at a premium could result in a realized loss.
Collateralized Mortgage Obligations ("CMO") A CMO is a security backed by a
portfolio of mortgages or mortgage securities held under an indenture. The
underlying mortgages or mortgage securities are issued or guaranteed by the U.S.
government or an agency or instrumentality thereof. The issuer's obligation to
make interest and principal payments is secured by the underlying portfolio of
mortgages or mortgage securities. CMOs are issued with a number of classes or
series which have different maturities and which may represent interests in some
or all of the interest or principal on the underlying collateral or a
combination thereof. CMOs of different classes are generally retired in sequence
as the underlying mortgage loans in the mortgage pool are repaid. In the event
of sufficient early prepayments on such mortgages, the class or series of CMO
first to mature generally will be retired prior to its maturity. Thus, the early
retirement of a particular class or series of CMO held by the Fund would have
the same effect as the prepayment of mortgages underlying a mortgage
pass-through security. CMOs may be considered derivative securities.
"Stripped" Securities Stripped securities are usually structured with two or
more classes that receive different proportions of the interest and principal
distribution on a pool of U.S. government or foreign government securities or
mortgage assets. In some cases, one class will receive all of the interest (the
interest-only or "IO" class), while the other class will receive all of the
principal (the principal-only or "PO" class). Stripped securities commonly have
greater market volatility than other types of fixed-income securities. In the
case of stripped mortgage securities, if the underlying mortgage assets
experience greater than anticipated payments of principal, a Fund may fail to
recoup fully its investments in IOs. The staff of the Securities and Exchange
Commission (the "SEC") has indicated that it views stripped mortgage securities
as illiquid unless the securities are issued by the U.S. government or its
agencies and are backed by fixed-rate mortgages. The Funds intend to abide by
the staff's position. Stripped securities may be considered derivative
securities.
Zero-coupon Securities; Pay-in-kind and Step Coupon Zero-coupon securities are
debt obligations that do not entitle the holder to any periodic payments of
interest either for the entire life of the obligation or for an initial period
after the issuance of the obligations. Pay-in-kind securities pay dividends or
interest in the form of additional securities of the issuer, rather than in
cash. These securities are issued and traded at a discount from their face
amounts. The amount of the discount varies depending on such factors as the time
remaining until maturity of the securities, prevailing interest rates, the
liquidity of the security and the perceived credit quality of the issuer. The
market prices of zero-coupon and pay-in-kind securities generally are more
volatile than the market prices of securities that pay interest periodically and
are likely to respond to changes in interest rates to a greater degree than do
non-zero-coupon securities having similar maturities and credit quality. In
order to satisfy a requirement for qualification as a "regulated investment
company" under the Code, a Fund must distribute each year at least 90% of its
net investment income, including the original issue discount accrued on
zero-coupon securities. Because the Fund will not on a current basis receive
cash payments from the issuer of a zero-coupon security in respect of accrued
original issue discount, in some years the Fund may have to distribute cash
obtained from other sources in order to satisfy the 90% distribution requirement
under the Code. Such cash might be obtained from selling other portfolio
holdings of the Fund. In some circumstances, such sales might be necessary in
order to satisfy cash distribution requirements even though investment
considerations might otherwise make it undesirable for the Fund to sell such
securities at such time. Step coupon bonds trade at a discount from their face
value and pay coupon interest. The coupon rate is low for an initial period and
then increases to a higher coupon rate thereafter. Market values of these types
of securities generally fluctuate in response to changes in interest rates to a
greater degree than do conventional interest-paying securities of comparable
term and quality. Under many market conditions, investments in such securities
may be illiquid, making it difficult for the Fund to dispose of them or
determine their current value.
When-issued Securities Each Fund may purchase "when-issued" equity securities,
which are traded on a price basis prior to actual issuance. Such purchases will
only be made to achieve a Fund's investment objective and not for leverage. The
when-issued trading period generally lasts from a few days to months, or a year
or more; during this period dividends on equity securities are not payable. No
dividend income accrues to the Fund prior to the time it takes delivery. A
frequent form of when-issued trading occurs when corporate securities to be
created by a merger of companies are traded prior to the actual consummation of
the merger. Such transactions may involve a risk of loss if the value of the
securities fall below the price committed to prior to actual issuance. Each
Trust's custodian will establish a segregated account for each Fund when it
purchases securities on a when-issued basis consisting of cash or liquid
securities equal to the amount of the when-issued commitments. Securities
transactions involving delayed deliveries or forward commitments are frequently
characterized as when-issued transactions and are similarly treated by each
Fund.
Repurchase Agreements Certain Funds may enter into repurchase agreements, by
which the Fund purchases a security and obtains a simultaneous commitment from
the seller to repurchase the security at an agreed-upon price and date. The
resale price is in excess of the purchase price and reflects an agreed-upon
market rate unrelated to the coupon rate on the purchased security. Such
transactions afford the Fund the opportunity to earn a return on temporarily
available cash at relatively low market risk. While the underlying security may
be a bill, certificate of indebtedness, note or bond issued by an agency,
authority or instrumentality of the United States government, the obligation of
the seller is not guaranteed by the United States government and there is a risk
that the seller may fail to repurchase the underlying security. In such event,
the Fund would attempt to exercise rights with respect to the underlying
security, including possible disposition in the market. However, the Fund may be
subject to various delays and risks of loss, including (a) possible declines in
the value of the underlying security during the period while the Fund seeks to
enforce its rights thereto, (b) possible reduced levels of income and lack of
access to income during this period and (c) inability to enforce rights and the
expenses involved in the attempted enforcement.
Reverse Repurchase Agreements Each Fund may enter into reverse repurchase
agreements. However, a Fund may not engage in reverse repurchase agreements in
excess of 5% of the applicable Fund's total assets. In a reverse repurchase
agreement the Fund transfers possession of a portfolio instrument to another
person, such as a financial institution, broker or dealer, in return for a
percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed-upon rate.
The ability to use reverse repurchase agreements may enable, but does not ensure
the ability of, a Fund to avoid selling portfolio instruments at a time when a
sale may be deemed to be disadvantageous. When effecting reverse repurchase
agreements, assets of the applicable Fund in a dollar amount sufficient to make
payment of the obligations to be purchased are segregated on the applicable
Fund's records at the trade date and maintained until the transaction is
settled.
Convertible Securities Certain Funds may invest in convertible securities,
including corporate bonds, notes or preferred stocks of U.S. or foreign issuers
that can be converted into (that is, exchanged for) common stocks or other
equity securities. Convertible securities also include other securities, such as
warrants, that provide an opportunity for equity participation. Because
convertible securities can be converted into equity securities, their values
will normally vary in some proportion with those of the underlying equity
securities. Convertible securities usually provide a higher yield than the
underlying equity, however, so that the price decline of a convertible security
may sometimes be less substantial than that of the underlying equity security.
Foreign Securities Investments in foreign securities present risks not typically
associated with investments in comparable securities of U.S. issuers.
Since most foreign securities are denominated in foreign currencies or
traded primarily in securities markets in which settlements are made in foreign
currencies, the value of these investments and the net investment income
available for distribution to shareholders of a Fund may be affected favorably
or unfavorably by changes in currency exchange rates or exchange control
regulations. Because a Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S. dollar
will result in a change in the U.S. dollar value of the Fund's assets and the
Fund's income available for distribution.
In addition, although a Fund's income may be received or realized in
foreign currencies, the Fund will be required to compute and distribute its
income in U.S. dollars. Therefore, if the value of a currency relative to the
U.S. dollar declines after a Fund's income has been earned in that currency,
translated into U.S. dollars and declared as a dividend, but before payment of
such dividend, the Fund could be required to liquidate portfolio securities to
pay such dividend. Similarly, if the value of a currency relative to the U.S.
dollar declines between the time a Fund incurs expenses in U.S. dollars and the
time such expenses are paid, the amount of such currency required to be
converted into U.S. dollars in order to pay such expenses in U.S. dollars will
be greater than the equivalent amount in such currency of such expenses at the
time they were incurred.
There may be less information publicly available about a foreign corporate
or government issuer than about a U.S. issuer, and foreign corporate issuers are
not generally subject to accounting, auditing and financial reporting standards
and practices comparable to those in the United States. The securities of some
foreign issuers are less liquid and at times more volatile than securities of
comparable U.S. issuers. Foreign brokerage commissions and securities custody
costs are often higher than those in the United States, and judgments against
foreign entities may be more difficult to obtain and enforce. With respect to
certain foreign countries, there is a possibility of governmental expropriation
of assets, confiscatory taxation, political or financial instability and
diplomatic developments that could affect the value of investments in those
countries. The receipt of interest on foreign government securities may depend
on the availability of tax or other revenues to satisfy the issuer's
obligations.
Investments in foreign securities may include investments in emerging or
developing countries, whose economies or securities markets are not yet highly
developed. Special considerations associated with these investments (in addition
to the considerations regarding foreign investments generally) may include,
among others, greater political uncertainties, an economy's dependence on
revenues from particular commodities or on international aid or development
assistance, currency transfer restrictions, highly limited numbers of potential
buyers for such securities and delays and disruptions in securities settlement
procedures.
Certain Funds may invest in foreign equity securities either by purchasing
such securities directly or by purchasing "depository receipts." Depository
receipts are instruments issued by a bank that represent an interest in equity
securities held by arrangement with the bank. Depository receipts can be either
"sponsored" or "unsponsored." Sponsored depository receipts are issued by banks
in cooperation with the issuer of the underlying equity securities. Unsponsored
depository receipts are arranged without involvement by the issuer of the
underlying equity securities. Less information about the issuer of the
underlying equity securities may be available in the case of unsponsored
depository receipts.
In addition, certain Funds may invest in securities issued by
supranational agencies. Supranational agencies are those agencies whose member
nations determine to make capital contributions to support the agencies'
activities, and include such entities as the International Bank of
Reconstruction and Development (the World Bank), the Asian Development Bank, the
European Coal and Steel Community and the Inter-American Development Bank.
In determining whether to invest in securities of foreign issuers, Nvest
Funds Management, L.P. ("Nvest Management") or the subadviser of each Fund will
consider the likely effects of foreign taxes on the net yield available to the
Fund and its shareholders. Compliance with foreign tax law may reduce the Fund's
net income available for distribution to shareholders.
Foreign Currency Most foreign securities in the Funds' portfolios will be
denominated in foreign currencies or traded in securities markets in which
settlements are made in foreign currencies. Similarly, any income on such
securities is generally paid to the Fund in foreign currencies. The value of
these foreign currencies relative to the U.S. dollar varies continually, causing
changes in the dollar value of the Fund's portfolio investments (even if the
local market price of the investments is unchanged) and changes in the dollar
value of the Fund's income available for distribution to its shareholders. The
effect of changes in the dollar value of a foreign currency on the dollar value
of the Fund's assets and on the net investment income available for distribution
may be favorable or unfavorable.
A Fund may incur costs in connection with conversions between various
currencies. In addition, a Fund may be required to liquidate portfolio assets,
or may incur increased currency conversion costs, to compensate for a decline in
the dollar value of a foreign currency occurring between the time when the Fund
declares and pays a dividend, or between the time when the Fund accrues and pays
an operating expense in U.S. dollars.
Foreign Currency Hedging Transactions To protect against a change in the foreign
currency exchange rate between the date on which a Fund contracts to purchase or
sell a security and the settlement date for the purchase or sale, or to "lock
in" the equivalent of a dividend or interest payment in another currency, a Fund
might purchase or sell a foreign currency on a spot (i.e., cash) basis at the
prevailing spot rate. If conditions warrant, a Fund may also enter into
contracts with banks or broker-dealers to purchase or sell foreign currencies at
a future date ("forward contracts"). A Fund will maintain cash or other liquid
assets eligible for purchase by the Fund in a segregated account with the
custodian in an amount at least equal to the lesser of (i) the difference
between the current value of the Fund's liquid holdings that settle in the
relevant currency and the Fund's outstanding obligations under currency forward
contracts, or (ii) the current amount, if any, that would be required to be paid
to enter into an offsetting forward currency contract which would have the
effect of closing out the original forward contract. The Fund's use of currency
hedging transactions may be limited by tax considerations. The Fund may also
purchase or sell foreign currency futures contracts traded on futures exchanges.
Foreign currency futures contract transactions involve risks similar to those of
other futures transactions. See "Futures, Options and Swap Contracts" below.
Privatizations In a number of countries around the world, governments have
undertaken to sell to investors interests in enterprises that the government has
historically owned or controlled. These transactions are known as
"privatizations" and may in some cases represent opportunities for significant
capital appreciation. In some cases, the ability of U.S. investors, such as the
Funds, to participate in privatizations may be limited by local law, or the
terms of participation may be less advantageous than for local investors. Also,
there is no assurance that privatized enterprises will be successful, or that an
investment in such an enterprise will retain its value or appreciate in value.
Investments in Other Investment Companies Because of restrictions on direct
investment by U.S. entities in certain countries, investing indirectly in such
countries (by purchasing shares of another fund that is permitted to invest in
such countries) may be the most practical or efficient way for a Fund to invest
in such countries. In other cases, where a Fund's subadviser desires to make
only a relatively small investment in a particular country, investing through
another fund that holds a diversified portfolio in that country may be more
effective than investing directly in issuers in that country. As an investor in
another investment company, the Fund will indirectly bear its share of the
expenses of that investment company. These expenses are in addition to the
Fund's own costs of operations. In some cases, investing in an investment
company may involve the payment of a premium over the value of the assets held
in that investment company's portfolio.
Futures, Options and Swap Contracts
FUTURES CONTRACTS A futures contract is an agreement between two parties to buy
and sell a particular commodity (e.g., an interest-bearing security) for a
specified price on a specified future date. In the case of futures on an index,
the seller and buyer agree to settle in cash, at a future date, based on the
difference in value of the contract between the date it is opened and the
settlement date. The value of each contract is equal to the value of the index
from time to time multiplied by a specified dollar amount. For example,
long-term municipal bond index futures trade in contracts equal to $1000
multiplied by the Bond Buyer Municipal Bond Index, and S&P 500 futures trade in
contracts equal to $500 multiplied by the S&P 500.
When a trader, such as a Fund, enters into a futures contract, it is
required to deposit with (or for the benefit of) its broker as "initial margin"
an amount of cash or short-term high-quality securities (such as U.S. Treasury
Bills or high-quality tax exempt bonds acceptable to the broker) equal to
approximately 2% to 5% of the delivery or settlement price of the contract
(depending on applicable exchange rules). Initial margin is held to secure the
performance of the holder of the futures contract. As the value of the contract
changes, the value of futures contract positions increases or declines. At the
end of each trading day, the amount of such increase and decline is received and
paid respectively by and to the holders of these positions. The amount received
or paid is known as "variation margin." If the Fund has a long position in a
futures contract it will establish a segregated account with the Fund's
custodian containing cash or liquid securities eligible for purchase by the Fund
equal to the purchase price of the contract (less any margin on deposit). For
short positions in futures contracts, the Fund will establish a segregated
account with the custodian with cash or liquid securities eligible for purchase
by the Fund that, when added to the amounts deposited as margin, equal the
market value of the instruments or currency underlying the futures contracts.
Although futures contracts by their terms require actual delivery and
acceptance of securities (or cash in the case of index futures), in most cases
the contracts are closed out before settlement. A futures sale is closed by
purchasing a futures contract for the same aggregate amount of the specific type
of financial instrument or commodity and with the same delivery date. Similarly,
the closing out of a futures purchase is closed by the purchaser selling an
offsetting futures contract.
Gain or loss on a futures position is equal to the net variation margin
received or paid over the time the position is held, plus or minus the amount
received or paid when the position is closed, minus brokerage commissions.
OPTIONS An option on a futures contract obligates the writer, in return for the
premium received, to assume a position in a futures contract (a short position
if the option is a call and a long position if the option is a put), at a
specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option generally will be accompanied by delivery
of the accumulated balance in the writer's futures margin account, which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option. The premium paid by the purchaser of an option
will reflect, among other things, the relationship of the exercise price to the
market price and volatility of the underlying contract, the remaining term of
the option, supply and demand and interest rates. Options on futures contracts
traded in the United States may only be traded on a United States board of trade
licensed by the Commodity Futures Trading Commission (the "CFTC").
An option on a security entitles the holder to receive (in the case of a
call option) or to sell (in the case of a put option) a particular security at a
specified exercise price. An "American style" option allows exercise of the
option at any time during the term of the option. A "European style" option
allows an option to be exercised only at the end of its term. Options on
securities may be traded on or off a national securities exchange.
A call option on a futures contract written by a Fund is considered by the
Fund to be covered if the Fund owns the security subject to the underlying
futures contract or other securities whose values are expected to move in tandem
with the values of the securities subject to such futures contract, based on
historical price movement volatility relationships. A call option on a security
written by the Fund is considered to be covered if the Fund owns a security
deliverable under the option. A written call option is also covered if the Fund
holds a call on the same futures contract or security as the call written where
the exercise price of the call held (a) is equal to or less than the exercise
price of the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash or liquid securities
eligible for purchase by the Fund in a segregated account with its custodian.
A put option on a futures contract written by a Fund, or a put option on a
security written by the Fund, is covered if the Fund maintains cash or liquid
securities eligible for purchase by the Fund with a value equal to the exercise
price in a segregated account with the Fund's custodian, or else holds a put on
the same futures contract (or security, as the case may be) as the put written
where the exercise price of the put held is equal to or greater than the
exercise price of the put written.
If the writer of an option wishes to terminate its position, it may effect
a closing purchase transaction by buying an option identical to the option
previously written. The effect of the purchase is that the writer's position
will be canceled. Likewise, the holder of an option may liquidate its position
by selling an option identical to the option previously purchased.
Closing a written call option will permit the Fund to write another call
option on the portfolio securities used to cover the closed call option. Closing
a written put option will permit the Fund to write another put option secured by
the segregated assets used to secure the closed put option. Also, effecting a
closing transaction will permit the cash or proceeds from the concurrent sale of
any futures contract or securities subject to the option to be used for other
Fund investments. If the Fund desires to sell particular securities covering a
written call option position, it will close out its position or will designate
from its portfolio comparable securities to cover the option prior to or
concurrent with the sale of the covering securities.
The Fund will realize a profit from closing out an option if the price of
the offsetting position is less than the premium received from writing the
option or is more than the premium paid to purchase the option; the Fund will
realize a loss from closing out an option transaction if the price of the
offsetting option position is more than the premium received from writing the
option or is less than the premium paid to purchase the option. Because
increases in the market price of a call option will generally reflect increases
in the market price of the covering securities, any loss resulting from the
closing of a written call option position is expected to be offset in whole or
in part by appreciation of such covering securities.
Since premiums on options having an exercise price close to the value of
the underlying securities or futures contracts usually have a time value
component (i.e., a value that diminishes as the time within which the option can
be exercised grows shorter) an option writer may profit from the lapse of time
even though the value of the futures contract (or security in some cases)
underlying the option (and of the security deliverable under the futures
contract) has not changed. Consequently, profit from option writing may or may
not be offset by a decline in the value of securities covering the option. If
the profit is not entirely offset, the Fund will have a net gain from the
options transaction, and the Fund's total return will be enhanced. Likewise, the
profit or loss from writing put options may or may not be offset in whole or in
part by changes in the market value of securities acquired by the Fund when the
put options are closed.
As an alternative to purchasing call and put options on index futures, a
Fund may purchase or sell call or put options on the underlying indices
themselves. Such options would be used in a manner identical to the use of
options on index futures.
Certain Funds may purchase put warrants and call warrants whose values
vary depending on the change in the value of one or more specified securities
indices ("index warrants"). Index warrants are generally issued by banks or
other financial institutions and give the holder the right, at any time during
the term of the warrant, to receive upon exercise of the warrant a cash payment
from the issuer based on the value of the underlying index at the time of
exercise. In general, if the value of the underlying index rises above the
exercise price of the index warrant, the holder of a call warrant will be
entitled to receive a cash payment from the issuer upon exercise based on the
difference between the value of the index and the exercise price of the warrant;
if the value of the underlying index falls, the holder of a put warrant will be
entitled to receive a cash payment from the issuer upon exercise based on the
difference between the exercise price of the warrant and the value of the index.
The holder of a warrant would not be entitled to any payments from the issuer at
a time when, in the case of a call warrant, the exercise price is less than the
value of the underlying index, or in the case of a put warrant, the exercise
price is less than the value of the underlying index. If the Fund were not to
exercise an index warrant prior to its expiration, then the Fund would lose the
amount of the purchase price paid by it for the warrant.
A Fund will normally use index warrants in a manner similar to its use of
options on securities indices. The risks of the Fund's use of index warrants are
generally similar to those relating to its use of index options. Unlike most
index options, however, index warrants are issued in limited amounts and are not
obligations of a regulated clearing agency, but are backed only by the credit of
the bank or other institution which issues the warrant. Also, index warrants
generally have longer terms than index options. Although the Fund will normally
invest only in exchange-listed warrants, index warrants are not likely to be as
liquid as certain index options backed by a recognized clearing agency. In
addition, the terms of index warrants may limit the Fund's ability to exercise
the warrants at such time, or in such quantities, as the Fund would otherwise
wish to do.
Certain Funds may buy and write options on foreign currencies in a manner
similar to that in which futures or forward contracts on foreign currencies will
be utilized. For example, a decline in the U.S. dollar value of a foreign
currency in which portfolio securities are denominated will reduce the U.S.
dollar value of such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminutions in the value of
the portfolio securities, the Fund may buy put options on the foreign currency.
If the value of the currency declines, the Fund will have the right to sell such
currency for a fixed amount in U.S. dollars, thereby offsetting, in whole or in
part, the adverse effect on its portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Fund may buy call options on the foreign currency.
The purchase of such options could offset, at least partially, the effects of
the adverse movements in exchange rates. As in the case of other types of
options, however, the benefit to the Fund from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, if currency exchange rates do not move in the direction or
to the extent desired, the Fund could sustain losses on transactions in foreign
currency options that would require the Fund to forego a portion or all of the
benefits of advantageous changes in those rates.
Certain Funds may also write options on foreign currencies. For example,
to hedge against a potential decline in the U.S. dollar value of foreign
currency denominated securities due to adverse fluctuations in exchange rates,
the Fund could, instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will most likely
not be exercised and the diminution in value of portfolio securities be offset
at least in part by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against a
potential increase in the U.S. dollar cost of securities to be acquired, the
Fund could write a put option on the relevant currency which, if rates move in
the manner projected, will expire unexercised and allow the Fund to hedge the
increased cost up to the amount of the premium. If exchange rates do not move in
the expected direction, the option may be exercised and the Fund would be
required to buy or sell the underlying currency at a loss, which may not be
fully offset by the amount of the premium. Through the writing of options on
foreign currencies, the Fund also may lose all or a portion of the benefits
which might otherwise have been obtained from favorable movements in exchange
rates.
All call options written by a Fund on foreign currencies will be
"covered." A call option written on a foreign currency by the Fund is "covered"
if the Fund owns the foreign currency underlying the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other foreign currencies held
in its portfolio. A call option is also covered if the Fund has a call on the
same foreign currency in the same principal amount as the call written if the
exercise price of the call held (i) is equal to or less than the exercise price
of the call written or (ii) is greater than the exercise price of the call
written, if the difference is maintained by the Fund in cash or liquid
securities eligible to be purchased by the Fund in a segregated account with the
Fund's custodian. For this purpose, a call option is also considered covered if
the Fund owns securities denominated in (or which trade principally in markets
where settlement occurs in) the same currency, which securities are readily
marketable, and the Fund maintains in a segregated account with its custodian
cash or liquid securities eligible to be purchased by the Fund in an amount that
at all times at least equals the excess of (x) the amount of the Fund's
obligation under the call option over (y) the value of such securities.
FUTURES AND OPTIONS ON TAX-EXEMPT BONDS AND BOND INDICES Municipal Income Fund,
Massachusetts Fund and California Fund may also purchase and sell interest rate
futures contracts and tax-exempt bond index futures contracts and may write and
purchase related options. Transactions involving futures and options on futures
may help to reduce the volatility of the Fund's net asset value, and the writing
of options on futures may yield additional income for the Fund, but these
results cannot be assured. Income from options and futures transactions is not
tax-exempt.
SWAP CONTRACTS Interest rate swaps involve the exchange by a Fund with another
party of their respective commitments to pay or receive interest (for example,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal). A currency swap is an agreement to exchange cash
flows on a notional amount based on changes in the relative values of the
specified currencies. An index swap is an agreement to make or receive payments
based on the different returns that would be achieved if a notional amount were
invested in a specified basket of securities (such as the S&P 500 or in some
other investment (such as U.S. Treasury securities). The Fund will maintain at
all times in a segregated account with its custodian cash or liquid securities
eligible to be purchased by the Fund in amounts sufficient to satisfy its
obligations under swap contracts.
RISKS The use of futures contracts, options and swap contracts involves risks.
One risk arises because of the imperfect correlation between movements in the
price of futures contracts and movements in the price of the securities that are
the subject of the hedge. A Fund's hedging strategies will not be fully
effective unless the Fund can compensate for such imperfect correlation. There
is no assurance that the Fund will be able to effect such compensation.
Options, futures and swap contracts fall into the broad category of
financial instruments known as "derivatives" and involve special risks. Use of
options, futures or swaps for other than hedging purposes may be considered a
speculative activity, involving greater risks than are involved in hedging.
The correlation between the price movement of the futures contract and the
hedged security may be distorted due to differences in the nature of the
markets. For example, to the extent that the Municipal Income Fund enters into
futures contracts on securities other than tax exempt bonds, the value of such
futures may not vary in direct proportion to the value of tax exempt bonds that
the Fund owns or intends to acquire, because of an imperfect correlation between
the movement of taxable securities and tax exempt bonds. If the price of the
futures contract moves more than the price of the hedged security, the relevant
Fund would experience either a loss or a gain on the future that is not
completely offset by movements in the price of the hedged securities. In an
attempt to compensate for imperfect price movement correlations, the Fund may
purchase or sell futures contracts in a greater dollar amount than the hedged
securities if the price movement volatility of the hedged securities is
historically greater than the volatility of the futures contract. Conversely,
the Fund may purchase or sell fewer contracts if the volatility of the price of
hedged securities is historically less than that of the futures contracts.
The price of index futures may not correlate perfectly with movement in
the relevant index due to certain market distortions. First, all participants in
the futures market are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions, which could distort the
normal relationship between the index and futures markets. Secondly, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market, and as a result the futures market may attract more
speculators than does the securities market. In addition, trading hours for
foreign stock index futures may not correspond perfectly to hours of trading on
the foreign exchange to which a particular foreign stock index future relates.
This may result in a disparity between the price of index futures and the value
of the relevant index due to the lack of continuous arbitrage between the index
futures price and the value of the underlying index. Finally, hedging
transactions using stock indices involve the risk that movements in the price of
the index may not correlate with price movements of the particular portfolio
securities being hedged.
Price movement correlation also may be distorted by the illiquidity of the
futures and options markets and the participation of speculators in such
markets. If an insufficient number of contracts are traded, commercial users may
not deal in futures contracts or options because they do not want to assume the
risk that they may not be able to close out their positions within a reasonable
amount of time. In such instances, futures and options market prices may be
driven by different forces than those driving the market in the underlying
securities, and price spreads between these markets may widen. The participation
of speculators in the market enhances its liquidity. Nonetheless, speculators
trading spreads between futures markets may create temporary price distortions
unrelated to the market in the underlying securities.
Positions in futures contracts and options on futures contracts may be
established or closed out only on an exchange or board of trade. There is no
assurance that a liquid market on an exchange or board of trade will exist for
any particular contract or at any particular time. The liquidity of markets in
futures contracts and options on futures contracts may be adversely affected by
"daily price fluctuation limits" established by commodity exchanges which limit
the amount of fluctuation in a futures or options price during a single trading
day. Once the daily limit has been reached in a contract, no trades may be
entered into at a price beyond the limit, which may prevent the liquidation of
open futures or options positions. Prices have in the past exceeded the daily
limit on a number of consecutive trading days. If there is not a liquid market
at a particular time, it may not be possible to close a futures or options
position at such time, and, in the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of variation margin.
However, if futures or options are used to hedge portfolio securities, an
increase in the price of the securities, if any, may partially or completely
offset losses on the futures contract.
An exchange-traded option may be closed out only on a national securities
or commodities exchange which generally provides a liquid secondary market for
an option of the same series. If a liquid secondary market for an
exchange-traded option does not exist, it might not be possible to effect a
closing transaction with respect to a particular option with the result that the
Fund would have to exercise the option in order to realize any profit. If the
Fund is unable to effect a closing purchase transaction in a secondary market,
it will be not be able to sell the underlying security until the option expires
or it delivers the underlying security upon exercise. Reasons for the absence of
a liquid secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities;
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or the Options Clearing Corporation
or other clearing organization may not at all times be adequate to handle
current trading volume or (vi) one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
Because the specific procedures for trading foreign stock index futures on
futures exchanges are still under development, additional or different margin
requirements as well as settlement procedures may be applicable to foreign stock
index futures at the time the International Equity Fund purchases foreign stock
index futures.
The successful use of transactions in futures and options depends in part
on the ability of a Fund's adviser or subadviser(s) to forecast correctly the
direction and extent of interest rate movements within a given time frame. To
the extent interest rates move in a direction opposite to that anticipated, the
Fund may realize a loss on the hedging transaction that is not fully or
partially offset by an increase in the value of portfolio securities. In
addition, whether or not interest rates move during the period that the Fund
holds futures or options positions, the Fund will pay the cost of taking those
positions (i.e., brokerage costs). As a result of these factors, the Fund's
total return for such period may be less than if it had not engaged in the
hedging transaction.
Options trading involves price movement correlation risks similar to those
inherent in futures trading. Additionally, price movements in options on futures
may not correlate with price movements in the futures underlying the options.
Like futures, options positions may become less liquid because of adverse
economic circumstances. The securities covering written option positions are
expected to offset adverse price movements if those options positions cannot be
closed out in a timely manner, but there is no assurance that such offset will
occur. Also, an option writer may not effect a closing purchase transaction
after it has been notified of the exercise of an option.
OVER-THE-COUNTER OPTIONS An over-the-counter option (an option not traded on a
national securities exchange) may be closed out only with the other party to the
original option transaction. While the Fund will seek to enter into
over-the-counter options only with dealers who agree to or are expected to be
capable of entering into closing transactions with the Fund, there can be no
assurance that the Fund will be able to liquidate an over-the-counter option at
a favorable price at any time prior to its expiration. Accordingly, the Fund
might have to exercise an over-the-counter option it holds in order to realize
any profit thereon and thereby would incur transactions costs on the purchase or
sale of the underlying assets. If the Fund cannot close out a covered call
option written by it, it will not be able to sell the underlying security until
the option expires or is exercised. Furthermore, over-the-counter options are
not subject to the protections afforded purchasers of listed options by the
Options Clearing Corporation or other clearing organizations.
The staff of the SEC has taken the position that over-the-counter options
on U.S. government securities and the assets used as cover for written
over-the-counter options on U.S. government securities should generally be
treated as illiquid securities for purposes of the investment restrictions
prohibiting the Government Securities Fund from investing more than 15% of its
net assets in illiquid securities. However, if a dealer recognized by the
Federal Reserve Bank of New York as a "primary dealer" in U.S. government
securities is the other party to an option contract written by the Fund, and the
Fund has the absolute right to repurchase the option from the dealer at a
formula price established in a contract with the dealer, the SEC staff has
agreed that the Fund only needs to treat as illiquid that amount of the "cover"
assets equal to the amount at which (i) the formula price exceeds (ii) any
amount by which the market value of the securities subject to the options
exceeds the exercise price of the option (the amount by which the option is
"in-the-money"). Although Back Bay Advisors, L.P. ("Back Bay Advisors"), the
Government Securities Fund's subadviser, does not believe that over-the-counter
options on U.S. government securities are generally illiquid, the Fund has
agreed that pending resolution of this issue it will conduct its operations in
conformity with the views of the SEC staff on such matters.
Back Bay Advisors has established standards for the creditworthiness of
the primary dealers with which the Government Securities Fund may enter into
over-the-counter option contracts having the formula-price feature referred to
above. Those standards, as modified from time to time, are implemented and
monitored by Back Bay Advisors. Such contracts will provide that the Fund has
the absolute right to repurchase an option it writes at any time at a repurchase
price which represents the fair market value, as determined in good faith
through negotiation between the parties, but which in no event will exceed a
price determined pursuant to a formula contained in the contract. Although the
specific details of the formula may vary between contracts with different
primary dealers, the formula will generally be based on a multiple of the
premium received by the Fund for writing the option, plus the amount, if any, by
which the option is "in-the-money." The formula will also include a factor to
account for the difference between the price of the securities and the exercise
price of the option if the option is written out-of-the-money. Although each
agreement will provide that the Fund's repurchase price shall be determined in
good faith (and that it shall not exceed the maximum determined pursuant to the
formula), the formula price will not necessarily reflect the market value of the
option written, and therefore the Fund might pay more to repurchase the option
contract than the Fund would pay to close out a similar exchange-traded option.
ECONOMIC EFFECTS AND LIMITATIONS Income earned by a Fund from its hedging
activities will be treated as capital gain and, if not offset by net recognized
capital losses incurred by the Fund, will be distributed to shareholders in
taxable distributions. Although gain from futures and options transactions may
hedge against a decline in the value of the Fund's portfolio securities, that
gain, to the extent not offset by losses, will be distributed in light of
certain tax considerations and will constitute a distribution of that portion of
the value preserved against decline. If the Municipal Income Fund is required to
use taxable fixed-income securities as margin, the portion of the Fund's
dividends that is taxable to shareholders will be larger than if that Fund is
permitted to use tax exempt bonds for that purpose.
The Fund intends to comply with guidelines of eligibility for exclusion
from the definition of the term "commodity pool operator" adopted by the CFTC
and the National Futures Association, which regulate trading in the futures
markets. The Fund will use futures contracts and related options primarily for
bona fide hedging purposes within the meaning of CFTC regulations. To the extent
that the Fund holds positions in futures contracts and related options that do
not fall within the definition of bona fide hedging transactions, the aggregate
initial margin and premiums required to establish such positions will not exceed
5% of the fair market value of the Fund's net assets, after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into.
FUTURE DEVELOPMENTS The above discussion relates to the Fund's proposed use of
futures contracts, options and options on futures contracts currently available.
The relevant markets and related regulations are still in the developing stage.
In the event of future regulatory or market developments, the Fund may also use
additional types of futures contracts or options and other investment techniques
for the purposes set forth above.
Short Sales Certain Funds may sell securities short against the box, that is:
(1) enter into short sales of securities that it currently owns or has the right
to acquire through the conversion or exchange of other securities that it owns
without additional consideration; and (2) enter into arrangements with the
broker-dealers through which such securities are sold short to receive income
with respect to the proceeds of short sales during the period the Fund's short
positions remain open. A Fund may make short sales of securities only if at all
times when a short position is open the Fund owns at least an equal amount of
such securities or securities convertible into or exchangeable for, without
payment of any further consideration, securities of the same issue as, and in
equal amount to, the securities sold short.
In a short sale against the box, a Fund does not deliver from its
portfolio securities sold and does not receive immediately the proceeds from the
short sale. Instead, the Fund borrows the securities sold short from a
broker-dealer through which the short sale is executed, and the broker-dealer
delivers such securities, on behalf of the Fund, to the purchaser of such
securities. Such broker-dealer is entitled to retain the proceeds from the short
sale until the Fund delivers to such broker-dealer the securities sold short. In
addition, the Fund is required to pay the broker-dealer the amount of any
dividends paid on shares sold short. Finally, to secure its obligation to
deliver to such broker-dealer the securities sold short, the Fund must deposit
and continuously maintain in a separate account with the Fund's custodian an
equivalent amount of the securities sold short or securities convertible into or
exchangeable for such securities without the payment of additional
consideration. A Fund is said to have a short position in the securities sold
until it delivers to the broker-dealer the securities sold, at which time the
Fund receives the proceeds of the sale. A Fund may close out a short position by
purchasing on the open market and delivering to the broker-dealer an equal
amount of the securities sold short, rather than by delivering portfolio
securities.
Short sales may protect a Fund against risk of losses in the value of its
portfolio securities because any unrealized losses with respect to such
portfolio securities should be wholly or partially offset by a corresponding
gain in the short position. However, any potential gains in such portfolio
securities should be wholly or partially offset by a corresponding loss in the
short position. The extent to which such gains or losses are offset will depend
on the amount of securities sold short relative to the amount the Fund owns,
either directly or indirectly, and, in the case where the Fund owns convertible
securities, changes in the conversion premium.
Short sale transactions involve certain risks. If the price of the
security sold short increases between the time of the short sale and the time
the Fund replaces the borrowed security, the Fund will incur a loss, and if the
price declines during this period, the Fund will realize a short-term capital
gain. Any realized short-term capital gain will be decreased, and any incurred
loss increased, by the amount of transaction costs and any premium, dividend or
interest which the Fund may have to pay in connection with such short sale.
Certain provisions of the Code may limit the degree to which a Fund is able to
enter into short sales. There is no limitation on the amount of each Fund's
assets that, in the aggregate, may be deposited as collateral for the obligation
to replace securities borrowed to effect short sales and allocated to segregated
accounts in connection with short sales. Star Advisers Fund, Star Small Cap Fund
and Star Worldwide Fund currently expect that no more than 20%, 25% and 20% of
their total assets, respectively, would be involved in short sales against the
box.
Illiquid Securities (Rule 144 and Section 4(2) Commercial Paper) Illiquid
securities are those which are not readily resaleable, which may include
securities whose disposition is restricted by federal securities laws.
Rule 144A securities are privately offered securities that can be resold
only to certain qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933. Certain Funds may also purchase commercial paper issued
under Section 4(2) of the Securities Act of 1933. Investing in Rule 144A
securities and Section 4(2) commercial paper could have the effect of increasing
the level of a Fund's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities. Rule
144A securities and Section 4(2) commercial paper are treated as illiquid,
unless a subadviser has determined, under guidelines established by each Trust's
Board of Trustees, that the particular issue of Rule 144A securities is liquid.
Investment in restricted or other illiquid securities involves the risk that a
Fund may be unable to sell such a security at the desired time. Also, a Fund may
incur expenses, losses or delays in the process of registering restricted
securities prior to resale.
Loans of Portfolio Securities Certain Funds may lend up to 33 1/3% of their
total assets (taken at current value) in the form of their portfolio securities
to broker-dealers under contracts calling for collateral equal to at least the
market value of the securities loaned, marked to market on a daily basis. These
Funds will continue to benefit from interest or dividends on the securities
loaned and may also receive interest through investment of the cash collateral
in short-term liquid investments, which may include shares of money market funds
subject to any investment restriction listed in Part I of this Statement. Any
voting rights, or rights to consent, relating to securities loaned pass to the
borrower. However, if a material event affecting the investment occurs, such
loans will be called so that the securities may be voted by the Fund. The Fund
pays various fees in connection with such loans, including shipping fees and
reasonable custodian and placement fees approved by the Boards of Trustees of
the Trusts or persons acting pursuant to the direction of the Boards.
These transactions must be fully collateralized at all times, but involve
some credit risk to the Fund if the other party should default on its obligation
and the Fund is delayed in or prevented from recovering the collateral.
Short-Term Trading Certain Funds may, consistent with their investment
objectives, engage in portfolio trading in anticipation of, or in response to,
changing economic or market conditions and trends. These policies may result in
higher turnover rates in the Fund's portfolio, which may produce higher
transaction costs and a higher level of taxable capital gains. Portfolio
turnover considerations will not limit any subadviser's investment discretion in
managing its segment or segments of a Fund's assets.
Money Market Instruments A Fund may seek to minimize risk by investing in money
market instruments, which are high-quality, short-term securities. Although
changes in interest rates can change the market value of a security, a Fund
expects those changes to be minimal and that the Fund will be able to maintain
the net asset value of its shares at $1.00, although this value cannot be
guaranteed.
Money market obligations of foreign banks or of foreign branches or
subsidiaries of U.S. banks may be subject to different risks than obligations of
domestic banks, such as foreign economic, political and legal developments and
the fact that different regulatory requirements apply.
Temporary Strategies A Fund has the flexibility to respond promptly to changes
in market and economic conditions. In the interest of preserving shareholders'
capital, the adviser may employ a temporary defensive strategy if it determines
such a strategy to be warranted. Pursuant to such a defensive strategy a Fund
temporarily may hold cash (U. S. dollars, foreign currencies, or multinational
currency units) and/or invest up to 100% of its assets in high quality debt
securities or money market instruments of U. S. or foreign issuers. It is
impossible to predict whether, when or for how long a Fund will employ defensive
strategies.
In addition, pending investment of proceeds from new sales of Fund shares
or to meet ordinary daily cash needs, a Fund may temporarily hold cash (U.S.
dollars, foreign currencies or multinational currency units) and may invest any
portion of its assets in money instruments. The use of defensive strategies may
prevent a Fund from achieving its goal.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUSTS
- --------------------------------------------------------------------------------
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 the 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
Trustees of the Trusts 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 Investment Company Act of 1940 (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
Center of Science and International Affairs, John F. Kennedy School of
Government; Special Advisor to the United States Secretary of Defense;
formerly, Assistant Secretary of Defense; formerly, Dean, John F. Kennedy
School of Government.
DANIEL M. CAIN - Trustee (55); 452 Fifth Avenue, New York, New York 10018;
Member of the Audit Committee for the Trusts; President and CEO, Cain
Brothers & Company, Incorporated (investment banking); Trustee, Universal
Health Realty Income Trust (Exchange), Norman Rockwell Museum, Sharon
Health Corporation and National Committee for Quality Healthcare (all
not-for-profit organizations);
KENNETH J. COWAN -- Trustee (68); One Beach Drive, S.E. #2103, St. Petersburg,
Florida 33701; 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 (56); 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, Harvard Graduate School of Government; Trustee, Council for
Excellence in Government (not for profit); Director, Frontier Ventures
(personal investment); Director, Telcom Ventures (telecommunications);
Director, Prime Communications (cable communications); Director, Neptune
Communications (undersea cable systems); formerly, Director of the U.S.
Office of Management and Budget and a member of President Bush's Cabinet;
formerly, Managing Director, Shearson Lehman Brothers (Investments).
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, GTE Corporation (communications services); Director, Rohm and
Haas Company (specialty chemicals); Trustee, Boston Public Library
Foundation; Board of Overseers, Museum of Fine Arts and Beth Israel/New
England Deaconess Hospital; Director, Harvard Graduate School Society
Council; Member, Visiting Committee, Harvard School of Public Health.
JOHN A. SHANE -- Trustee (67); 200 Unicorn Park Drive, Woburn, Massachusetts
01801; Member of the Audit Committee for the Trusts; President, Palmer
Service Corporation (venture capital organization); General Partner,
Palmer Partners L.P.; Director, Arch Communications Group, Inc. (paging
service); Director, Eastern Bank Corporation; Director, Gensym Corporation
(developer of expert system software); Director, Overland Data, Inc.
(manufacturer of computer tape drives); Director, United Asset Management
Corporation (holding company for institutional money management firms).
*PETER S. VOSS -- Chairman of the Board, Chief Executive Officer and
Trustee (53); Chairman of the Board and Director, President and Chief
Executive Officer, Nvest, L.P. and Nvest Companies, L.P. ("Nvest
Companies"); Chairman of the Board and Director, President and Chief
Executive Officer, Nvest Corporation; Director, Nvest Services Company;
Director, Nvest Distribution Corporation; Director of various affiliates
of Nvest Management; formerly, Director, New England Financial; Board
Member, Investment Company Institute and United Way of Massachusetts Bay;
Committee Member, New York Stock Exchange Listed Company Advisory
Committee.
PENDLETON P. WHITE -- Trustee (69); 6 Breckenridge Lane, Savannah, Georgia
31411; Member of the Contract Review and Governance Committee for the
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 and Transfer Agent and Shareholders Services 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 polices, 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 ages (in
parentheses) and principal occupations during at least the past five years are
listed below.
THOMAS P. CUNNINGHAM - Treasurer (54); Senior Vice President, Nvest Services
Company; Senior Vice President, Nvest Management; formerly, Vice President,
Allmerica Financial Life Insurance and Annuity Company, formerly,
Treasurer, Allmerica Investment Trust; formerly, Vice President, First Data
Investor Services Group.
JOHN E. PELLETIER - Secretary and Clerk (35); Director, Nvest Distribution
Corporation; Senior Vice President, General Counsel, Secretary and Clerk,
Nvest Funds Distributor, L.P.; 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 funds
service company); formerly, Vice President and General Counsel, Boston
Institutional Group (mutual funds service company); formerly, Senior Vice
President and General Counsel, Financial Research Corporation.
Each person listed above holds the same position(s) with all three Trusts.
Previous positions during the past five years with New England Financial or
Metropolitan Life Insurance Company ("MetLife"), Nvest Funds Distributor, L.P.
or Nvest Management are omitted, if not materially different from a trustee's or
officer's current position with such entity. As indicated below under "Trustee
Fees," each of the Trusts' trustees is also a trustee of certain other
investment companies for which Nvest Funds Distributor, L.P. acts as principal
underwriter. Except as indicated above, the address of each trustee and officer
of the Trusts is 399 Boylston Street, Boston, Massachusetts 02116.
Trustee Fees
The Trusts pay no compensation to their officers or to their trustees who
are interested persons thereof.
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 and Nvest Cash
Management Trust and Nvest Tax Exempt Money Market Trust (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 that
he or she attends. Each committee member receives an additional retainer fee at
the annual rate of $6,000. Furthermore, each committee chairman receives an
additional retainer fee (beyond the $6,000 fee) at the annual rate of $4,000.
These fees are allocated among the mutual fund portfolios in the Nvest Funds
Trusts based on a formula that takes into account, among other factors, the
relative net assets of each Fund.
During the fiscal year ended December 31, 1999, the trustees of the Trusts
received the amounts set forth in the following table for serving as a trustee
of the Trusts and for also serving as trustees of the other Nvest Funds Trusts.
<TABLE>
<CAPTION>
Pension or
Aggregate Aggregate Aggregate Retirement
Compensation Compensation Compensation Benefits Total
from from from Accrued as Estimated Compensation
Nvest Nvest Nvest Part of Annual from the
Funds Funds Funds Fund Benefits Nvest Funds
Trust I Trust II Trust III Expenses Upon Trusts
Name of Trustee in 1999* in 1999* in 1999* in 1999 Retirement in 1999*
--------------- ----------- ------------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Graham T. Allison, Jr. $40,775 $11,090 $1,552 $0 $0 $60,000
Daniel M. Cain $43,623 $11,740 $1,597 $0 $0 $64,000
Kenneth J. Cowan $43,623 $11,740 $1,597 $0 $0 $64,000
Richard Darman $40,775 $11,090 $1,552 $0 $0 $60,000
Sandra O. Moose $40,775 $11,090 $1,552 $0 $0 $60,000
John A. Shane $40,775 $11,090 $1,552 $0 $0 $60,000
Pendleton P. White $40,775 $11,090 $1,552 $0 $0 $60,000
* Amounts include payments deferred by Trustees for 1999. The total amount of deferred compensation for all
periods to date accrued for the Trustees follows: Allison ($810, 057); Cain ($16,000); Cowan ($55,777);
Darman ($15,000).
</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 the Funds 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 will make an investment in the selected Fund (s)
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.
At April 1, 2000, the officers and trustees of the Trusts as a group owned
less than 1% of the outstanding shares of each Fund.
Advisory and Subadvisory Agreements
Each Fund's advisory agreement between the Fund and Nvest Management
(between the Fund and Capital Growth Management Limited Partnership ("CGM"), in
the case of Growth Fund) provides that the adviser (Nvest Management or CGM)
will furnish or pay the expenses of the applicable Fund for office space,
facilities and equipment, services of executive and other personnel of the Trust
and certain administrative services. Nvest Management is responsible for
obtaining and evaluating such economic, statistical and financial data and
information and performing such additional research as is necessary to manage
each Fund's assets in accordance with its investment objectives and policies.
Each Fund pays all expenses not borne by its adviser or subadviser(s)
including, but not limited to, the charges and expenses of the Fund's custodian
and transfer agent, independent auditors and legal counsel for the Fund and the
Trusts' independent trustees, 12b-1 fees, all brokerage commissions and transfer
taxes in connection with portfolio transactions, all taxes and filing fees, the
fees and expenses for registration or qualification of its shares under federal
and state securities laws, all expenses of shareholders' and trustees' meetings
and of preparing, printing and mailing reports to shareholders and the
compensation of trustees who are not directors, officers or employees of the
Fund's adviser, subadviser(s) or their affiliates, other than affiliated
registered investment companies. In the case of Funds with Class Y shares,
certain expenses may be allocated differently between the Fund's Class A, Class
B and Class C shares, on the one hand, and Class Y shares on the other hand.
Each Fund's advisory agreement and (except in the case of Growth Fund)
each Fund's subadvisory agreement(s) 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 Trust has received an exemptive order from 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
the Fund's Board of Trustees. Shareholders will be notified of any subadviser
changes. Each advisory 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 subadviser upon 90 days' notice and
automatically terminates upon termination of the related advisory agreement.
Each advisory and subadvisory agreement provides that the adviser or
subadviser 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.
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 Distribution Corporation is also the sole
general partner of Nvest Funds Distributor, L.P. (the "Distributor") and the
sole shareholder of Nvest Services Company, Inc. the transfer and dividend
disbursing agent of the Funds. Nvest Companies owns the entire limited
partnership interest in each of Nvest Management and the Distributor Nvest
Services Company 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.
Nvest Companies' managing general partner, Nvest Corporation, is a
wholly-owned subsidiary of MetLife New England Holdings, Inc., which in turn is
a wholly-owned subsidiary of MetLife, a stock life insurance company, which is
wholly-owned by MetLife, Inc., a publicly traded corporation. MetLife owns
approximately 47% (and in the aggregate, directly and indirectly, approximately
48%) of the outstanding limited partnership interests in Nvest Companies. Nvest
Companies' advising general partner, Nvest, L.P., is a publicly-traded company
listed on the New York Stock Exchange. Nvest Corporation is the sole general
partner of Nvest, L.P.. The eighteen principal subsidiary or affiliated asset
management firms of Nvest Companies, collectively, have more than $133 billion
of assets under management or administration as of December 31, 1999.
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. Nvest Companies 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.
Loomis, Sayles & Company, L.P. ("Loomis Sayles") was organized in 1926 and
is one of the oldest investment management firms in the country. An important
feature of the Loomis Sayles investment approach is its emphasis on investment
research. Recommendations and reports of the Loomis Sayles research department
are circulated throughout the Loomis Sayles organization and are available to
the individuals in the Loomis Sayles organization who are responsible for making
investment decisions for the Funds' portfolios as well as numerous other
institutional and individual clients to which Loomis Sayles provides investment
advice. These clients include some accounts of New England Financial and MetLife
and their affiliates. Loomis Sayles is a limited partnership whose sole general
partner, Loomis, Sayles & Company, Inc., is a wholly-owned subsidiary of Nvest
Holdings. Nvest Companies owns the entire limited partnership interest in Loomis
Sayles.
CGM is a limited partnership whose sole general partner, Kenbob, Inc., is
a corporation owned in equal shares by Robert L. Kemp and G. Kenneth Heebner.
Nvest Companies owns a majority limited partnership interest in CGM. Prior to
March 1, 1990, Growth Fund was managed by Loomis Sayles' Capital Growth
Management Division. On March 1, 1990, Loomis Sayles reorganized its Capital
Growth Management Division into CGM. In addition to advising the Growth Fund,
CGM acts as investment adviser of CGM Capital Development Fund, CGM Trust, Nvest
Zenith Fund's Capital Growth Series and Nvest Variable Annuity Fund I. CGM also
provides investment advice to other mutual funds and other institutional and
individual clients.
Westpeak Investment Advisors, L.P. ("Westpeak"), organized in 1991,
provides investment management services to institutional clients, including
accounts of New England Financial and its affiliates. Westpeak is a limited
partnership whose sole general partner, Westpeak Investment Advisors, Inc., is a
wholly-owned subsidiary of Nvest Holdings. Nvest Companies owns the entire
limited partnership interest in Westpeak.
Kobrick Funds LLC ("Kobrick"), a Delaware limited liability company, was
formed to succeed to the business a predecessor limited liability company also
named Kobrick Funds LLC (the "Kobrick Predecessor"). The Kobrick Predecessor was
formed in 1998 as the result of a reorganization of its predecessor,
Kobrick-Cendant Funds, Inc., an investment manager. Kobrick is a wholly-owned
subsidiary of Nvest Companies engaged in the business of investment management.
Janus Capital Corporation ("Janus Capital") serves as investment adviser
to the Janus mutual funds and to other mutual funds, individual, charitable,
corporate and retirement accounts. Kansas City Southern Industries, Inc.
("KCSI"), a publicly traded holding company, owns approximately 82% of the
outstanding voting stock of Janus Capital, indirectly through its wholly-owned
subsidiary, Stilwell Financial, Inc. Thomas H. Bailey, President and Chairman of
the Board of Janus Capital, owns approximately 12% of Janus Capital's voting
stock and by agreement with KCSI, selects a majority of Janus Capital's Board.
KSCI has announced its intention to spin off its financial services
subsidiaries, which it expects to complete in the first half of 2000.
Jurika & Voyles, L.P., ("Jurika & Voyles") founded in 1983, has
discretionary management authority with respect to assets for various clients
including corporations, pension plans, 401(k) plans, profit sharing plans,
trusts and estates, foundations and charities, mutual funds and individuals.
Jurika & Voyles is a wholly-owned subsidiary of Nvest Companies engaged in the
business of investment management.
Harris Associates L.P. ("Harris Associates") was organized in 1995
to succeed to the business of a predecessor limited partnership also named
Harris Associates L.P., which together with its predecessor had advised and
managed mutual funds since 1970. Harris Associates is a limited partnership
whose sole general partner is Harris Associates Inc., a wholly-owned subsidiary
of Nvest Holdings. Nvest Companies owns the entire limited partnership interest
in Harris Associates. Harris Associates also serves as investment adviser to
individuals, trusts, retirement plans, endowments and foundations, and manages
numerous private partnerships.
Montgomery Asset Management, LLC ("Montgomery"), a Delaware limited
liability company, was formed in 1997 as an investment adviser. Montgomery is
the successor to Montgomery Asset Management, L.P., a California limited
partnership formed in 1990. Montgomery is a wholly-owned subsidiary of
Commerzbank AG, a German commercial bank.
RS Investment Management, L.P. ("RS Investment Management") (formerly,
Robertson, Stephens & Company Investment Management, L.P.) was formed in 1993
and provides investment advisory services to both private and public investment
funds. On February 26, 1999, Robertson Stephens Investment Management Co. LLC
purchased Robertson Stephens Investment Management Co. and its subsidiary, RS
Investment Management, from BankAmerica Corporation.
Vaughan, Nelson, Scarborough & McCullough, L.P. ("VNSM") was formed in
1970 and provides investment advisory services to foundations, university
endowments, corporate retirement plans and individuals. VNSM is a limited
partnership whose sole general partner Vaughan, Nelson, Scarborough &
McCullough, Inc., is a wholly-owned subsidiary of Nvest Holdings. Nvest
Companies owns the entire limited partnership interest in VNSM.
Certain officers and employees of Back Bay Advisors have responsibility
for portfolio management of other advisory accounts and clients (including other
registered investment companies and accounts of affiliates of Back Bay Advisors)
that may invest in securities in which the Funds may invest. Where 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 for which Back Bay
Advisors acts as subadviser 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 Trusts' trustees are of the view that the benefits of retaining Back
Bay Advisors as investment manager outweigh the disadvantages, if any, that
might result from participating in such transactions.
Certain officers of Loomis Sayles have responsibility for the management
of other client portfolios. The Pasadena, Boston and Detroit offices of Loomis
Sayles make the investment decisions for the Balanced Fund. The Detroit office
of Loomis Sayles makes the investment decisions for the segments of the Star
Advisers and Star Value Funds' portfolios that are managed by Loomis Sayles. The
Boston office makes the investment decisions for Strategic Income Fund and the
segment of the Star Small Cap Fund portfolio that is managed by Loomis Sayles.
The San Francisco office makes the investment decisions for the International
Equity Fund and the segment of the Star Worldwide portfolio that is managed by
Loomis Sayles. The New York office makes the investment decisions for High
Income Fund. These offices make investment decisions for the relevant Fund
independently of one another. The other investment companies and clients served
by Loomis Sayles sometimes invest in securities in which Balanced, Star
Advisers, Star Small Cap, Star Value, Star Worldwide, High Income, Strategic
Income and International Equity Funds also invest. If one of these Funds and
such other clients advised by the same office of Loomis Sayles desire to buy or
sell the same portfolio securities at about the same time, purchases and sales
will be allocated, to the extent practicable, on a pro rata basis in proportion
to the amounts desired to be purchased or sold for each. It is recognized that
in some cases the practices described in this paragraph could have a detrimental
effect on the price or amount of the securities which each of the Funds
purchases or sells. In other cases, however, it is believed that these practices
may benefit the relevant Fund. It is the opinion of the Trusts' trustees that
the desirability of retaining Loomis Sayles as subadviser for Strategic Income,
Balanced, Star Advisers, Star Small Cap, Star Value, Star Worldwide, High Income
and International Equity Funds outweighs the disadvantages, if any, which might
result from these practices.
Certain officers and trustees of the Growth Fund also serve as officers,
directors or trustees of other investment companies advised by CGM. The other
investment companies and clients served by CGM sometimes invest in securities in
which the Growth Fund also invests. If the Growth Fund and such other investment
companies or clients advised by CGM desire to buy or sell the same portfolio
securities at the same time, purchases and sales will be allocated to the extent
practicable on a pro rata basis in proportion to the amounts desired to be
purchased or sold for each. It is recognized that in some cases the practices
described in this paragraph could have a detrimental effect on the price or
amount of the securities which the Growth Fund purchases or sells. In other
cases, however, it is believed that these practices may benefit Growth Fund. It
is the opinion of the trustees of Trust I that the desirability of retaining CGM
as adviser for the Growth Fund outweighs the disadvantages, if any, which might
result from these practices.
The segment of the Star Advisers Fund managed by Kobrick and one or more
of the other mutual funds or clients to which Kobrick serves as investment
adviser, may from time to time, purchase or sell the same securities or have the
same securities under consideration for purchase or sale. In those instances
when securities transactions are carried on at the same time on behalf of the
Fund and such other mutual funds and accounts, transactions in such securities
for such accounts may be grouped with securities transactions carried out on
behalf of the Fund. The practice of grouping orders of various accounts will be
followed in order to obtain benefit of best prices or commission rates. In
certain cases where the aggregate order may be executed in a series of
transactions at various prices, the transactions will be allocated as to amount
and price in a manner considered equitable to each account so that each
receives, to the extent practicable, the average price for such transactions.
Transactions will not be grouped unless it is Kobrick's judgment that such
aggregation is consistent with its duty to seek best execution (which includes
the duty to seek best price) for the Fund. The books and records of the Fund and
any such other account will separately reflect, for each account, the orders of
which are aggregated and the securities held by and bought and sold for that
account.
Janus Capital performs investment advisory services for other mutual
funds, individual, charitable, corporate and retirement accounts, as well as for
its segment of Star Advisers Fund. Although the overall investment objectives of
the Fund may differ from the objectives of the other investment accounts and
other funds served by Janus Capital, there may be securities that are suitable
for the portfolio of the Fund as well as for one or more of the other funds or
the other investment accounts. Therefore, purchases and sales of the same
investment securities may be recommended for the Fund and for one or more of the
other funds or other investment accounts. To the extent that the Fund and one or
more of the other funds or other investment accounts seek to acquire or sell the
same security at the same time, either the price obtained by the Fund or the
amount of securities that may be purchased or sold by the Fund at one time may
be adversely affected. In such cases, the purchase and sale transactions are
allocated among the Fund, the other funds and the other investment accounts in a
manner believed by the management of Janus Capital to be equitable to each. It
is the opinion of the trustees of Trust I that the desirability of retaining
Janus Capital as a subadviser to Star Advisers Fund outweighs the disadvantages,
if any, which might result from these procedures.
Certain officers of Westpeak have responsibility for portfolio management
for other clients (including affiliates of Westpeak), some of which may invest
in securities in which Growth and Income Fund, Capital Growth Fund, and Star
Value Fund (Westpeak segment) also may invest. When the Funds and other clients
desire to purchase or sell the same security at or about the same time, the
purchase and sale orders are ordinarily placed and confirmed separately but may
be combined to the extent practicable and allocated as nearly as practicable on
a pro rata basis in proportion to the amounts desired to be purchased or sold
for each (or if filled over the course of more than one day, allocated randomly
using algorithms generated by its trade order management system). It is believed
that the ability of those clients to participate in larger volume transactions
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 the Funds or the price at which a security may be sold.
It is the opinion of the trustees of the Trusts that the desirability of
retaining Westpeak as subadviser for the Funds outweighs the disadvantages, if
any, which might result from these practices.
Certain officers and employees of Jurika & Voyles have responsibility for
portfolio management of other advisory accounts and clients (including other
registered investment companies and accounts of affiliates of Jurika & Voyles)
that may invest in securities in which the Bullseye Fund may invest. Where
Jurika & Voyles 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 Jurika & Voyles to the participating accounts. Where
advisory accounts have competing interests in a limited investment opportunity,
Jurika & Voyles will allocate investment opportunities based on numerous
considerations, including the time the competing accounts have had funds
available for investment, and the relative amounts of available funds, an
account's cash requirements and the time the competing accounts have had
investments available for sale. It is Jurika & Voyles' 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 Fund to participate in larger volume transactions in
this manner will in some cases produce better executions for the Fund. However,
in some cases, this procedure could have a detrimental effect on the price and
amount of a security available to the Fund or the price at which a security may
be sold. The trustees are of the view that the benefits of retaining Jurika &
Voyles as investment manager outweigh the disadvantages, if any, that might
result from participating in such transactions.
Certain officers and employees of Harris Associates have
responsibility for portfolio management of other advisory accounts and clients
(including other registered investment companies and accounts of affiliates of
Harris Associates) that may invest in securities in which Star Advisers Fund,
Star Worldwide Fund, Star Value Fund and/or Star Small Cap Fund may invest.
Where Harris Associates 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 Harris Associates to the participating
accounts. Where advisory accounts have competing interests in a limited
investment opportunity, Harris Associates will allocate investment opportunities
based on numerous considerations, including the time the competing accounts have
had funds available for investment, the amounts of available funds, an account's
cash requirements and the time the competing accounts have had investments
available for sale. It is Harris Associates' 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 Star Advisers Fund, Star Worldwide Fund, Star Value Fund and Star
Small Cap Fund to participate in larger volume transactions in this manner will
in some cases produce better executions for these Funds. However, in some cases,
this procedure could have a detrimental effect on the price and amount of a
security available to these Funds or the price at which a security may be sold.
The trustees of Trust I are of the view that the benefits of retaining Harris
Associates as a subadviser to Star Advisers Fund, Star Worldwide Fund, Star
Value Fund and Star Small Cap Fund outweigh the disadvantages, if any, that
might result from participating in such transactions.
In addition to managing segments of Star Worldwide Fund and Star
Small Cap Fund portfolios, Montgomery serves as investment adviser to other
mutual funds, pension and profit-sharing plans, and other institutional and
private investors. At times, Montgomery may effect purchases and sales of the
same investment securities for Star Worldwide Fund and/or Star Small Cap Fund
and for one or more other investment accounts. In such cases, it will be the
practice of Montgomery to allocate the purchase and sale transactions among the
Funds and the accounts in such manner as it deems equitable. In making such
allocation, the main factors to be considered are the respective investment
objectives of the Funds and the accounts, the relative size of portfolio
holdings of the same or comparable securities, the current availability of cash
for investment by the Funds and each account, the size of investment commitments
generally held by the Funds and each account and the opinions of the persons at
Montgomery responsible for selecting investments for the Funds and the accounts.
It is the opinion of the trustees of Trust I that the desirability of retaining
Montgomery as a subadviser to Star Worldwide Fund and Star Small Cap Fund
outweighs the disadvantages, if any, which might result from these procedures.
In addition to managing a segment of Star Value Fund portfolio and Equity
Income Fund, VNSM serves as investment adviser to foundations, university
endowments and corporate retirement and family/individual core funds. Portfolio
transactions for each client account are generally completed independently,
except when decisions are made to purchase or sell the same securities for a
number of client accounts simultaneously. In this event, the transactions are
averaged as to the price and allocated as to amount in accordance with the daily
purchase or sale orders actually placed for each client account. Such orders are
combined when possible to facilitate best execution, as well as for the purpose
of negotiating more favorable brokerage commissions. It is the opinion of the
trustees of the Trusts that the desirability of retaining VNSM as a subadviser
to Star Value Fund and Equity Income Fund outweighs the disadvantages, if any,
which might result from these procedures.
Investment decisions for its segment of Star Small Cap Fund and for other
investment advisory clients of RS Investment Management and its affiliates are
made with a view to achieving their respective investment objectives. Investment
decisions are the product of many factors in addition to basic suitability for
the particular client involved. Thus, a particular security may be bought or
sold for certain clients even though it could be bought or sold for other
clients at the same time. Likewise, a particular security may be bought for one
or more clients when one or more clients are selling the same security. In some
instances, one client may sell a particular security to another client. It also
sometimes happens that two or more clients simultaneously purchase or sell the
same security, in which event each day's transactions in such security are,
insofar as possible, averaged as to price and allocated between such clients in
a manner which in RS Investment Management's opinion is equitable to each and in
accordance with the amount being purchased or sold by each client. There may be
circumstances when purchases or sales of portfolio securities for one or more
clients will have an adverse effect on other clients. RS Investment Management
employs staffs of portfolio managers who draw upon a variety of resources for
research information. It is the opinion of the trustees of Trust I that the
desirability of retaining RS Investment Management as a subadviser to Star Small
Cap Fund outweighs the disadvantages, if any, which could result from these
procedures.
Nvest Management believes that Star Funds' multi-adviser approach to
equity investing -- one that combines the varied styles of the subadvisers in
selecting securities for the Funds' portfolios -- offers a different investment
opportunity than funds managed by a single adviser using a single style. Nvest
Management believes that assigning portfolio management responsibility for a
Fund to several subadvisers, whose varying management styles have resulted in
records of success, may increase the likelihood that the Fund may produce
superior results for its shareholders, with less variability of return and less
risk of persistent under-performance than a fund managed by a single adviser. Of
course, past results should not be considered a prediction of future
performance, and there is no assurance that a Fund will in fact achieve superior
results over any period of time.
On a daily basis, capital activity will be allocated equally by Nvest
Management among the segments of each Star Fund. However, Nvest Management may,
subject to review of the Trust's Board of Trustees, allocate net investment
capital differently among any of the subadvisers. This action may be necessary,
if, for example, a subadviser determines that it desires no additional
investment capital. Similarly, because each segment of each Fund will perform
differently from the other segments of the Fund depending upon the investments
it holds and changing market conditions, one segment may be larger or smaller at
various times than other segments. For example, as of March 31, 2000, the
percentages of Star Advisers Fund's net assets held in the segments of the Fund
managed by Harris Associates, Kobrick, Janus Capital and Loomis Sayles were 11%,
32%, 42% and 15%, respectively. As of March 31, 2000, the percentages of Star
Worldwide Fund's net assets held in the segments of the Fund managed by Harris
Associates (international segment), Harris Associates (domestic segment),
Montgomery, and Loomis Sayles were 20%, 16%, 25% and 39%, respectively. As of
March 31, 2000, the percentages of the Star Small Cap Fund's net assets held in
the segment of the Fund managed by RS Investment Management, Montgomery, Loomis
Sayles and Harris Associates were 42%, 16%, 30%, and 12%, respectively. As of
March 31, 2000, the percentages of Star Value Fund's net assets held in the
segments of the Fund managed by Harris Associates, VNSM, Loomis Sayles and
Westpeak were 25%, 25%, 25% and 25%, respectively.
Although it reserves the right to do so, subject to the review of the
Trust's trustees, Nvest Management does not intend to reallocate the assets of
any Fund among the segments to reduce differences in size.
Nvest Management oversees the portfolio management services provided to
the Funds by each of the subadvisers. Subject to the review of the Trust's
trustees, Nvest Management monitors each subadviser to assure that the
subadviser is managing its segment of a Fund consistently with the Fund's
investment objective and restrictions and applicable laws and guidelines,
including, but not limited to, compliance with the diversification requirements
set forth in the 1940 Act and Subchapter M of the Code. In addition, Nvest
Management and Nvest Services Company also provide each Fund with administrative
services which include, among other things, day-to-day administration of matters
related to the Fund's existence, maintenance of its records, preparation of
reports and assistance in the preparation of the Fund's registration statement
under federal and state laws. Nvest Management does not, however, determine what
investments will be purchased or sold for any Fund. Because each subadviser
manages its portfolio independently from the others, the same security may be
held in two different segments of a Star Fund or may be acquired for one segment
of the Star Fund at a time when the subadviser of another segment deems it
appropriate to dispose of the security from that other segment. Similarly, under
some market conditions, one or more of the subadvisers may believe that
temporary, defensive investments in short-term instruments or cash are
appropriate when another subadviser or subadvisers believe continued exposure to
the equity markets is appropriate. Because each subadviser directs the trading
for its segment of a Star Fund, and does not aggregate its transactions with
those of the other subadvisers, the Fund may incur higher brokerage costs than
would be the case if a single adviser or subadviser were managing the entire
Star Fund.
Nvest Management may terminate any subadvisory agreement without
shareholder approval. In such case, Nvest Management may either enter into an
agreement with another subadviser to manage the Fund or Star Fund segment or
will allocate the segment's assets among the other segments of the Star Fund.
Distribution Agreements and Rule 12b-1 Plans. Under a separate agreement
with each Fund, the Distributor serves as the principal distributor of each
class of shares of the Funds. Under these agreements (the "Distribution
Agreements"), the Distributor conducts a continuous offering and is not
obligated to sell a specific number of shares. The Distributor bears the cost of
making information about the Funds available through advertising and other means
and the cost of printing and mailing Prospectuses to persons other than
shareholders. Each Fund pays the cost of registering and qualifying its shares
under state and federal securities laws and the distribution of Prospectuses to
existing shareholders.
The Distributor is compensated under each agreement through receipt of the
sales charges on Class A shares described below under "Net Asset Value and
Public Offering Price" and is paid by the Funds the service and distribution
fees described in the Prospectus. The Distributor may, at its discretion,
reallow the entire sales charge imposed on the sale of Class A shares of each
Fund to investment dealers from time to time. The SEC is of the view that
dealers receiving all or substantially all of the sales charge may be deemed
underwriters of a Fund's shares.
Each Fund has adopted Rule 12b-1 plans (the "Plans") for its Class A,
Class B and Class C shares which, among other things, permit it to pay the
Fund's distributor (Nvest Funds Distributor, L.P.) monthly fees out of its net
assets. These fees consist of a service fee and a distribution fee. Any such
fees that are paid by the distributor to securities dealers are known as "trail
commissions." Pursuant to Rule 12b-1 under the 1940 Act, each Plan was approved
by the shareholders of each Fund, and (together with the related Distribution
Agreement) by the Board of Trustees, including a majority of the trustees who
are not interested persons of the relevant Trust (as defined in the 1940 Act)
and who have no direct or indirect financial interest in the operation of the
Plan or the Distribution Agreement (the "Independent Trustees").
Under the Plans, each Fund pays the Distributor a monthly service fee at
an annual rate not to exceed 0.25% of the Fund's average daily net assets
attributable to the Class A, Class B and Class C shares. In the case of the
Class B shares, the Distributor pays investment dealers the first year's service
fee at the time of sale, in the amount of up to 0.25% of the amount invested. In
the case of Class C shares, the Distributor retains the first year's service fee
of 0.25% assessed against such shares. After the first year for Class A, Class B
and Class C shares, the Distributor may pay up to the entire amount of this fee
to securities dealers who are dealers of record with respect to the Fund's
shares, on a quarterly basis, unless other arrangements are made between the
Distributor and the securities dealer, for providing personal services to
investors in shares of the Fund and/or the maintenance of shareholder accounts.
The Service Fee may be paid only to reimburse the Distributor for expenses
of providing personal services to investors, including, but not limited to, (i)
expenses (including overhead expenses) of the Distributor for providing personal
services to investors in connection with the maintenance of shareholder accounts
and (ii) payments made by the Distributor to any securities dealer or other
organization (including, but not limited to, any affiliate of the Distributor)
with which the Distributor has entered into a written agreement for this
purpose, for providing personal services to investors and/or the maintenance of
shareholder accounts, which payments to any such organization may be in amounts
in excess of the cost incurred by such organization in connection therewith.
To the extent that the Distributor's reimbursable expenses in any year
exceed the maximum amount payable under the relevant Plan for that year, such
expenses may be carried forward for reimbursement in future years in which the
Plan remains in effect. The amounts of unreimbursed Class A expenses carried
over into 1999 from previous plan years for the Stock Funds were as follows:
$563,284 for Capital Growth Fund, $2,041,399 for Balanced Fund, $2,030,882 for
Growth Fund, $514,256 for International Equity Fund and $1,651,994 for Star
Value Fund. The Class B and C service fees for all Funds which have such classes
of shares, and the Class A service fee for Growth and Income Fund, are payable
regardless of the amount of the Distributor's related expenses. The amounts of
unreimbursed expenses carried over into 1999 from previous plan years with
respect to the Class A shares of the Bond Funds are as follows: $1,583,658 for
Government Securities Fund; $2,272,723 for the Limited Term U.S. Government
Fund; $1,929,283 for Short Term Corporate Income Fund; $1,919,349 for Bond
Income Fund; and $1,700,600 for Municipal Income Fund.
Class A shares of Limited Term U.S. Government Fund and Massachusetts Tax
Free Income Fund pay a monthly distribution fee at an annual rate not to exceed
0.10% of each Fund's average daily net assets. This fee is payable only to
reimburse the Distributor for expenses incurred in connection with the
distribution of each Fund's shares, but unreimbursed expenses can be carried
forward into future years.
Each Fund's Class B and Class C shares also pay the Distributor a monthly
distribution fee at an annual rate not to exceed 0.75% of the average net assets
of the respective Fund's Class B and Class C shares. The Distributor retains the
0.75% distribution fee assessed against both Class B and Class C shares during
the first year of investment. After the first year for Class B shares, the
Distributor retains the annual distribution fee as compensation for its services
as distributor of such shares. After the first year for Class C shares, the
Distributor may pay up to the entire amount of this fee to securities dealers
who are dealers of record with respect to the Fund's shares, as distribution
fees in connection with the sale of the Fund's shares on a quarterly basis,
unless other arrangements are made between the Distributor and the securities
dealer.
Each Plan may be terminated by vote of a majority of the relevant
Independent Trustees, or by vote of a majority of the outstanding voting
securities of the relevant class of shares of the relevant Fund. Each Plan may
be amended by vote of the relevant trustees, including a majority of the
relevant Independent Trustees, cast in person at a meeting called for that
purpose. Any change in any Plan that would materially increase the fees payable
thereunder by the relevant class of shares of the relevant Fund requires
approval by vote of the holders of a majority of such shares outstanding. The
Trusts' trustees review quarterly a written report of such costs and the
purposes for which such costs have been incurred. For so long as a Plan is in
effect, selection and nomination of those trustees who are not interested
persons of the relevant Trust shall be committed to the discretion of such
disinterested persons.
The Distributor has entered into selling agreements with investment
dealers, including New England Securities, MetLife Securities,and Nathan & Lewis
Securities, Inc., affiliates of the Distributor, for the sale of the Funds'
shares. The Distributor may at its expense pay an amount not to exceed 0.50% of
the amount invested to dealers who have selling agreements with the Distributor.
Class Y shares of the Funds may be offered by registered representatives of New
England Securities, MetLife Securities and Nathan & Lewis Securities, Inc. who
are also employees of Nvest Associates, Inc. ("Nvest Associates"), an indirect,
wholly-owned subsidiary of Nvest Companies. Nvest Associates may receive
compensation from each Fund's adviser or subadviser with respect to sales of
Class Y shares.
The Distribution Agreement for any Fund may be terminated at any time on
60 days' written notice without payment of any penalty by the Distributor or by
vote of a majority of the outstanding voting securities of the relevant Fund or
by vote of a majority of the relevant Independent Trustees.
The Distribution Agreements and the Plans will continue in effect for
successive one-year periods, provided that each such continuance is specifically
approved (i) by the vote of a majority of the relevant Independent Trustees and
(ii) by the vote of a majority of the entire Board of Trustees cast in person at
a meeting called for that purpose or by a vote of a majority of the outstanding
securities of a Fund (or the relevant class, in the case of the Plans).
With the exception of the Distributor, New England Securities and their
direct and indirect parent companies, no interested person of the Trusts or any
trustee of the Trusts had any direct or indirect financial interest in the
operation of the Plans or any related agreement.
Benefits to the Funds and their shareholders resulting from the Plans are
believed to include (1) enhanced shareholder service, (2) asset retention, (3)
enhanced bargaining position with third party service providers and economies of
scale arising from having higher asset levels and (4) portfolio management
opportunities arising from having an enhanced positive cash flow.
The Distributor controls the words "Nvest" in the names of the Trusts and
the Funds and if it should cease to be the principal distributor of the Funds'
shares, Nvest Funds Trust I, Nvest Funds Trust II, Nvest Funds Trust III or the
affected Fund may be required to change their names and delete these words or
letters. The Distributor also acts as principal distributor for Kobrick Capital
Fund, Kobrick Emerging Growth Fund, Kobrick Growth Fund, Nvest Cash Management
Trust and Nvest Tax Exempt Money Market Trust.
The portion of the various fees and expenses for Class A, B, and with
respect to certain Funds, C shares that are paid (reallowed) to securities
dealers are shown below:
BOND FUNDS
For Class A shares, the service fee is payable only to reimburse the
Distributor for amounts it pays in connection with providing personal services
to investors and/or maintaining shareholder accounts. To the extent that the
Distributor's reimbursable expenses in any year exceed the maximum amount
payable for that year under the relevant service plan, these expenses may be
carried forward for reimbursement in future years as long as the plan remains in
effect. The portion of the various fees and expenses for Class A shares of the
Bond Funds that are paid to securities dealers are shown below:
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
ALL FUNDS EXCEPT SHORT TERM CORPORATE INCOME FUND AND LIMITED TERM U.S. GOVERNMENT FUNDS
<CAPTION>
MAXIMUM MAXIMUM MAXIMUM MAXIMUM
SALES CHARGE REALLOWANCE OR FIRST YEAR FIRST YEAR
PAID BY INVESTORS COMMISSION SERVICE FEE COMPENSATION
INVESTMENT (% OF OFFERING PRICE) (% OF OFFERING PRICE) (% OF NET INVESTMENT) (% OF OFFERING PRICE)
<S> <C> <C> <C> <C>
Less than $100,000 4.50% 4.00% 0.25% 4.25%
$100,000 - $249,999 3.50% 3.00% 0.25% 3.25%
$250,000 - $499,999 2.50% 2.15% 0.25% 2.40%
$500,000 - $999,999 2.00% 1.70% 0.25% 1.95%
INVESTMENTS OF $1 MILLION OR MORE
First $3 million none 1.00%(2) 1.25% 0.25%
Excess over $3 million (1) none 0.50%(2) 0.25% 0.75%
INVESTMENTS WITH NO SALES CHARGE (3) none 0.00% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT TERM CORPORATE INCOME AND LIMITED TERM U.S. GOVERNMENT FUNDS
Less than $100,000 3.00% 2.70% 0.25% 2.95%
$100,000 - $249,999 2.50% 2.15% 0.25% 2.40%
$250,000 - $499,999 2.00% 1.70% 0.25% 1.95%
$500,000 - $999,999 1.25% 1.00% 0.25% 1.25%
INVESTMENTS OF $1 MILLION OR MORE
First $3 million none 1.00%(2) 0.25% 1.25%
Excess over $3 million (1) none 0.50%(2) 0.25% 0.75%
INVESTMENTS WITH NO SALES CHARGE (3) none 0.00% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) For investments by Retirement Plans (Plans under Sections 401(a) or 401(k) of the Code with investments of $1 million or more
that have 100 or more eligible employees), the Distributor may pay a 0.50% commission for investments in excess of $3 million
and up to $10 million. Those Plans with investments of over $10 million are eligible to purchase Class Y shares of the Funds
(except Municipal Income Fund), which are described in a separate prospectus.
(2) These commissions are not payable if the purchase represents the reinvestment of a redemption made during the previous 12
calendar months.
(3)Refers to any investments made by municipalities, financial institutions, trusts and affinity group members as described earlier
in the Prospectus under the section entitled "Ways to Reduce or Eliminate Sales Charges."
</TABLE>
The Class B and Class C service fees are payable regardless of the amount
of the Distributor's related expenses. The portion of the various fees and
expenses for Class B and Class C shares of the Bond Funds that are paid to
securities dealers are shown below:
<TABLE>
- -------------------------------------------------------------------------------------------------
HIGH INCOME, STRATEGIC INCOME, BOND INCOME, MUNICIPAL INCOME AND GOVERNMENT SECURITIES FUNDS
(class B only for Municipal Income and Government Securities Funds)
- -------------------------------------------------------------------------------------------------
<CAPTION>
MAXIMUM REALLOWANCE MAXIMUM FIRST YEAR MAXIMUM FIRST YEAR
OR COMMISSION SERVICE FEE COMPENSATION
INVESTMENT (% OF OFFERING PRICE) (% OF NET INVESTMENT) (% OF OFFERING PRICE)
<S> <C> <C> <C>
All amounts for Class B 3.75% 0.25% 4.00%
All amounts for Class C 1.00% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
SHORT TERM CORPORATE INCOME AND LIMITED TERM U.S. GOVERNMENT FUNDS
- -------------------------------------------------------------------------------------------------
All amounts for Class B 2.75% 0.25% 3.00%
All amounts for Class C 1.00% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------
</TABLE>
MASSACHUSETTS TAX FREE INCOME FUND
For Class A shares, the service fee is payable only to reimburse the
Distributor for amounts it pays in connection with providing personal services
to investors and/or maintaining shareholder accounts. To the extent that the
Distributor's reimbursable expenses in any year exceed the maximum amount
payable for that year under the relevant service plan, these expenses may be
carried forward for reimbursement in future years as long as the plan remains in
effect. The portion of the various fees and expenses for Class A shares of the
Massachusetts Fund that are paid to securities dealers are shown below:
<TABLE>
<CAPTION>
MAXIMUM MAXIMUM MAXIMUM MAXIMUM
SALES CHARGE REALLOWANCE OR FIRST YEAR FIRST YEAR
PAID BY INVESTORS COMMISSION SERVICE FEE COMPENSATION
INVESTMENT (% OF OFFERING PRICE) (% OF OFFERING PRICE) (% OF NET INVESTMENT) (% OF OFFERING PRICE)
<S> <C> <C> <C> <C>
Less than $50,000 4.25% 3.75% 0.25% 4.00%
$50,000 - $99,999 4.00% 3.50% 0.25% 3.75%
$100,000 - $249,999 3.50% 3.00% 0.25% 3.25%
$250,000 - $499,999 2.50% 2.15% 0.25% 2.40%
$500,000 - $999,999 2.00% 1.70% 0.25% 1.95%
INVESTMENTS OF $1 MILLION OR MORE
First $3 Million none 1.00%(1) 0.25% 1.25%
Excess over $3 Million none 0.50%(1) 0.25% 0.75%
INVESTMENTS WITH NO SALES CHARGE(2) none 0.00% 0.25% 0.25%
(1) These commissions are not payable if the purchase represents the reinvestment of a redemption made during the previous 12
calendar months.
(2) Refers to any investments made by municipalities, financial institutions, trusts and affinity group members as described earlier
in the Prospectus under the section entitled "Ways to Reduce or Eliminate Sales Charges."
</TABLE>
The Class B service fees are payable regardless of the amount of the
Distributor's related expenses. The portion of the various fees and expenses for
Class B shares of the State Tax Free Funds that are paid to securities dealers
are shown below:
<TABLE>
- ---------------------------------------------------------------------------------------------------
<CAPTION>
MAXIMUM REALLOWANCE MAXIMUM FIRST YEAR MAXIMUM FIRST YEAR
OR COMMISSION SERVICE FEE COMPENSATION
INVESTMENT (% OF OFFERING PRICE) (% OF NET INVESTMENT) (% OF OFFERING PRICE)
<S> <C> <C> <C>
All amounts for Class B 3.75% 0.25% 4.00%
- ---------------------------------------------------------------------------------------------------
</TABLE>
INTERMEDIATE TERM TAX FREE FUND OF CALIFORNIA
For Class A shares, the service fee is payable only to reimburse the
Distributor for amounts it pays in connection with providing personal services
to investors and/or maintaining shareholder accounts. To the extent that the
Distributor's reimbursable expenses in any year exceed the maximum amount
payable for that year under the relevant service plan, these expenses may be
carried forward for reimbursement in future years as long as the plan remains in
effect. The portion of the various fees and expenses for Class A shares of the
California Fund that are paid to securities dealers are shown below:
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MAXIMUM MAXIMUM MAXIMUM MAXIMUM
SALES CHARGE REALLOWANCE OR FIRST YEAR FIRST YEAR
PAID BY INVESTORS COMMISSION SERVICE FEE COMPENSATION
INVESTMENT (% OF OFFERING PRICE) (% OF OFFERING PRICE) (% OF NET INVESTMENT) (% OF OFFERING PRICE)
<S> <C> <C> <C> <C>
Less than $100,000 2.50% 2.15% 0.25% 2.40%
$100,000 - $249,999 2.00% 1.70% 0.25% 1.95%
$250,000 - $499,999 1.50% 1.25% 0.25% 1.50%
$500,000 - $999,999 1.25% 1.00% 0.25% 1.25%
INVESTMENTS OF $1 MILLION OR MORE
First $3 Million none 1.00%(1) 0.25% 1.25%
Excess over $3 Million none 0.50%(1) 0.25% 0.75%
INVESTMENTS WITH NO SALES CHARGE(2) none 0.00% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) These commissions are not payable if the purchase represents the reinvestment of a redemption made during the previous 12
calendar months.
(2) Refers to any investments made by municipalities, financial institutions, trusts and affinity group members as described earlier
in the Prospectus under the section entitled "Ways to Reduce or Eliminate Sales Charges."
</TABLE>
The Class B service fees are payable regardless of the amount of the
Distributor's related expenses. The portion of the various fees and expenses for
Class B shares of the Fund that are paid to securities dealers are shown below:
<TABLE>
- ---------------------------------------------------------------------------------------------------
<CAPTION>
MAXIMUM REALLOWANCE MAXIMUM FIRST YEAR MAXIMUM FIRST YEAR
OR COMMISSION SERVICE FEE COMPENSATION
INVESTMENT (% OF OFFERING PRICE) (% OF NET INVESTMENT) (% OF OFFERING PRICE)
<S> <C> <C> <C>
All amounts for Class B 3.75% 0.25% 4.00%
- ---------------------------------------------------------------------------------------------------
</TABLE>
STOCK FUNDS AND STAR FUNDS
For Class A shares, the service fee is payable only to reimburse the
Distributor for amounts it pays in connection with providing personal services
to investors and/or maintaining shareholder accounts. To the extent that the
Distributor's reimbursable expenses in any year exceed the maximum amount
payable for that year under the relevant service plan, these expenses may be
carried forward for reimbursement in future years as long as the plan remains in
effect. The portion of the various fees and expenses for Class A shares of the
Stock and Star Funds that are paid to securities dealers are shown below:
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MAXIMUM MAXIMUM MAXIMUM MAXIMUM
SALES CHARGE REALLOWANCE OR FIRST YEAR FIRST YEAR
PAID BY INVESTORS COMMISSION SERVICE FEE COMPENSATION
INVESTMENT (% OF OFFERING PRICE) (% OF OFFERING PRICE) (% OF NET INVESTMENT) (% OF OFFERING PRICE)
<S> <C> <C> <C> <C>
Less than $50,000* 5.75% 5.00% 0.25% 5.25%
$50,000 - $99,999 4.50% 4.00% 0.25% 4.25%
$100,000 - $249,999 3.50% 3.00% 0.25% 3.25%
$250,000 - $499,999 2.50% 2.15% 0.25% 2.40%
$500,000 - $999,999 2.00% 1.70% 0.25% 1.95%
INVESTMENTS OF $1 MILLION OR MORE
First $3 Million none 1.00%(2) 0.25% 1.25%
Excess over $3 Million (1) none 0.50%(2) 0.25% 0.75%
INVESTMENTS WITH NO SALES CHARGE(3) none 0.00% 0.25% 0.25%
* (Growth Fund only) For accounts established prior to February 28, 1997 having a total investment value of between (and
including) $25,000 and $49,000, a reduced sales charge of 5.50% of the offering price (or 5.82% of the net amount invested),
with a dealer's concession of 4.25% as a percentage of offering price, will be charged on the sale of additional Class A shares
of Growth Fund if the total investment value of Growth Fund account after such sale is between (and including) $25,000 and
$49,000.
(1) For investments by Retirement Plans (Plans under Sections 401(a) or 401(k) of the Code with investments of $1 million or more
that have 100 or more eligible employees), the Distributor may pay a 0.50% commission for investments in excess of $3 million
and up to $10 million. Those Plans with investments of over $10 million are eligible to purchase Class Y shares of the funds,
which are described in a separate prospectus.
(2) These commissions are not payable if the purchase represents the reinvestment of a redemption made during the previous 12
calendar months.
(3) Refers to any investments made by municipalities, financial institutions, trusts and affinity group members as described
earlier in the Prospectus under the section entitled "Ways to Reduce or Eliminate Sales Charges."
</TABLE>
The Class B and Class C service fees are payable regardless of the amount
of the Distributor's related expenses. The portion of the various fees and
expenses for Class B and Class C shares of the Stock and Star Funds that are
paid to securities dealers are shown below:
<TABLE>
- -------------------------------------------------------------------------------------------------
<CAPTION>
MAXIMUM REALLOWANCE MAXIMUM FIRST YEAR MAXIMUM FIRST YEAR
OR COMMISSION SERVICE FEE COMPENSATION
INVESTMENT (% OF OFFERING PRICE) (% OF NET INVESTMENT) (% OF OFFERING PRICE)
<S> <C> <C> <C>
All amounts for Class B 3.75% 0.25% 4.00%
All amounts for Class C 1.00% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------
</TABLE>
ALL FUNDS
Each transaction receives the net asset value next determined after an
order is received on sales of each class of shares. The sales charge is
allocated between the investment dealer and the Distributor. The Distributor
receives the Contingent Deferred Sales Charge (the "CDSC"). Proceeds from the
CDSC on Class A and C shares are paid to the Distributor and are used by the
Distributor to defray the expenses for services the Distributor provides the
Trusts. Proceeds from the CDSC on Class B shares are paid to the Distributor and
are remitted to FEP Capital, L.P. to compensate FEP Capital, L.P. for financing
the sale of Class B shares pursuant to certain Class B financing and servicing
agreements between the Distributor and FEP Capital, L.P. The Distributor may, at
its discretion, pay (reallow) the entire sales charge imposed on the sale of
Class A shares to investment dealers from time to time.
For new amounts invested at net asset value by an eligible governmental
authority, the Distributor may, at its expense, pay investment dealers a
commission of 0.025% of the average daily net assets of an account at the end of
each calendar quarter for up to one year. These commissions are not payable if
the purchase represents the reinvestment of redemption proceeds from any other
Nvest Fund or if the account is registered in street name.
The Distributor may at its expense provide additional concessions to
dealers who sell shares of the Funds, including: (i) full reallowance of the
sales charge of Class A shares, (ii) additional compensation with respect to the
sale of Class A, B and C shares and (iii) financial assistance programs to firms
who sell or arrange for the sale of Fund shares including, but not limited to,
remuneration for: the firm's internal sales contests and incentive programs,
marketing and sales fees, expenses related to advertising or promotional
activity and events, and shareholder record keeping or miscellaneous
administrative services. Payment for travel, lodging and related expenses may be
provided for attendance at Nvest Funds' seminars and conferences, e.g., due
diligence meetings held for training and educational purposes. The payment of
these concessions and any other compensation offered will conform with state and
federal laws and the rules of any self-regulatory organization, such as the
National Association of Securities Dealers, Inc. The participation of such firms
in financial assistance programs is at the discretion of the firm.
During the fiscal years ended December 31, 1997, 1998 and 1999, the
Distributor received commissions on the sale of Class A shares of Nvest Funds
Trust I aggregating $11,172,220, $8,591,707 and $7,955,714, respectively, of
which $9,669,150, $7,375,844 and $6,807,853, respectively, was reallowed to
other securities dealers and the balance retained by the Distributor. During the
fiscal years ended December 31,1997, 1998 and 1999, the Distributor received
CDSCson the redemption of Class A, Class B and Class C shares of Nvest Funds
Trust I aggregating $2,391,360, $3,195,287 and $3,862,850, respectively, of
which $2,286,280, $3,124,921 and $3,603,038, respectively, was paid to FEP
Capital, L.P. and the balance retained by the Distributor. See "Other
Arrangements" for information about amounts received by the Distributor from
Nvest Funds Trust I's investment advisers and subadvisers or the Funds directly
for providing certain administrative services relating to Nvest Funds Trust I.
During the fiscal years ended December 31, 1997, 1998 and 1999, the
Distributor received commissions on the sale of the Class A shares of Nvest
Funds Trust II aggregating $1,493,346, $2,348,271 and $2,466,104, respectively,
of which $1,286,296, $2,206,752 and $2,113,378, respectively, was reallowed to
other securities dealers and the balance retained by the Distributor. During the
fiscal years ended December 31, 1997, 1998 and 1999, the Distributor received
CDSCs on the redemption of Class A, Class B and Class C shares of Nvest Funds
Trust II aggregating $375,973, $540,167 and $857,306, respectively, of which
$343,457, $497,662 and $789,072, respectively, was paid to FEP Capital, L.P. and
the balance retained by the Distributor. See "Other Arrangements" for
information about amounts received by the Distributor from Nvest Funds Trust
II's investment advisers and subadvisers or the Funds directly for providing
certain administrative services relating to Nvest Funds Trust II.
During the fiscal years ended December 31, 1997, 1998 and 1999, the
Distributor received commissions on the sales of the Class A shares of Nvest
Funds Trust III aggregating $262,310, $561,929 and $79,050, respectively, of
which $236,902, $502,693 and $67,250, respectively, was reallowed to other
securities dealers and the balance retained by the Distributor. During the
fiscal years ended December 31, 1997, 1998 and 1999, the Distributor received
CDSCs on the redemption of Class A, Class B and Class C shares of Nvest Funds
Trust III aggregating $1,953, $51,773 and $128,244, respectively, of which
$1,953, $49,553 and $123,951, respectively, was paid to FEP Capital, L.P. and
the balance retained by the Distributor. See "Other Arrangements" for
information about amounts received by the Distributor from Nvest Funds Trust
III's investment advisers and subadvisers or the Funds directly for providing
certain administrative services relating to Nvest Funds Trust III.
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 Fund portfolio securities. State Street Bank
also maintains certain accounts and records of the Trusts and calculates the
total net asset value, total net income and net asset value per share of each
Fund on a daily basis.
Independent Accountants. The Trusts' independent accountants are
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts 02110. The
independent accountants conduct an annual audit of each Trust'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 December 31, 1999 and incorporated by reference into this
Statement, have been so included in reliance on the reports of each Trusts'
independent accountants, given on the authority of such firms as experts in
auditing and accounting.
Other Arrangements
Pursuant to a contract between the Funds and Nvest Services Company, Nvest
Services Company acts as shareholder servicing and transfer agent for the Funds
and is responsible for services in connection with the establishment,
maintenance and recording of shareholder accounts, including all related tax and
other reporting requirements and the implementation of investment and redemption
arrangements offered in connection with the sale of the Funds' shares. For
Classes A, B and C the Funds pay an annual per-account fee to Nvest Services
Company for these services in the amount of [$20.10 for Bullseye Fund, Balanced
Fund, Growth Fund, Capital Growth Fund, International Equity Fund, Equity Income
Fund, Star Advisers Fund, Star Worldwide Fund, Star Small Cap Fund, Star Value
Fund and Growth and Income Fund, and $17.35 for High Income Fund, Massachusetts
Fund, Limited Term U.S. Government Fund, Short Term Corporate Income Fund,
California Fund, Bond Income Fund, Municipal Income Fund, Strategic Income Fund
and Government Securities Fund. For Class Y, each Fund pays a fee of 0.10% of
average daily net assets of such class. 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.
In addition, during the fiscal year ended December 31, 1999 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 Funds pay Nvest Services Company
a 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 Management received fees from the Funds for the
following fiscal years ending December 31, 1997, 1998 and 1999:
Fiscal Year Ended December 31,
--------------------------------
Fund 1997 1998 1999
---------------------------- -------- -------- --------
Strategic Income $ 50,979 $ 72,358 $ 87,873
Bond Income $ 43,165 $ 60,796 $ 93,528
Municipal Income $ 38,598 $ 47,566 $ 57,743
Government Securities $ 30,213 $ 34,398 $ 39,373
International Equity $ 32,743 $ 28,617 $ 29,210
Growth $194,847 $298,419 $485,101
Capital Growth $ 38,845 $ 50,067 $ 74,071
Balanced $ 63,400 $ 82,246 $ 99,614
Star Advisers $129,628 $191,247 $310,812
Star Worldwide $ 43,298 $ 58,980 $ 74,470
Star Small Cap $ 23,420 $ 35,775 $ 47,197
Star Value $ 66,675 $ 90,930 $103,852
High Income $ 24,855 $ 37,309 $ 50,720
Short Term Corporate Income $ 44,817 $ 45,463 $ 34,629
Limited Term U.S. Government $ 50,735 $ 56,908 $ 64,717
Massachusetts $ 29,915 $ 35,876 $ 41,880
California $ 20,168 $ 22,493 $ 23,808
Growth and Income $ 47,565 $ 80,888 $153,450
Bullseye NA $ 13,737 $ 18,707
Equity Income $ 3,543 $ 21,298 $ 22,000
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
All Fixed-income Funds. In placing orders for the purchase and sale of
portfolio securities for each Fund, Back Bay Advisors and Loomis Sayles always
seek the best price and execution. Some of each Fund's portfolio transactions
are placed with brokers and dealers that provide Back Bay Advisors or Loomis
Sayles with supplementary investment and statistical information or furnish
market quotations to that Fund, the other Funds or other investment companies
advised by Back Bay Advisors or Loomis Sayles. 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 services,
they may, to the extent used, tend to reduce the expenses of Back Bay Advisors
or Loomis Sayles. The services may also be used by Back Bay Advisors or Loomis
Sayles in connection with their other advisory accounts and in some cases may
not be used with respect to the Funds.
All Equity Funds. In placing orders for the purchase and sale of equity
securities, each Fund's adviser or subadviser selects only brokers that it
believes are financially responsible, will provide efficient and effective
services in executing, clearing and settling an order and will charge commission
rates that, when combined with the quality of the foregoing services, will
produce the best price and execution for the transaction. This does not
necessarily mean that the lowest available brokerage commission will be paid.
However, the commissions are believed to be competitive with generally
prevailing rates. Each Fund's adviser or subadviser will use its best efforts to
obtain information as to the general level of commission rates being charged by
the brokerage community from time to time and will evaluate the overall
reasonableness of brokerage commissions paid on transactions by reference to
such data. In making such evaluation, all factors affecting liquidity and
execution of the order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account.
Star Advisers Fund (Segment Advised by Janus Capital). Decisions as to the
assignment of portfolio business for the segment of Star Advisers Fund's
portfolio advised by Janus Capital and negotiation of its commission rates are
made by Janus Capital, whose policy is to obtain the "best execution" (prompt
and reliable execution at the most favorable securities price) of all portfolio
transactions. In placing portfolio transactions for its segments, Janus Capital
may agree to pay brokerage commissions for effecting a securities transaction in
an amount higher than another broker or dealer would have charged for effecting
that transaction as authorized, under certain circumstances, by the Securities
Exchange Act of 1934.
In selecting brokers and dealers and in negotiating commissions, Janus
Capital considers a number of factors, including, but not limited to: Janus
Capital's knowledge of currently available negotiated commission rates or prices
of securities currently available and other current transaction costs; the
nature of the securities being traded; the size and type of the transaction; the
nature and character of the markets for the security to be purchased or sold;
the desired timing of the trade; the activity existing and expected in the
market for the particular security; confidentiality; the quality of the
execution, clearance and settlement services; financial stability of the broker
or dealer; the existence of actual or apparent operational problems of any
broker or dealer; and research products or services provided. In recognition of
the value of the foregoing factors, Janus Capital may place portfolio
transactions with a broker or dealer with which it has negotiated a commission
that is in excess of the commission another broker or dealer would have charged
for effecting that transaction if Janus Capital determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research provided by such broker or dealer viewed in terms of
either that particular transaction or of the overall responsibilities of Janus
Capital. Research may include furnishing advice, either directly or through
publications or writing, as to the value of securities, the advisability of
purchasing or selling specific securities and the availability of securities or
purchasers or sellers of securities; furnishing seminars, information, analyses
and reports concerning issuers, industries, securities, trading markets and
methods, legislative developments, changes in accounting practices, economic
factors and trends and portfolio strategy; access to research analysts,
corporate management personnel, industry experts, economists and government
officials; comparative performance evaluation and technical measurement services
and quotation services, and products and other services (such as third party
publications, reports and analyses, and computer and electronic access,
equipment, software, information and accessories that deliver, process or
otherwise utilize information, including the research described above) that
assist Janus Capital in carrying out its responsibilities. Research received
from brokers or dealers is supplemental to Janus Capital's own research efforts.
Janus Capital may use research products and services in servicing other
accounts in addition to Star Advisers Fund. If Janus Capital determines that any
research product or service has a mixed use, such that it also serves functions
that do not assist in the investment decision-making process, Janus Capital may
allocate the costs of such service or product accordingly. Only that portion of
the product or service that Janus Capital determines will assist it in the
investment decision-making process may be paid for in brokerage commission
dollars. Such allocation may create a conflict of interest for Janus Capital.
Janus Capital may also consider sales of shares of mutual funds advised by
Janus Capital by a broker-dealer or the recommendation of a broker-dealer to its
customers that they purchase shares of such funds as a factor in the selection
of broker-dealers to execute portfolio transactions for Star Advisers Fund. In
placing portfolio business with such broker-dealers, Janus Capital will seek the
best execution of each transaction.
Star Advisers Fund (Segment Advised by Kobrick). Kobrick's policy is to
seek for its clients, including its segment of the Fund managed by Kobrick, what
in Kobrick's judgment will be the best overall execution of purchase or sale
orders and the most favorable net prices in securities transactions consistent
with its judgment as to the business qualifications of the various broker or
dealer firms with which Kobrick may do business, and Kobrick may not necessarily
choose the broker offering the lowest available commission rate. Decisions with
respect to the market where the transaction is to be completed, to the form of
transaction (whether principal or agency) and to the allocation of orders among
brokers or dealers are made in accordance with this policy. In selecting brokers
or dealers to effect portfolio transactions, consideration is given to their
proven integrity and financial responsibility, their demonstrated execution
experience and capabilities both generally and with respect to particular
markets or securities, the competitiveness of their commission rates in agency
transactions (and their net prices in principal transactions), their willingness
to commit capital, and their clearance and settlement capability. Kobrick makes
every effort to keep informed of commission rate structures and prevailing
bid/ask spread characteristics of the markets and securities in which
transactions for its segment of the Fund occurs. Against this background,
Kobrick evaluates the reasonableness of a commission or a net price with respect
to a particular transaction by considering such factors as difficulty of
execution or security positioning by the executing firm. Kobrick may or may not
solicit competitive bids based on its judgment of the expected benefit or harm
to the execution process for that transaction.
When it appears that a number of firms could satisfy the required
standards in respect of a particular transaction, consideration may also be
given to services other than execution services which certain of such firms have
provided in the past or may provide in the future. Negotiated commission rates
and prices, however, are based upon Kobrick's judgment of the rate which
reflects the execution requirements of the transaction without regard to whether
the broker provides services in addition to execution. Among such other services
are the supplying of supplemental investment research; general economic,
political and business information; analytical and statistical data; relevant
market information, quotation equipment and services; reports and information
about specific companies, industries and securities; purchase and sale
recommendations for stocks and bonds; portfolio strategy services; historical
statistical information; market data services providing information on specific
issues and prices; financial publications; proxy voting data and analysis
services; technical analysis of various aspects of the securities markets,
including technical charts; computer hardware used for brokerage and research
purposes; computer software and databases, including those used for portfolio
analysis and modeling; and portfolio evaluation services and relative
performance of accounts. Certain nonexecution services provided by
broker-dealers may in turn be obtained by the broker-dealers from third parties
that are paid for such services by the broker-dealers.
Kobrick regularly reviews and evaluates the services furnished by
broker-dealers. Some services may be used for research and investment
decision-making purposes, and also for marketing or administrative purposes.
Under these circumstances, Kobrick allocates the cost of such services to
determine the appropriate proportion of the cost which is allocable to purposes
other than research or investment decision-making and is therefore paid directly
by Kobrick. Some research and execution services may benefit Kobrick's clients
as a whole, while others may benefit a specific segment of clients. Not all such
services will necessarily be used exclusively in connection with the accounts
which pay the commissions to the broker-dealer producing the services.
Kobrick has no fixed agreements or understanding with any broker-dealer as
to the amount of brokerage business which that firm may expect to receive for
services supplied to Kobrick or otherwise. There may be, however, understandings
with certain firms that in order for such firms to be able to continuously
supply certain services, they need to receive allocation of a specified amount
of brokerage business. These understandings are honored to the extent possible
in accordance with Kobrick's obligation to obtain best execution and the
policies set forth above.
It is not Kobrick's policy to intentionally pay a firm a brokerage
commission higher that that which another firm would charge for handling the
same transaction in recognition of services (other than execution services);
provided, however, that Kobrick is aware that this is an area where differences
of opinion as to fact and circumstances may exist, and in such circumstances, if
any, Kobrick relies on the provisions of Section 28(e) of the Securities Act of
1934, to the extent applicable.
All Equity Funds Advised by Loomis Sayles. In placing orders for the
purchase and sale of securities for Balanced Fund, International Equity Fund and
the segments of Star Advisers Fund, Star Small Cap Fund, Star Worldwide Fund and
Star Value Fund advised by Loomis Sayles, Loomis Sayles follows the same
policies as for the other Funds for which it acts as subadviser, except that
Loomis Sayles may cause these Funds or segments to pay a broker-dealer that
provides brokerage and research services to Loomis Sayles an amount of
commission for effecting a securities transaction for the Fund in excess of the
amount another broker-dealer would have charged for effecting that transaction.
Loomis Sayles must determine in good faith that such greater commission is
reasonable in relation to the value of the brokerage and research services
provided by the executing broker-dealer viewed in terms of that particular
transaction or Loomis Sayles' overall responsibilities to the Fund and its other
clients. Loomis Sayles' authority to cause these Funds or segments to pay such
greater commissions is also subject to such policies as the trustees of the
Trusts may adopt from time to time.
Growth Fund Advised by CGM. In placing orders for the purchase and sale of
portfolio securities for the Fund, CGM always seeks the best price and
execution. Transactions in unlisted securities will be carried out through
broker-dealers that make the primary market for such securities unless, in the
judgment of CGM, a more favorable price can be obtained by carrying out such
transactions through other brokers.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker that CGM believes will provide the best price and execution
for a transaction. These research services include not only a wide variety of
reports on such matters as economic and political developments, industries,
companies, securities, portfolio strategy, account performance, daily prices of
securities, stock and bond market conditions and projections, asset allocation
and portfolio structure, but also meetings with management representatives of
issuers and with other analysts and specialists. Although it is not possible to
assign an exact dollar value to these services, they may, to the extent used,
tend to reduce CGM's expenses. Such services may be used by CGM in servicing
other client accounts and in some cases may not be used with respect to the
Fund. Receipt of services or products other than research from brokers is not a
factor in the selection of brokers.
Growth and Income Fund, Capital Growth Fund and Star Value Fund Segment
(Advised by Westpeak). In placing orders for the purchase and sale of
securities, Westpeak always seeks best execution. Westpeak selects only brokers
or dealers that it believes are financially responsible, will provide efficient
and effective services in executing, clearing and settling an order and will
charge commission rates that, when combined with the quality of the foregoing
services, will produce best price and execution. This does not necessarily mean
that the lowest available brokerage commission will be paid. Westpeak will use
its best efforts to obtain information as to the general level of commission
rates being charged by the brokerage community from time to time and will
evaluate the overall reasonableness of brokerage commissions paid on
transactions by reference to such data. In making such evaluation, all factors
affecting liquidity and execution of the order, as well as the amount of the
capital commitment by the broker in connection with the order, are taken into
account. Westpeak may cause the Fund to pay a broker-dealer that provides
brokerage and research services to Westpeak an amount of commission for
effecting a securities transaction for the Fund in excess of the amount another
broker-dealer would have charged effecting that transaction. Westpeak must
determine in good faith that such greater commission is reasonable in relation
to the value of the brokerage and research services provided by the executing
broker-dealer viewed in terms of that particular transaction or Westpeak's
overall responsibilities to the Fund and its other clients. Westpeak's authority
to cause the Fund it manages to pay such greater commissions is also subject to
such policies as the trustees of the Trusts may adopt from time to time.
Bullseye Fund (Advised by Jurika & Voyles). In placing orders for the
purchase and sale of portfolio securities for the Fund, Jurika & Voyles always
seeks best execution, subject to the considerations set forth below.
Transactions in unlisted securities are carried out through broker-dealers who
make the market for such securities unless, in the judgment of Jurika & Voyles,
a more favorable execution can be obtained by carrying out such transactions
through other brokers or dealers.
Jurika & Voyles selects only brokers or dealers that it believes are
financially responsible, will provide efficient and effective services in
executing, clearing and settling an order and will charge commission rates
which, when combined with the quality of the foregoing services, will produce
best execution for the transaction. This does not necessarily mean that the
lowest available brokerage commission will be paid. However, the commissions are
believed to be competitive with generally prevailing rates. Jurika & Voyles will
use its best efforts to obtain information as to the general level of commission
rates being charged by the brokerage community from time to time and will
evaluate the overall reasonableness of brokerage commissions paid on
transactions by reference to such data. In making such evaluation, all factors
affecting liquidity and execution of the order, as well as the amount of the
capital commitment by the broker in connection with the order, are taken into
account.
Receipt of brokerage or research services from brokers may sometimes be a
factor in selecting a broker which Jurika & Voyles believes will provide best
execution for a transaction. These services include not only a wide variety of
reports on such matters as economic and political developments, industries,
companies, securities, portfolio strategy, account performance, daily prices of
securities, stock and bond market conditions and projections, asset allocation
and portfolio structure, but also meetings with management representatives of
issuers and with other analysts and specialists. Although it is not possible to
assign an exact dollar value to these services, they may, to the extent used,
tend to reduce Jurika & Voyles' expenses. Such services may be used by Jurika &
Voyles in servicing other client accounts and in some cases may not be used with
respect to the Fund. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best execution,
Jurika & Voyles may, however, consider purchases of shares of the Fund by
customers of broker-dealers as a factor in the selection of broker-dealers to
execute the Fund's securities transactions.
Jurika & Voyles may cause the Fund to pay a broker-dealer that provides
brokerage and research services to Jurika & Voyles an amount of commission for
effecting a securities transaction for the Fund in excess of the amount another
broker-dealer would have charged for effecting that transaction. Jurika & Voyles
must determine in good faith that such greater commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker-dealer viewed in terms of that particular transaction or Jurika
& Voyles' overall responsibilities to the Fund and its other clients. Jurika &
Voyles' authority to cause the Fund to pay such greater commissions is also
subject to such policies as the trustees of the Trust may adopt from time to
time.
Star Advisers, Star Worldwide, Star Value Fund and Star Small Cap Funds
(Segments Advised by Harris Associates). In placing orders for the purchase and
sale of portfolio securities for the segments of Star Advisers Fund, Star
Worldwide Fund, Star Value Fund and Star Small Cap Fund advised by Harris
Associates, Harris Associates always seeks best execution, subject to the
considerations set forth below. Transactions in unlisted securities are carried
out through broker-dealers that make the market for such securities unless, in
the judgment of Harris Associates, a more favorable execution can be obtained by
carrying out such transactions through other brokers or dealers. Subject to the
above standard, portfolio transactions for each Fund may be executed through
Harris Associates Securities L.P., a registered broker-dealer and an affiliate
of Harris Associates.
Harris Associates selects only brokers or dealers that it believes
are financially responsible, will provide efficient and effective services in
executing, clearing and settling an order and will charge commission rates
which, when combined with the quality of the foregoing services, will produce
best execution for the transaction. This does not necessarily mean that the
lowest available brokerage commission will be paid. However, the commissions are
believed to be competitive with generally prevailing rates. Harris Associates
will use its best efforts to obtain information as to the general level of
commission rates being charged by the brokerage community from time to time and
will evaluate the overall reasonableness of brokerage commissions paid on
transactions by reference to such data. In making such evaluation, all factors
affecting liquidity and execution of the order, as well as the amount of the
capital commitment by the broker in connection with the order, are taken into
account.
Receipt of brokerage or research services from brokers may sometimes
be a factor in selecting a broker which Harris Associates believes will provide
best execution for a transaction. These services include not only a wide variety
of reports on such matters as economic and political developments, industries,
companies, securities, portfolio strategy, account performance, daily prices of
securities, stock and bond market conditions and projections, asset allocation
and portfolio structure, but also meetings with management representatives of
issuers and with other analysts and specialists. Although it is not possible to
assign an exact dollar value to these services, they may, to the extent used,
tend to reduce Harris Associates' expenses. Such services may be used by Harris
Associates in servicing other client accounts and in some cases may not be used
with respect to the Funds. Consistent with the Rules of the National Association
of Securities Dealers, Inc., and subject to seeking best execution, Harris
Associates may, however, consider purchases of shares of Star Advisers Fund,
Star Worldwide Fund and Star Small Cap Fund by customers of broker-dealers as a
factor in the selection of broker-dealers to execute Fund portfolio
transactions.
Harris Associates may cause its segments of Star Advisers Fund, Star
Worldwide Fund, Star Value Fund and Star Small Cap Fund to pay a broker-dealer
that provides brokerage and research services to Harris Associates an amount of
commission for effecting a securities transaction for the Fund in excess of the
amount another broker-dealer would have charged for effecting that transaction.
Harris Associates must determine in good faith that such greater commission is
reasonable in relation to the value of the brokerage and research services
provided by the executing broker-dealer viewed in terms of that particular
transaction or Harris Associates' overall responsibilities to the Funds and its
other clients. Harris Associates' authority to cause the Funds to pay such
greater commissions is also subject to such policies as the trustees of the
Trusts may adopt from time to time.
Star Worldwide and Star Small Cap Funds (Segments Advised by
Montgomery). In all purchases and sales of securities for its segments of the
Funds, Montgomery's primary consideration is to obtain the most favorable
execution available. Pursuant to the subadvisory agreements between Nvest
Management and Montgomery, Montgomery determines which securities are to be
purchased and sold by its segments and which broker-dealers are eligible to
execute its segments' portfolio transactions, subject to the instructions of,
and review by, Nvest Management and the trustees. Purchases and sales of
securities within the U.S. other than on a securities exchange will generally be
executed directly with a market-maker unless, in the opinion of Montgomery, a
better price and execution can otherwise be obtained by using a broker for the
transaction.
For Star Worldwide Fund, Montgomery contemplates purchasing most
equity securities directly in the securities markets located in emerging or
developing countries or in the over-the-counter markets. In purchasing American
Depository Receipts ("ADRs") and European Depository Receipts ("EDRs") (and
other similar instruments), Montgomery's segments of Star Worldwide Fund may
purchase those listed on stock exchanges, or traded in the over-the-counter
markets in the U.S. or Europe, as the case may be. ADRs, like other securities
traded in the U.S., will be subject to negotiated commission rates. The foreign
and domestic debt securities and money market instruments in which Montgomery's
segment of Star Worldwide Fund may invest may be traded in the over-the-counter
markets.
Purchases of portfolio securities for the segments also may be made
directly from issuers or from underwriters. Where possible, purchase and sale
transactions will be effected through dealers (including banks) which specialize
in the types of securities which this segment will be holding, unless better
executions are available elsewhere. Dealers and underwriters usually act as
principals for their own account. Purchases from underwriters will include a
concession paid by the issuer to the underwriter and purchases from dealers will
include the spread between the bid and the asked price. If the execution and
price offered by more than one dealer or underwriter are comparable, the order
may be allocated to a dealer or underwriter that has provided research or other
services as discussed below.
In placing portfolio transactions, Montgomery will use its best
efforts to choose a broker-dealer capable of providing the services necessary
generally to obtain the most favorable execution available. The full range and
quality of services available will be considered in making these determinations,
such as the firm's ability to execute trades in a specific market required by
the segment of the Fund, such as in an emerging market, the size of the order,
the difficulty of execution, the operational facilities of the firm involved,
the firm's risk in positioning a block of securities, and other factors.
Montgomery may also consider the sale of Star Worldwide Fund and
Star Small Cap Fund shares as a factor in the selection of broker-dealers to
execute portfolio transactions for its segments. The placement of portfolio
transactions with broker-dealers who sell shares of the Funds is subject to
rules adopted by the National Association of Securities Dealers, Inc.
While Montgomery's general policy is to seek first to obtain the
most favorable execution available, in selecting a broker-dealer to execute
portfolio transactions, weight may also be given to the ability of a
broker-dealer to furnish brokerage, research and statistical services to
Montgomery, even if the specific services were not imputed just to the Fund and
may be lawfully and appropriately used by Montgomery in advising other clients.
Montgomery considers such information, which is in addition to, and not in lieu
of, the services required to be performed by it under its subadvisory agreements
with Nvest Management, to be useful in varying degrees, but of indeterminable
value. In negotiating any commissions with a broker or evaluating the spread to
be paid to a dealer, the segments of the Funds may therefore pay a higher
commission or spread than would be the case if no weight were given to the
furnishing of these supplemental services, provided that the amount of such
commission or spread has been determined in good faith by Montgomery to be
reasonable in relation to the value of the brokerage and/or research services
provided by such broker-dealer, which services either produce a direct benefit
to the segments of the Funds or assist Montgomery in carrying out its
responsibilities to the segments of the Funds. The standard of reasonableness is
to be measured in light of Montgomery's overall responsibilities to its
segments. The trustees of the Trusts review all brokerage allocations where
services other than best execution capabilities are a factor to ensure that the
other services provided meet the criteria outlined above and produce a benefit
to the Fund.
On occasion, situations may arise in which legal and regulatory
considerations will preclude trading for the segments' accounts by reason of
activities of Montgomery Securities, a broker-dealer affiliated with Montgomery,
or its affiliates. It is the judgment of the trustees that the Funds will not be
materially disadvantaged by any such trading preclusion and that the
desirability of continuing their subadvisory arrangements with Montgomery and
Montgomery's affiliation with Montgomery Securities and other affiliates of
Montgomery Securities outweigh any disadvantages that may result from the
foregoing.
Montgomery's sell discipline for the segments' investments is based
on the premise of a long-term investment horizon; however, sudden changes in
valuation levels arising from, for example, new macroeconomic policies,
political developments, and industry conditions could change the assumed time
horizon. Liquidity, volatility, and overall risk of a position are other factors
considered by Montgomery in determining the appropriate investment horizon.
At the company level, sell decisions are influenced by a number of
factors, including current stock valuation relative to the estimated fair value
range, or a high price-to-earnings ratio relative to expected growth. Negative
changes in the relevant industry sector, or a reduction in international
competitiveness and declining financial flexibility, may also signal a sell.
Star Small Cap Fund (Segment Advised by RS Investment Management).
It is the policy of RS Investment Management, in effecting transactions in
portfolio securities, to seek the best execution of orders. The determination of
what may constitute best execution in a securities transaction involves a number
of judgmental considerations, including, without limitation, the overall direct
net economic result to this segment of the Fund (involving both price paid or
received and any commissions and other costs), the efficiency with which the
transaction is effected, the ability to effect the transaction at all when a
large block is involved, the availability of the broker to stand ready to
execute possibly difficult transactions for this segment in the future, and the
financial strength and stability of the broker.
Subject to the policy of seeking best execution of orders at the
most favorable prices, RS Investment Management may execute transactions with
brokerage firms which provide research services and products to RS Investment
Management. The phrase "research services and products" includes advice as to
the value of securities, the advisability of investing in, purchasing or selling
securities, the availability of securities or purchasers or sellers of
securities, the furnishing of analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and the
performance of accounts, and the obtainment of products such as third-party
publications, computer and electronic access equipment, software programs, and
other information and accessories that may assist RS Investment Management in
furtherance of its investment advisory responsibilities to its advisory clients.
Such services and products permit RS Investment Management to supplement its own
research and analysis activities, and provide it with information from
individuals and research staffs of many securities firms. Generally, it is not
possible to place a dollar value on the benefits derived from specific research
services and products. RS Investment Management may receive a benefit from these
research services and products which is not passed on, in the form of a direct
monetary benefit, to this segment of the Fund. If RS Investment Management
determines that any research product or service has a mixed use, such that it
also serves functions that do not assist in the investment decision-making
process, RS Investment Management may allocate the cost of such service or
product accordingly. The portion of the product or service that RS Investment
Management determines will assist it in the investment decision-making process
may be paid for in brokerage commission dollars. Any such allocation may create
a conflict of interest for RS Investment Management. Subject to the standards
outlined in this and the preceding paragraph, RS Investment Management may
arrange to execute a specified dollar amount of transactions through a broker
that has provided research products or services. Such arrangements do not
constitute commitments by RS Investment Management to allocate portfolio
brokerage upon any prescribed basis, other than upon the basis of seeking best
execution of orders.
Research services and products may be useful to RS Investment
Management in providing investment advice to any of the funds or clients it
advises. Likewise, information made available to RS Investment Management from
brokers effecting securities transactions for such other funds and clients may
be utilized on behalf of another fund. Thus, there may be no correlation between
the amount of brokerage commissions generated by a particular fund or client and
the indirect benefits received by that fund or client.
Subject to the policy of seeking the best execution of orders, sales
of shares of the Fund may also be considered as a factor in the selection of
brokerage firms to execute portfolio transactions for this segment of the Fund.
Because selection of executing brokers is not based solely on net
commissions, the segment of the Fund advised by RS Investment Management may pay
an executing broker a commission higher than that which might have been charged
by another broker for that transaction. RS Investment Management will not
knowingly pay higher mark-ups on principal transactions to brokerage firms as
consideration for receipt of research services or products. While it is not
practicable for RS Investment Management to solicit competitive bids for
commissions on each portfolio transaction, consideration is regularly given to
available information concerning the level of commissions charged in comparable
transactions by various brokers. Transactions in over-the-counter securities are
normally placed with principal market makers, except in circumstances where, in
the opinion of RS Investment Management, better prices and execution are
available elsewhere.
Equity Income Fund and Star Value Fund Segment Advised by VNSM. In
placing orders for the purchase and sale of securities for Equity Income Fund,
VNSM selects only brokers or dealers which it believes are financially
responsible and will provide efficient and effective services in executing,
clearing and settling an order. VNSM will use its best efforts to obtain
information as to the general level of commission rates being charged by the
brokerage community from time to time and will evaluate the overall
reasonableness of brokerage commissions paid on transactions by reference to
such data. In making such evaluation, all factors affecting liquidity and
execution of the order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account. Transactions in
unlisted securities are carried out through broker-dealers who make the primary
market for such securities unless, in the judgment of VNSM, a more favorable
price can be obtained by carrying out such transactions through other brokers or
dealers.
Receipt of research services from brokers may sometimes be a factor
in selecting a broker which VNSM believes will provide best execution for a
transaction. These research services include not only a wide variety of reports
on such matters as economic and political developments, industries, companies,
securities, portfolio strategy, account performance, daily prices of securities,
stock and bond market conditions and projections, asset allocation and portfolio
structure, but also meetings with management representatives of issuers and with
other analysts and specialists. Although it is not possible to assign an exact
dollar value to these services, they may, to the extent used, tend to reduce
VNSM's expenses. Such services may be used by VNSM in servicing other client
accounts and in some cases may not be used with respect to the Fund. Receipt of
services or products other than research from brokers is not a factor in the
selection of brokers. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., VNSM may, however, consider purchases
of shares of the Fund and other funds managed by VNSM by customers of
broker-dealers as a factor in the selection of broker-dealers to execute the
Fund's securities transactions.
In placing orders for the purchase and sale of securities for the
Fund, VNSM may cause the Fund to pay a broker-dealer that provides the brokerage
and research services to VNSM an amount of commission for effecting a securities
transaction for the Fund in excess of the amount another broker-dealer would
have charged for effecting that transaction. VNSM must determine in good faith
that such greater commission is reasonable in relation to the value of the
brokerage and research services provided by the executing broker-dealer viewed
in terms of that particular transaction or VNSM's overall responsibilities to
the Trust and its other clients. VNSM's authority to cause the Fund to pay such
greater commissions is also subject to such policies as the Trustees of the
Trust may adopt from time to time.
Portfolio Trades of All Subadvisers Subject to the overriding objective of
obtaining the best possible execution of orders, each of the subadvisers may
allocate brokerage transactions to affiliated brokers. In order for the
affiliated broker to effect portfolio transactions for the Fund, the
commissions, fees or other remuneration received by the affiliated broker must
be reasonable and fair compared to the commissions, fees and other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period. Furthermore, the trustees of the Trusts, including a majority
of those trustees who are not "interested persons" of the Trusts, as defined in
the 1940 Act, have adopted procedures which are reasonably designed to provide
that any commissions, fees or other remuneration paid to an affiliated broker
are consistent with the foregoing standard.
General
Portfolio turnover is not a limiting factor with respect to investment
decisions. The Funds anticipate that their portfolio turnover rates will vary
significantly from time to time depending on the volatility of economic and
market conditions. Portfolio turnover rates for the Massachusetts Fund and the
California Fund differed significantly over the two most recently completed
fiscal years due to changes in the number of securities transactions made by
these Funds.
Subject to procedures adopted by the Board of Trustees of the Trusts, the
Funds' brokerage transactions may be executed by brokers that are affiliated
with Nvest Companies or the Funds' advisers or subadvisers. Any such
transactions will comply with Rule 17e-1 under the 1940 Act.
Under the 1940 Act, persons affiliated with each Trust are prohibited from
dealing with each Trust's Funds as a principal in the purchase and sale of
securities. Since transactions in the over-the-counter market usually involve
transactions with dealers acting as principals for their own accounts,
affiliated persons of the Trusts, such as New England Securities, may not serve
as the Funds' dealer in connection with such transactions.
To the extent permitted by applicable law, and in all instances subject to
the foregoing policy of best execution, the adviser or subadviser may allocate
brokerage transactions in a manner that takes into account the sale of shares of
one or more Funds distributed by the Distributor. In addition, the adviser or
subadviser may allocate brokerage transactions to broker-dealers (including
affiliates of the Distributor) that have entered into arrangements in which the
broker-dealer allocates a portion of the commissions paid by a Fund toward the
reduction of that Fund's expenses, subject to the requirement that the adviser
or subadviser will seek best execution.
It is expected that the portfolio transactions in fixed-income securities
will generally be with issuers or dealers on a net basis without a stated
commission. Securities firms may receive brokerage commissions on transactions
involving options, futures and options on futures and the purchase and sale of
underlying securities upon exercise of options. The brokerage commissions
associated with buying and selling options may be proportionately higher than
those associated with general securities transactions.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE TRUSTS AND OWNERSHIP OF SHARES
- --------------------------------------------------------------------------------
Nvest Funds Trust I is organized as a Massachusetts business trust under
the laws of Massachusetts by an Agreement and Declaration of Trust (a
"Declaration of Trust") dated June 7, 1985, as amended, and is a "series"
company as described in Section 18(f)(2) of the 1940 Act. Until September 1986,
the name of the Trust was "New England Life Government Securities Trust"; from
September 1986 to March 1994, its name was "The New England Funds." Its name was
"New England Funds Trust I" from April 1994 to January 2000, at which time its
name was changed to "Nvest Funds Trust I." Prior to January 5, 1996, the name of
the Municipal Income Fund was "New England Tax Exempt Income Fund." The initial
Fund of the Trust (the Fund now called Nvest Government Securities Fund)
commenced operations on September 16, 1985. International Equity Fund commenced
operations on May 22, 1992. The Capital Growth Fund was organized in 1992 and
commenced operations on August 3, 1992. Star Advisers Fund was organized in 1994
and commenced operations on July 7, 1994. Strategic Income Fund was organized in
1995 and commenced operations on May 1, 1995. Star Worldwide Fund was organized
in 1995 and commenced operations on December 29, 1995. Star Small Cap Fund was
organized in 1996 and commenced operations on December 31, 1996. The remaining
Funds in the Trust are successors to the following corporations which commenced
operations in the years indicated:
Corporation Date of Commencement
----------- --------------------
NEL Growth Fund, Inc.* 1968
NEL Retirement Equity Fund, Inc.** 1970
NEL Equity Fund, Inc.*** 1968
NEL Income Fund, Inc.**** 1973
NEL Tax Exempt Bond Fund, Inc.***** 1977
* Predecessor of the Growth Fund
** Predecessor of the Star Value Fund (prior
to February 28, 2000 the name of the Fund
was "Nvest Value Fund")
*** Predecessor of the Balanced Fund
**** Predecessor of the Bond Income Fund
***** Predecessor of the Municipal Income Fund
Nvest Funds Trust II is organized as a Massachusetts business trust
pursuant to a Declaration of Trust dated May 6, 1931, as amended, and consisted
of a single Fund (now the Growth and Income Fund) until January 1989, when the
Trust was reorganized as a "series" company as described in Section 18(f)(2) of
the 1940 Act. The Trust has six separate portfolios. Until December 1988, the
name of the Trust was "Investment Trust of Boston"; from December 1988 until
April 1992, its name was "Investment Trust of Boston Funds"; from April 1992
until March 1994, its name was "TNE Funds Trust." Its name was "New England
Funds Trust II" from April 1994 to January 2000, at which time its name was
changed to "Nvest Funds Trust II." High Income Fund and Massachusetts Fund are
successors to separate investment companies that were organized in 1983 and
1984, respectively, and reorganized as series of the Trust in January 1989.
Limited Term U.S. Government Fund was organized in 1988 and commenced operations
in January 1989. Short Term Corporate Income Fund was organized in 1991 and
commenced operations on October 18 of that year. California Fund was organized
in 1993 and commenced operations on April 23 of that year. Prior to December 1,
1998, the name of Short Term Corporate Income Fund was "Adjustable Rate U.S.
Government Fund." Prior to May 1, 1999, the name of Growth and Income Fund,
which was organized in 1931 and commenced operations on May 6th of that year,
was "Growth Opportunities Fund."
Nvest Funds Trust III was organized as a Massachusetts business trust
pursuant to a Declaration of Trust dated August 22, 1995. The Trust has eight
separate funds (Nvest Bullseye Fund, Nvest Equity Income Fund, Nvest Core Equity
Fund, Nvest Stock and Bond Fund, Nvest Select Fund, Nvest Small Cap Value Fund,
Nvest Small Cap Growth Fund and Nvest Total Return Bond Fund). Nvest Equity
Income Fund was organized in 1995 and commenced operations on November 28, 1995.
Nvest Bullseye Fund, Nvest Core Equity Fund, Nvest Stock and Bond Fund, Nvest
Select Fund, Nvest Small Cap Value Fund, Nvest Small Cap Growth Fund and Nvest
Total Return Bond Fund were organized in 1998. Nvest Bullseye Fund commenced
operations on March 31, 1998. Nvest Core Equity Fund, Nvest Stock and Bond Fund,
Nvest Select Fund, Nvest Small Cap Value Fund, Nvest Small Cap Growth Fund and
Nvest Total Return Bond Fund are not currently offered to the public.
The Declarations of Trust of Nvest Funds Trust I, Nvest Funds Trust II and
Nvest Funds Trust III permit each Trust's trustees to issue an unlimited number
of full and fractional shares of each series. Each Fund is represented by a
particular series of shares. The Declarations of Trust further permit each
Trust's Board of Trustees to divide the shares of each series into any number of
separate classes, each having such rights and preferences relative to other
classes of the same series as each Trust's Board of 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 shareholder meetings. The shares of each Fund do not have any
preemptive rights. Upon termination of any Fund, whether pursuant to liquidation
of the Trust or otherwise, shareholders of each class of the Fund are entitled
to share pro rata in the net assets attributable to that class of shares of the
Fund available for distribution to shareholders. The Declarations of Trust also
permit the Board of Trustees to charge shareholders directly for custodial,
transfer agency and servicing expenses.
The shares of all the Funds (except as noted in each of the Fund's
Prospectuses) are divided into four classes: Class A, Class B, Class C and Class
Y. Each Fund offers such classes of shares as set forth in such Fund's
Prospectus. Class Y shares are available for purchase only by certain eligible
institutional investors and have higher minimum purchase requirements than
Classes A, B and C. All expenses of each Fund (excluding transfer agency fees
and expenses of printing and mailing Prospectuses to shareholders ("Other
Expenses")) are borne by its Class A, B, C and Y shares on a pro rata basis,
except for 12b-1 fees, which are borne only by Classes A, B and C and may be
charged at a separate rate to each such class. Other Expenses of Classes A, B
and C are borne by such classes on a pro rata basis, but Other Expenses relating
to the Class Y shares may be allocated separately to the Class Y shares. The
Class A, Class B, Class C and Class Y structure could be terminated should
certain IRS rulings be rescinded.
The assets received by each class of a Fund for the issue or sale of its
shares and all income, earnings, profits, losses and proceeds therefrom, subject
only to the rights of the creditors, are allocated to, and constitute the
underlying assets of, that class of a Fund. The underlying assets of each class
of a Fund are segregated and are charged with the expenses with respect to that
class of a Fund and with a share of the general expenses of the relevant trust.
Any general expenses of the Trust that are not readily identifiable as belonging
to a particular class of a Fund are allocated by or under the direction of the
trustees in such manner as the trustees determine to be fair and equitable.
While the expenses of each Trust are allocated to the separate books of account
of each Fund, certain expenses may be legally chargeable against the assets of
all of the Funds in a Trust.
The Declarations of Trust also permit each Trust's Board of Trustees,
without shareholder approval, to subdivide any Fund or series or class of shares
into various sub-series or sub-classes 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 existing series or
classes.
The Declarations of Trust provide for the perpetual existence of the
Trusts. Any Trust or any Fund, however, may be terminated at any time by vote of
at least two-thirds of the outstanding shares of each 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 each fractional share held) and may vote (to the extent
provided therein) in the election of trustees and the termination of the Trust
and on other matters submitted to the vote of shareholders.
The Declarations of Trust provide that on any matter submitted to a vote
of all shareholders of a Trust, all Trust shares entitled to vote shall be voted
together irrespective of series or class unless the rights of a particular
series or class would be adversely affected by the vote, in which case a
separate vote of that series or class shall also be required to decide the
question. Also, a separate vote shall be held whenever required by the 1940 Act
or any rule thereunder. Rule 18f-2 under the 1940 Act provides in effect that a
series or class shall be deemed to be affected by a matter unless it is clear
that the interests of each series or class in the matter are substantially
identical or that the matter does not affect any interest of such series or
class. On matters affecting an individual series or class, only shareholders of
that series or class are entitled to vote. Consistent with the current position
of the SEC, shareholders of all series and classes vote together, irrespective
of series or class, on the election of trustees and the selection of the 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) a Trust will
hold a shareholders' meeting for the election of trustees at such time as less
than a majority of the trustees holding office have been elected by
shareholders, and (ii) if there is a vacancy on the Board of Trustees, such
vacancy may be filled only by a vote of the shareholders unless, after filing
such vacancy by other means, at least two-thirds of the trustees holding office
shall have been elected by the shareholders. In addition, trustees may be
removed from office by a written consent signed by the holders of two-thirds of
the outstanding shares and filed with a Trust's custodian or by a vote of the
holders of two-thirds of the outstanding shares at a meeting duly called for
that purpose, which meeting shall be held upon the written request of the
holders of not less than 10% of the outstanding shares.
Upon written request by the holders of shares having a net asset value of
at least $25,000 or at least 1% of the outstanding shares stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
trustee, the Trusts have 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 Trust's or a Fund's name or to cure technical problems in the
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 other provisions relating to Trust shares in
response to applicable laws or regulations. If one or more new series of a 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, shareholders could, under certain circumstances,
be held personally liable for the obligations of a Trust. However, the
Declarations of Trust disclaim shareholder liability for acts or obligations of
a Trust and require that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by a Trust or the trustees.
The Declarations of Trust provide for indemnification out of each Fund's
property for all loss and expense of any shareholder held personally liable for
the obligations of the Fund by reason of owning shares of such Fund. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is considered remote since it is limited to circumstances in which the
disclaimer is inoperative and a Fund itself would be unable to meet its
obligations.
The Declarations of Trust further provide that the relevant Board of
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 trustees and 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 persons may not be indemnified against
any liability to the Trust or the Trust's shareholders to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office. 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
possible liability and approved the use of the combined Prospectus for Funds of
all three 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.
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
The procedures for purchasing shares of the Funds are summarized in the
Prospectuses. All purchases made by check should be in U.S. dollars and made
payable to Nvest Funds, or, in the case of a retirement account, the custodian
or trustee.
For purchase of Fund shares by mail, the settlement date is the first
business day after receipt of the check by the transfer agent so long as it is
received by the close of regular trading of the New York Stock Exchange (the
"Exchange") on a day when the Exchange is open; otherwise the settlement date is
the following business day. For telephone orders, the settlement date is the
third business day after the order is made.
Shares may also be purchased either in writing, by phone or, in the case
of Class A, B and C shares, by electronic funds transfer using Automated
Clearing House ("ACH"), or by exchange as described in the Prospectuses through
firms that are members of the National Association of Securities Dealers, Inc.
and that have selling agreements with the Distributor. You may also use Nvest
Funds Personal Access Line(TM) (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.
The Distributor may at its discretion accept a telephone order for the
purchase of $5,000 or more of a Fund's Class A, B and C shares. Payment must be
received by the Distributor within three business days following the transaction
date or the order will be subject to cancellation. Telephone orders must be
placed through the Distributor or your investment dealer.
If you wish transactions in your account to be effected by another person
under a power of attorney from you, special rules as summarized in the
Prospectus may apply.
- --------------------------------------------------------------------------------
NET ASSET VALUE AND PUBLIC OFFERING PRICE
- --------------------------------------------------------------------------------
The method for determining the public offering price and net asset value
per share is summarized in the Prospectus.
The total net asset value of each class of shares of a Fund (the excess of
the assets of such Fund attributable to such class over the liabilities
attributable to such class) is determined as of the close of regular trading
(normally 4:00 p.m. Eastern time) on each day that the Exchange is open for
trading. The weekdays that the Exchange is expected to be closed are New Year's
Day, Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Securities
listed on a national securities exchange or on the NASDAQ National Market System
are valued at their last sale price, or, if there is no reported sale during the
day, the last reported bid price estimated by a broker. Unlisted securities
traded in the over-the-counter market are valued at the last reported bid price
in the over-the-counter market or on the basis of yield equivalents as obtained
from one or more dealers that make a market in the securities. U.S. government
securities are traded in the over-the-counter market. Options, interest rate
futures and options thereon that are traded on exchanges are valued at their
last sale price as of the close of such exchanges. Securities for which current
market quotations are not readily available and all other assets are taken at
fair value as determined in good faith by the Board of Trustees, although the
actual calculations may be made by persons acting pursuant to the direction of
the Board.
Generally, trading in foreign government securities and other fixed-income
securities, as well as trading in equity securities in markets outside the
United States, is substantially completed each day at various times prior to the
close of the Exchange. Securities traded on a non-U.S. exchange will be valued
at their last sale price (or the last reported bid price, if there is no
reported sale during the day), on the exchange on which they principally trade,
as of the close of regular trading on such exchange except for securities traded
on the London Stock Exchange ("British Equities"). British Equities will be
valued at the mean between the last bid and last asked prices on the London
Stock Exchange. The value of other securities principally traded outside the
United States will be computed as of the completion of substantial trading for
the day on the markets on which such securities principally trade. Securities
principally traded outside the United States will generally be valued several
hours before the close of regular trading on the Exchange, generally 4:00 p.m.
Eastern time, when the Funds compute the net asset value of their shares.
Occasionally, events affecting the value of securities principally traded
outside the United States may occur between the completion of substantial
trading of such securities for the day and the close of the Exchange, which
events will not be reflected in the computation of a Fund's net asset value. If
events materially affecting the value of a Fund's securities occur during such
period, then these securities will be valued at their fair value as determined
in good faith by or in accordance with procedures approved by the Trusts'
trustees. The effect of fair value pricing is that securities may not be priced
on the basis of quotations from the primary market in which they are traded but
rather, may be priced by another method that the Board of Trustees believes
accurately reflects fair value.
Trading in some of the portfolio securities of some of the Funds takes
place in various markets outside the United States on days and at times other
than when the Exchange is open for trading. Therefore, the calculation of these
Funds' net asset value does not take place at the same time as the prices of
many of its portfolio securities are determined, and the value of the Fund's
portfolio may change on days when the Fund is not open for business and its
shares may not be purchased or redeemed.
The per share net asset value of a class of a Fund's shares is computed by
dividing the number of shares outstanding into the total net asset value
attributable to such class. The public offering price of a Class A share of a
Fund is the net asset value per share next-determined after a properly completed
purchase order is accepted by Nvest Services Company or State Street Bank, plus
a sales charge as set forth in the Fund's Prospectus. The public offering price
of a Class B, C or Y share of a Fund is the next-determined net asset value.
- --------------------------------------------------------------------------------
REDUCED SALES CHARGES
CLASS A SHARES ONLY
- --------------------------------------------------------------------------------
The following special purchase plans are summarized in the Prospectuses and are
described in greater detail below.
CUMULATIVE PURCHASE DISCOUNT. A Fund shareholder may make an initial or an
additional purchase of Class A shares and be entitled to a discount on the sales
charge payable on that purchase. This discount will be available if the
shareholder's "total investment" in the Fund reaches the breakpoint for a
reduced sales charge in the table under "How Sales Charges Are Calculated-Class
A shares" in the Prospectus. The total investment is determined by adding the
amount of the additional purchase, including sales charge, to the current public
offering price of all series and classes of shares of the Nvest Trusts held by
the shareholder in one or more accounts. If the total investment exceeds the
breakpoint, the lower sales charge applies to the entire additional investment
even though some portion of that additional investment is below the breakpoint
to which a reduced sales charge applies. For example, if a shareholder who
already owns shares of one or more Funds or other of the Nvest Funds with a
value at the current public offering price of $30,000 makes an additional
purchase of $20,000 of Class A shares of another Fund or Nvest Fund, the reduced
sales charge of 4.5% of the public offering price will apply to the entire
amount of the additional investment.
LETTER OF INTENT. A Letter of Intent (a "Letter"), which can be effected
at any time, is a privilege available to investors which reduces the sales
charge on investments in Class A shares. Ordinarily, reduced sales charges are
available for single purchases of Class A shares only when they reach certain
breakpoints (e.g., $50,000, $100,000, etc.). By signing a Letter, a shareholder
indicates an intention to invest enough money in Class A shares within 13 months
to reach a breakpoint. If the shareholder's intended aggregate purchases of all
series and classes of the Trusts over a defined 13-month period will be large
enough to qualify for a reduced sales charge, the shareholder may invest the
smaller individual amounts at the public offering price calculated using the
sales load applicable to the 13-month aggregate investment.
A Letter is a non-binding commitment, the amount of which may be
increased, decreased or canceled at any time. The effective date of a Letter is
the date it is received in good order by the Distributor, or, if communicated by
a telephone exchange or order, at the date of telephoning provided a signed
Letter, in good order, reaches the Distributor within five business days.
A reduced sales charge is available for aggregate purchases of all series
and classes of shares of the Trusts pursuant to a written Letter effected within
90 days after any purchase. In the event the account was established prior to 90
days before the effective date of the Letter, the account will be credited with
the Rights of Accumulation ("ROA") towards the breakpoint level that will be
reached upon the completion of the 13 months' purchases. The ROA credit is the
value of all shares held as of the effective dates of the Letter based on the
"public offering price computed on such date."
The cumulative purchase discount, described above, permits the aggregate
value at the current public offering price of Class A shares of any accounts
with the Trusts held by a shareholder to be added to the dollar amount of the
intended investment under a Letter, provided the shareholder lists them on the
account application.
State Street Bank will hold in escrow shares with a value at the current
public offering price of 5% of the aggregate amount of the intended investment.
The amount in escrow will be released when the commitment stated in the Letter
is completed. If the shareholder does not purchase shares in the amount
indicated in the Letter, the shareholder agrees to remit to State Street Bank
the difference between the sales charge actually paid and that which would have
been paid had the Letter not been in effect, and authorizes State Street Bank to
redeem escrowed shares in the amount necessary to make up the difference in
sales charges. Reinvested dividends and distributions are not included in
determining whether the Letter has been completed.
COMBINING ACCOUNTS. Purchases of all series and classes of the Nvest Funds
(excluding the Nvest Cash Management Trust and Nvest Tax Exempt Money Market
Trust (the "Money Market Funds") unless the shares were purchased through an
exchange another Nvest Fund) by or for an investor, the investor's spouse,
parents, children, siblings, in-laws, grandparents or grandchildren and any
other account of the investor, including sole proprietorships, in any Trust may
be treated as purchases by a single individual for purposes of determining the
availability of a reduced sales charge. Purchases for a single trust estate or a
single fiduciary account may also be treated as purchases by a single individual
for this purpose, as may purchases on behalf of a participant in a tax-qualified
retirement plan and other employee benefit plans, provided that the investor is
the sole participant in the plan. Any other group of individuals acceptable to
the Distributor may also combine accounts for such purpose. The values of all
accounts are combined to determine the sales charge.
COMBINING WITH OTHER SERIES AND CLASSES OF THE NVEST FUNDS. A
shareholder's total investment for purposes of the cumulative purchase discount
includes the value at the current public offering price of any shares of series
and classes of the Trusts that the shareholder owns (which excludes shares of
the Money Market Funds unless such shares were purchased by exchanging shares of
any other Nvest Fund). Shares owned by persons described in the preceding
paragraph may also be included.
UNIT HOLDERS OF UNIT INVESTMENT TRUSTS. Unit investment trust
distributions may be invested in Class A shares of any Fund at a reduced sales
charge of 1.50% of the public offering price (or 1.52% of the net amount
invested); for large purchases on which a sales charge of less than 1.50% would
ordinarily apply, such lower charge also applies to investments of unit
investment trust distributions.
CLIENTS OF ADVISERS OR SUBADVISERS. No front-end sales charge or CDSC
applies to investments of $25,000 or more in Class A shares of the Funds by (1)
clients of an adviser or subadviser to any series of the Trusts; any director,
officer or partner of a client of an adviser or subadviser to any series of the
Trusts; or the spouse, parents, children, siblings, in-laws, grandparents or
grandchildren of the foregoing; (2) any individual who is a participant in a
Keogh or IRA Plan under a prototype of an adviser or subadviser to any series of
the Trusts if at least one participant in the plan qualifies under category (1)
above; and (3) an individual who invests through an IRA and is a participant in
an employee benefit plan that is a client of an adviser or subadviser to any
series of the Trusts. Any investor eligible for this arrangement should so
indicate in writing at the time of the purchase.
OFFERING TO EMPLOYEES OF METLIFE AND ASSOCIATED ENTITIES. There is no
front-end sales charge, CDSC or initial investment minimum related to
investments in Class A shares of the Funds by any of the Trusts' advisers or
subadvisers, the Distributor or any other company affiliated with New England
Financial or MetLife; current and former directors and trustees of the Trusts;
agents and general agents of New England Financial or MetLife and their
insurance company subsidiaries; current and retired employees of such agents and
general agents; registered representatives of broker-dealers who have selling
arrangements with the Distributor; the spouse, parents, children, siblings,
in-laws, grandparents or grandchildren of the persons listed above and any
trust, pension, profit sharing or other benefit plans for any of the foregoing
persons and any separate account of New England Financial or MetLife or any
insurance company affiliated with New England Financial or MetLife.
ELIGIBLE GOVERNMENTAL AUTHORITIES. There is no sales charge or CDSC
related to investments in Class A shares of any Fund by any state, county or
city or any instrumentality, department, authority or agency thereof that has
determined that a Fund is a legally permissible investment and that is
prohibited by applicable investment laws from paying a sales charge or
commission in connection with the purchase of shares of any registered
investment company.
INVESTMENT ADVISORY ACCOUNTS. Shares of any Fund may be purchased at net
asset value by investment advisers, financial planners or other intermediaries
who place trades for their own accounts or the accounts of their clients and who
charge a management, consulting or other fee for their services; clients of such
investment advisers, financial planners or other intermediaries who place trades
for their own accounts if the accounts are linked to the master account of such
investment adviser, financial planner or other intermediary on the books and
records of the broker or agent; and retirement and deferred compensation plans
and trusts used to fund those plans, including, but not limited to, those
defined in Sections 401(a), 403(b), 401(k) and 457 of the Code and "rabbi
trusts." Investors may be charged a fee if they effect transactions through a
broker or agent.
CERTAIN BROKER-DEALERS AND FINANCIAL SERVICES ORGANIZATIONS. Shares of any
Fund also may be purchased at net asset value through certain broker-dealers
and/or financial services organizations without any transaction fee. Such
organizations may also receive compensation based upon the average value of the
Fund shares held by their customers. This compensation may be paid by Nvest
Management, Loomis Sayles and/or Harris Associates out of its own assets, and/or
be paid indirectly by the Fund in the form of servicing, distribution or
transfer agent fees.
CERTAIN RETIREMENT PLANS. Shares of the Funds are available at net asset
value for investments by participant-directed 401(a) and 401(k) plans that have
100 or more eligible employees or by retirement plans whose third party
administrator or dealer has entered into a service agreement with the
Distributor to perform certain administrative services, subject to certain
operational and minimum size requirements specified from time to time by the
Distributor. This compensation may be paid indirectly by the Fund in the form of
service and/or distribution fees.
BANK TRUST DEPARTMENTS OR TRUST COMPANIES. Shares of the Funds are
available at net asset value for investments by non-discretionary and
non-retirement accounts of bank trust departments or trust companies, but are
unavailable if the trust department or institution is part of an organization
not principally engaged in banking or trust activities.
SHAREHOLDERS OF REICH AND TANG GOVERNMENT SECURITIES TRUST. Shareholders
of Reich and Tang Government Securities Trust may exchange their shares of that
fund for Class A shares of the Funds at net asset value and without imposition
of a sales charge.
CERTAIN ACCOUNTS OF GROWTH FUND. For accounts established prior to
February 28, 1997 having a total investment value of between (and including)
$25,000 and $49,000, a reduced sales charge of 5.50% of the offering price (or
5.82% of the net amount invested), with a dealer's concession of 4.25% as a
percentage of offering price, will be charged on the sale of additional Class A
shares of Growth Fund if the total investment value of Growth Fund account after
such sale is between (and including) $25,000 and $49,000.
The reduction or elimination of the sales charges in connection with
special purchase plans described above reflects the absence or reduction of
expenses associated with such sales.
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Open Accounts
A shareholder's investment is automatically credited to an open account
maintained for the shareholder by State Street Bank. Following each transaction
in the account, a shareholder will receive a confirmation statement disclosing
the current balance of shares owned and the details of recent transactions in
the account. After the close of each calendar year, State Street Bank will send
each shareholder a statement providing federal tax information on dividends and
distributions paid to the shareholder during the year. This statement should be
retained as a permanent record. Nvest Services Company may charge a fee for
providing duplicate information.
The open account system provides for full and fractional shares expressed
to three decimal places and, by making the issuance and delivery of stock
certificates unnecessary, eliminates problems of handling and safekeeping, and
the cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates. Certificates will not be issued for Class B or Class C shares.
The costs of maintaining the open account system are paid by the Funds and
no direct charges are made to shareholders. Although the Funds have no present
intention of making such direct charges to shareholders, they each reserve the
right to do so. Shareholders will receive prior notice before any such charges
are made.
Automatic Investment Plans (Class A, B and C Shares)
Subject to each Fund's investor eligibility requirements, investors may
automatically invest in additional shares of a Fund on a monthly basis by
authorizing the Distributor to draw checks on an investor's bank account. The
checks are drawn under the Investment Builder Program, a program designed to
facilitate such periodic payments, and are forwarded to Nvest Services Company
for investment in the Fund. A plan may be opened with an initial investment of
$100 or more and thereafter regular monthly checks of $100 or more will be drawn
on the investor's account. The reduced minimum initial investment pursuant to an
automatic investment plan is referred to in the Prospectus. An Investment
Builder application must be completed to open an automatic investment plan. An
application may be found in the Prospectus or may be obtained by calling the
Distributor at 800-225-5478 or your investment dealer.
This program is voluntary and may be terminated at any time by 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 the shareholder at least thirty days
prior to any payment date. State Street Bank is under no obligation to notify
shareholders as to the nonpayment of any check.
Retirement Plans Offering Tax Benefits (Class A, B and C Shares)
The federal tax laws provide for a variety of retirement plans offering
tax benefits. These plans may be funded with shares of the Funds or with certain
other investments. The plans include H.R. 10 (Keogh) plans for self-employed
individuals and partnerships, individual retirement accounts (IRAs), corporate
pension trust and profit sharing plans, including 401(k) plans, and retirement
plans for public school systems and certain tax exempt organizations, i.e.,
403(b) plans.
The reduced minimum initial investment available to retirement plans
offering tax benefits is referred to in the Prospectus. For these plans, initial
investments in a Fund must be at least $250 for each participant in corporate
pension and profit sharing plans and Keogh plans, at least $500 for IRAs and at
least $100 for any subsequent investments. There is a special initial and
subsequent investment minimum of $25 for payroll deduction investment programs
for 401(k), SARSEP, SEP, SIMPLE Plans, 403(b) and certain other retirement
plans. Income dividends and capital gain distributions must be reinvested
(unless the investor is over age 59 1/2 or disabled). These types of accounts
may be subject to fees. Plan documents and further information can be obtained
from the Distributor.
An investor should consult a competent tax or other adviser as to the
suitability of a Fund's shares as a vehicle for funding a plan, in whole or in
part, under the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and as to the eligibility requirements for a specific plan and its
state as well as federal tax aspects.
Certain retirement plans may also be eligible to purchase Class Y shares.
See the Prospectus relating to Class Y shares.
Systematic Withdrawal Plans (Class A, B and C Shares)
An investor owning a Fund's shares having a value of $5,000 or more at the
current public offering price may establish a Systematic Withdrawal Plan
providing for periodic payments of a fixed or variable amount. An investor may
terminate the plan at any time. A form for use in establishing such a plan is
available from the servicing agent or your investment dealer. Withdrawals may be
paid to a person other than the shareholder if a signature guarantee is
provided. Please consult your investment dealer or the Distributor.
A shareholder under a Systematic Withdrawal Plan may elect to receive
payments monthly, quarterly, semiannually or annually for a fixed amount of not
less than $50 or a variable amount based on (1) the market value of a stated
number of shares, (2) a specified percentage of the account's market value or
(3) a specified number of years for liquidating the account (e.g., a 20-year
program of 240 monthly payments would be liquidated at a monthly rate of 1/240,
1/239, 1/238, etc.). The initial payment under a variable payment option may be
$50 or more.
In the case of shares subject to a CDSC, the amount or percentage you
specify may not, on an annualized basis, exceed 10% of the value, as of the time
you make the election, of your account with the Fund with respect to which you
are electing the Plan. Withdrawals of Class B shares of a Fund under the Plan
will be treated as redemptions of shares purchased through the reinvestment of
Fund distributions, or, to the extent such shares in your account are
insufficient to cover Plan payments, as redemptions from the earliest purchased
shares of such Fund in your account. No CDSC applies to a redemption pursuant to
the Plan.
All shares under the Plan must be held in an open (uncertificated)
account. Income dividends and capital gain distributions will be reinvested
(without a sales charge in the case of Class A shares) at net asset value
determined on the record date.
Since withdrawal payments represent proceeds from the liquidation of
shares, withdrawals may reduce and possibly exhaust the value of the account,
particularly in the event of a decline in net asset value. Accordingly, a
shareholder should consider whether a Systematic Withdrawal Plan and the
specified amounts to be withdrawn are appropriate in the circumstances. The
Funds and the Distributor make no recommendations or representations in this
regard. It may be appropriate for a shareholder to consult a tax adviser before
establishing such a plan.
It may be disadvantageous for a shareholder to purchase on a regular basis
additional Fund shares with a sales charge while redeeming shares under a
Systematic Withdrawal Plan. Accordingly, the Funds and the Distributor do not
recommend additional investments in Class A shares by a shareholder who has a
withdrawal plan in effect and who would be subject to a sales load on such
additional investments. 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 another Nvest Fund, subject to the investor
eligibility requirements of that other Fund and to state securities law
requirements. Shares will be purchased at the selected Fund's net asset value
(without a sales charge or CDSC) on the dividend record date. A dividend
diversification account must be in the same registration (shareholder name) as
the distributing Fund account and, if a new account in the purchased Fund is
being established, the purchased Fund's minimum investment requirements must be
met. Before establishing a Dividend Diversification Program into any other Nvest
Fund, you must obtain and carefully read a copy of that Fund's Prospectus.
Exchange Privilege
A shareholder may exchange the shares of any Fund (except that Class A
shares of the California Fund may only be exchanged if such shares have been
held for at least six months) for shares of the same class of any other Nvest
Fund (subject to the investor eligibility requirements, if any, of the Nvest
Fund into which the exchange is being made) on the basis of relative net asset
values at the time of the exchange without any sales charge. An exchange of
shares in one Fund for shares of another Fund is a taxable event on which gain
or loss may be recognized. In the case of Class A shares of the California Fund
held less than six months, if exchanged for shares of any other Fund that has a
higher sales charge, shareholders will pay the difference between any sales
charge already paid on their shares and the higher sales charge of the Fund into
which they are exchanging at the time of the exchange. Exchanges of Class A
shares of Short Term Corporate Income Fund (formerly Adjustable Rate U.S.
Government Fund) purchased before December 1, 1998 will also pay the difference
between any sales charge already paid on their shares and the higher sales
charge of the Fund into which they are exchanging. When an exchange is made from
the Class A, Class B or Class C shares of one Fund to the same class of shares
of another Fund, the shares received by the shareholder in the exchange will
have the same age characteristics as the shares exchanged. The age of the shares
determines the expiration of the CDSC and, for the Class B shares, the
conversion date. If you own Class A, Class B or Class C shares, you may also
elect to exchange your shares of any Fund for shares of the same class of the
Money Market Funds. On all exchanges of Class A or C shares subject to a CDSC
and Class B shares into the Money Market Funds, the exchange stops the aging
period relating to the CDSC, and, for Class B shares only, conversion to Class A
shares. The aging period resumes only when an exchange is made back into Class B
shares of a Fund. In addition, you may also exchange Class A shares of the Money
Market Funds that have not previously paid a sales charge to Class B or Class C
shares of any Nvest Fund. If you own Class Y shares, you may exchange those
shares for Class Y shares of other Funds or for Class A shares of the Money
Market Funds. These options are summarized in the Prospectus. An exchange may be
effected, provided that neither the registered name nor address of the accounts
are different and provided that a certificate representing the shares being
exchanged has not been issued to the shareholder, by (1) a telephone request to
the Fund or Nvest Services Company at 800-225-5478 or (2) a written exchange
request to the Fund or Nvest Services Company, P.O. Box 8551, Boston, MA
02266-8551. You must acknowledge receipt of a current Prospectus for a Fund
before an exchange for that Fund can be effected. The minimum amount for an
exchange is $1,000.
Agents, general agents, directors and senior officers of New England
Financial and its insurance company subsidiaries may, at the discretion of New
England Financial, elect to exchange Class A shares of any series of the Trusts
acquired in connection with deferred compensation plans offered by New England
Financial for Class Y shares of any series of the Trusts which offers Class Y
shares. To obtain a prospectus and more information about Class Y shares, please
call the Distributor toll free at 800-225-5478.
Except as otherwise permitted by SEC rule, shareholders will receive at
least 60 days advance notice of any material change to the exchange privilege.
The investment objectives of the Nvest Funds (including the Kobrick Funds) and
the Money Market Funds as set forth in the Prospectuses are as follows:
STOCK FUNDS:
NVEST GROWTH FUND seeks long-term growth of capital through investments in
equity securities of companies whose earnings are expected to grow at a faster
rate than the United States economy.
NVEST CAPITAL GROWTH FUND seeks long-term growth of capital.
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 (FORMERLY GROWTH OPPORTUNITIES 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.
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.
ACCESS SHARES (NOT CURRENTLY OFFERED):
NVEST CORE EQUITY FUND seeks long-term capital appreciation by investing
all or substantially all of its assets in The Oakmark Fund.
NVEST STOCK AND BOND FUND seeks high current income as well as
preservation and growth of capital by investing all or substantially all of its
assets in The Oakmark Equity and Income Fund.
NVEST SELECT FUND seeks long-term capital appreciation by investing all or
substantially all of its assets in The Oakmark Select Fund.
NVEST SMALL CAP VALUE FUND seeks long-term capital appreciation by
investing all or substantially all of its assets in The Oakmark Small Cap Fund.
NVEST SMALL CAP GROWTH FUND seeks long-term capital growth by investing
all or substantially all of its assets in the Loomis Sayles Small Cap Growth
Fund.
NVEST TOTAL RETURN BOND FUND seeks high total investment return through a
combination of current income and capital appreciation by investing all or
substantially all of its assets in the Loomis Sayles Bond Fund.
MONEY MARKET FUNDS:
NVEST CASH MANAGEMENT TRUST - MONEY MARKET SERIES seeks maximum current
income consistent with preservation of capital and liquidity.
NVEST TAX EXEMPT MONEY MARKET TRUST - seeks current income exempt from
federal income taxes consistent with preservation of capital and liquidity.
As of March 31, 2000, the net assets of the Nvest Funds (including the Kobrick
Funds) and the Money Market Funds totaled over $8 billion.
Automatic Exchange Plan (Class A, B and C Shares)
As described in the Prospectus following the caption "Additional Investor
Services," a shareholder may establish an Automatic Exchange Plan under which
shares of a Fund are automatically exchanged each month for shares of the same
class of one or more of the other funds. Registration on all accounts must be
identical. The two dates each month on which exchanges may be made are the 15th
and 28th (or the first business day thereafter if either the 15th or the 28th is
not a business day) until the account is exhausted or until Nvest Services
Company is notified in writing to terminate the plan. Exchanges may be made in
amounts of $100 or more. The Service Options Form is available from Nvest
Services Company or your financial representative to establish an Automatic
Exchange Plan.
Broker Trading Privileges
The Distributor may, from time to time, enter into agreements with one or
more brokers or other intermediaries to accept purchase and redemption orders
for Fund shares until the close of regular trading on the Exchange (normally,
4:00 p.m. Eastern Time on each day that the Exchange is open for trading); such
purchase and redemption orders will be deemed to have been received by the Fund
when the authorized broker or intermediary accepts such orders; and such orders
will be priced using that Fund's net asset value next computed after the orders
are placed with and accepted by such brokers or intermediaries. Any purchase and
redemption orders received by a broker or intermediary under these agreements
will be transmitted daily to the Distributor no later than the time specified in
such agreement; but, in any event, no later than 6:00 a.m. following the day
that such purchase or redemption orders are received by the broker or
intermediary.
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 are subject to the terms and conditions
outlined in the following NVEST FUNDS ONLINE AND TELEPHONIC CUSTOMER AGREEMENT.
This agreement is also posted on our Web site. The initiation of any activity
through the Nvest Funds Personal Access Line(R), or Web site at
www.nvestfunds.cOm by an investor shall indicate agreement with the following
terms and conditions:
NVEST FUNDS ONLINE AND TELEPHONIC CUSTOMER AGREEMENT NOTE:
ACCESSING OR REQUESTING ACCOUNT INFORMATION OR TRANSACTIONS THROUGH THIS SITE
CONSTITUTES AND SHALL BE DEEMED TO BE AN ACCEPTANCE OF THE FOLLOWING TERMS AND
CONDITIONS.
The accuracy, completeness and timeliness of all mutual fund information
provided is the sole responsibility of the mutual fund company which provides
the information. No party which provides a connection between this web site and
a mutual fund or its transfer agency system can verify or ensure the receipt of
any information transmitted to or from a mutual fund or its transfer agent, or
the acceptance by, or completion of any transaction with, a mutual fund.
The online acknowledgments or other messages which appear on your screen for
transactions entered do not mean that the transactions have been received,
accepted or rejected by the mutual fund. These acknowledgments are only an
indication that the transactional information entered by you has either been
transmitted to the mutual fund, or that it cannot be transmitted. It is the
responsibility of the mutual fund to confirm to you that it has received the
information and accepted or rejected a transaction. It is the responsibility of
the mutual fund to deliver to you a current prospectus, confirmation statement
and any other documents or information required by applicable law.
NO TRANSACTION SHALL BE DEEMED ACCEPTED UNTIL YOU RECEIVE A WRITTEN CONFIRMATION
FROM THE FUND COMPANY.
You are responsible for reviewing all mutual fund account statements received by
you in the mail in order to verify the accuracy of all mutual fund account
information provided in the statement and transactions entered through this
site. You are also responsible for promptly notifying the mutual fund of any
errors or inaccuracies relating to information contained in, or omitted from
your mutual fund account statements, including errors or inaccuracies arising
from the transactions conducted through this site.
TRANSACTIONS ARE SUBJECT TO ALL REQUIREMENTS, RESTRICTIONS AND FEES AS SET FORTH
IN THE PROSPECTUS OF THE SELECTED FUND.
THE CONDITIONS SET FORTH IN THIS AGREEMENT EXTEND NOT ONLY TO TRANSACTIONS
TRANSMITTED VIA THE INTERNET BUT TO TELEPHONIC TRANSACTIONS INITIATED THROUGH
THE NVEST FUNDS PERSONAL ACCESS LINE(R).
You are responsible for the confidentiality and use of your personal
identification numbers, account numbers, social security numbers and any other
personal information required to access the site or transmit telephonically. Any
individual that possesses the information required to pass through all security
measures will be presumed to be you. All transactions submitted by an individual
presumed to be you will be solely your responsibility.
You agree that Nvest Funds does not have the responsibility to inquire as to the
legitimacy or propriety of any instructions received from you or any person
believed to be you, and is not responsible or liable for any losses that may
occur from acting on such instructions.
Nvest Funds is not responsible for incorrect data received via the Internet or
telephonically from you or any person believed to be you. Transactions submitted
over the Internet and telephonically are solely your responsibility and Nvest
Funds makes no warranty as to the correctness, completeness, or the accuracy of
any transmission. Similarly Nvest Funds bears no responsibility for the
performance of any computer hardware, software, or the performance of any
ancillary equipment and services such as telephone lines, modems, or Internet
service providers.
The processing of transactions over this site or telephonically will involve the
transmission of personal data including social security numbers, account numbers
and personal identification numbers. While Nvest Funds has taken reasonable
security precautions including data encryption designed to protect the integrity
of data transmitted to and from the areas of our Web site that relate to the
processing of transactions, we disclaim any liability for the interception of
such data.
You agree to immediately notify Nvest Funds if any of the following occurs:
1. You do not receive confirmation of a transaction submitted via the Internet
or telephonically within five (5) business days.
2. You receive confirmation of a transaction of which you have no knowledge and
was not initiated or authorized by you.
3. You transmit a transaction for which you do not receive a confirmation
number.
4. You have reason to believe that others may have gained access to your
personal identification number (PIN) or other personal data.
5. You notice an unexplained discrepancy in account balances or other changes to
your account, including address changes, and banking instructions on any
confirmations or statements.
Any costs incurred in connection with the use of the Nvest Funds Personal Access
Line(R) or the Nvest Funds Internet site including telephone line costs, and
Internet service provider costs are solely your responsibility. Similarly Nvest
Funds makes no warranties concerning the availability of Internet services, or
network availability.
Nvest Funds reserves the right to suspend, terminate or modify the Internet
capabilities offered to shareholders without notice.
YOU HAVE THE ABILITY TO RESTRICT INTERNET AND TELEPHONIC ACCESS TO YOUR ACCOUNTS
BY NOTIFYING NVEST FUNDS OF YOUR DESIRE TO DO SO.
Written notifications to Nvest Funds should be sent to:
Nvest Funds
P O Box 8551
Boston, MA 02266-8551
Notification may also be made by calling 800-225-5478 during normal business
hours.
- --------------------------------------------------------------------------------
REDEMPTIONS
- --------------------------------------------------------------------------------
The procedures for redemption of shares of a Fund are summarized in the
Prospectus. As described in the Prospectus, a CDSC may be imposed on certain
purchases of Class A, Class B and Class C shares. For purposes of the CDSC, an
exchange of shares from one fund to another fund is not considered a redemption
or a purchase. For federal tax purposes, however, such an exchange is considered
a sale and a purchase and, therefore, would be considered a taxable event on
which you may recognize a gain or loss. In determining whether a CDSC is
applicable to a redemption of Class A, Class B or Class C shares, the
calculation will be determined in the manner that results in the lowest rate
being charged. Therefore, for Class B shares it will be assumed that the
redemption is first of any Class A shares in the shareholder's Fund account,
second of shares held for over six years, third of shares issued in connection
with dividend reinvestment and fourth of shares held longest during the six-year
period. For Class C shares and Class A shares subject to CDSC, it will be
assumed that the redemption is first of any shares that have been in the
shareholder's Fund account for over a year, and second of any shares that have
been in the shareholder's Fund account for under a year. The charge will not be
applied to dollar amounts representing an increase in the net asset value of
shares since the time of purchase or reinvested distributions associated with
such shares. Unless you request otherwise at the time of redemption, the CDSC is
deducted from the redemption, not the amount remaining in the account.
To illustrate, assume an investor purchased 100 Class B shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares under dividend reinvestment. If at such time the investor
makes his or her first redemption of 50 shares (proceeds of $600), 10 shares
will not be subject to the CDSC because of dividend reinvestment. With respect
to the remaining 40 shares, the CDSC is applied only to the original cost of $10
per share and not to the increase in the net asset value of $2 per share.
Therefore, $400 of the $600 redemption proceeds will be charged at a rate of 4%
(the applicable rate in the second year after purchase).
For Class B shares purchased prior to May 1, 1997, the CDSC will be
calculated as follows: 4% if redemption occurs within the first year, 3% if
redemption occurs within the second year or third year, 2% if redemption occurs
within the fourth year, 1% if redemption occurs within the 5th year and no CDSC
for redemptions after the fifth year. Class C shares purchased prior to March 1,
1998 are not subject to a CDSC on redemption.
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 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 by telephone, subject to
established verification procedures.
Checkwriting is available on Class A shares of Limited Term U.S.
Government Fund and Short Term Corporate Income Fund. 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 $500 or
more. The checkwriting privilege does not apply to shares for which you have
requested share certificates to 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. Limited Term U.S. Government Fund, Short Term Corporate
Income Fund 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 your 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 ten
calendar days prior to the redemption request (unless the Fund is aware that the
check has cleared).
The CDSC may be waived on redemptions made from IRA accounts due to
attainment of age 59 1/2 for IRA shareholders who established accounts prior to
January 3, 1995. The CDSC may also be waived on redemptions made from IRA
accounts due to death, disability, return of excess contribution, required
minimum distributions at age 70 1/2 (waivers apply only to amounts necessary to
meet the required minimum amount), certain withdrawals pursuant to a systematic
withdrawal plan, not to exceed 10% annually of the value of the account, and
redemptions made from the account to pay custodial fees.
The CDSC may be waived on redemptions made from 403(b)(7) custodial
accounts due to attainment of age 59 1/2 for shareholders who established
custodial accounts prior to January 3, 1995.
The CDSC may also be waived on redemptions necessary to pay plan
participants or beneficiaries from qualified retirement plans under Section 401
of the Code, including profit sharing plans, money purchase plans, 401(k) and
custodial accounts under Section 403(b)(7) of the Code. Distributions necessary
to pay plan participants and beneficiaries include payment made due to death,
disability, separation from service, normal or early retirement as defined in
the plan document, loans from the plan and hardship withdrawals, return of
excess contributions, required minimum distributions at age 70 1/2 (waivers only
apply to amounts necessary to meet the required minimum amount), certain
withdrawals pursuant to a systematic withdrawal plan, not to exceed 10% annually
of the value of your account, and redemptions made from qualified retirement
accounts or Section 403(b)(7) custodial accounts necessary to pay custodial
fees.
A CDSC will apply in the event of plan level transfers, including
transfers due to changes in investment where assets are transferred outside of
Nvest Funds, including IRA and 403(b)(7) participant-directed transfers of
assets to other custodians (except for the reasons given above) or qualified
transfers of assets due to trustee-directed movement of plan assets due to
merger, acquisition or addition of additional funds to the plan.
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
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.
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 also "Income Dividends, Capital Gain Distributions and Tax
Status," below.
The Funds may also close your account and send you the proceeds if the
balance in your account falls below a minimum amount set by each Trust's Board
of Trustees (currently $1,000 for all accounts except Keogh, pension and profit
sharing plans, automatic investment plans and accounts that have fallen below
the minimum solely because of fluctuations in the net asset value per share).
Shareholders who are affected by this policy will be notified of the Fund's
intention to close the account and will have 60 days immediately following the
notice to bring the account up to the minimum.
Reinstatement Privilege (Class A shares only)
The Prospectus describes redeeming shareholders' reinstatement privileges
for Class A shares. Written notice and the investment check from persons wishing
to exercise this reinstatement privilege must be received by your investment
dealer within 120 days after the date of the redemption. The reinstatement or
exchange will be made at net asset value next determined after receipt of the
notice and the investment check and will be limited to the amount of the
redemption proceeds or to the nearest full share if fractional shares are not
purchased.
Even though an account is reinstated, the redemption will constitute a
sale for federal income tax purposes. Investors who reinstate their accounts by
purchasing shares of the Funds should consult with their tax advisers with
respect to the effect of the "wash sale" rule if a loss is realized at the time
of the redemption.
- --------------------------------------------------------------------------------
STANDARD PERFORMANCE MEASURES
- --------------------------------------------------------------------------------
Calculations of Yield
Each Fund (except Growth, Growth and Income, Star Advisers, Star
Worldwide, Star Small Cap, Star Value, International Equity, Equity Income,
Bullseye and Capital Growth Funds) may advertise the yield of its Class A, Class
B, Class C and Class Y shares. Yield for each class will be computed by
annualizing net investment income per share for a recent 30-day period and
dividing that amount by the maximum offering price per share of the relevant
class (reduced by any undeclared earned income expected to be paid shortly as a
dividend) on the last trading day of that period. Net investment income will
reflect amortization of any market value premium or discount of fixed-income
securities (except for obligations backed by mortgages or other assets) and may
include recognition of a pro rata portion of the stated dividend rate of
dividend paying portfolio securities. Each Fund's yield will vary from time to
time depending upon market conditions, the composition of its portfolio and
operating expenses of the relevant Trust allocated to each Fund. These factors,
possible differences in the methods used in calculating yield and the tax exempt
status of distributions should be considered when comparing a Fund's yield to
yields published for other investment companies and other investment vehicles.
Yield should also be considered relative to changes in the value of the Fund's
shares and to the relative risks associated with the investment objectives and
policies of the Fund. Yields do not take into account any applicable sales
charges or CDSC. Yield may be stated with or without giving effect to any
expense limitations in effect for a Fund. For those funds that present yields
reflecting an expense limitation or waiver, its yield would have been lower if
no limitation or waiver were in effect.
Each Fund may also present one or more distribution rates for each class
in its sales literature. These rates will be determined by annualizing the
class's distributions from net investments income and net short-term capital
gain over a recent 12-month, 3-month or 30-day period and dividing that amount
by the maximum offering price or the net asset value, rather than the maximum
offering price, is used to calculate the distribution rate, the rate will be
higher.
The Municipal Income Fund, the Massachusetts Fund and the California Fund
each may also advertise a taxable equivalent yield, calculated as described
above except that, for any given tax bracket, net investment income will be
calculated using as gross investment income an 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 (or combined
federal and state) income tax rate for taxpayers in that tax bracket. To see the
taxable equivalent yield calculation charts for these Funds, see the section
entitled "Miscellaneous Investment Practices of the Funds."
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 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.
Calculation of Total Return. Total return is a measure of the change in
value of an investment in a Fund over the period covered, which assumes that any
dividends or capital gains distributions are automatically reinvested in shares
of the same class of that Fund rather than paid to the investor in cash. Each
Fund may show each class's average annual total return for the one-year,
five-year and ten-year periods (or for the life of the class, if shorter)
through the end of the most recent calendar quarter. The formula for total
return used by the Funds is prescribed by the SEC and includes three steps: (1)
adding to the total number of shares of the particular class that would be
purchased by a hypothetical $10,000 investment in the Fund (with or without
giving effect to the deduction of sales charge or CDSC, if applicable) all
additional shares that would have been purchased if all dividends and
distributions paid or distributed during the period had been automatically
reinvested; (2) calculating the value of the hypothetical initial investment as
of the end of the period by multiplying the total of shares owned at the end of
the period by the net asset value per share of the relevant class on the last
trading day of the period; (3) dividing this account value for the hypothetical
investor by the amount of the initial investment, and annualizing the result for
periods of less than one year. Total return may be stated with or without giving
effect to any expense limitations in effect for a Fund. For those funds that
present returns reflecting an expense limitation or waiver, its total return
would have been lower if no limitation or waiver were in effect.
Performance Comparisons
Yield and Total Return. Yields and total returns will generally be higher
for Class A shares than for Class B and Class C shares of the same Fund, because
of the higher levels of expenses borne by the Class B and Class C shares.
Because of its lower operating expenses, Class Y shares of each Fund can be
expected to achieve a higher yield and total return than the same Fund's Class
A, Class B and Class C shares. The Funds may from time to time include their
yield and total return in advertisements or in information furnished to present
or prospective shareholders. The Funds may from time to time include in
advertisements its total return and the ranking of those performance figures
relative to such figures for groups of mutual funds categorized by Morningstar,
Inc. ("Morningstar") or Lipper, Inc. ("Lipper") as having similar investment
objectives or styles.
Total return may also be used to compare the performance of the Fund
against certain widely acknowledged standards or indices for stock and bond
market performance or against the U.S. Bureau of Labor Statistics' Consumer
Price Index.
The Standard & Poor's Composite Index of 500 Stocks (the "S&P 500") is a
market capitalization-weighted and unmanaged index showing the changes in the
aggregate market value of 500 stocks relative to the base period 1941-43. The
S&P 500 is composed almost entirely of common stocks of companies listed on the
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included.
The Standard & Poor's Composite Index of 400 Stocks (the "S&P 400") is a
market capitalization-weighted and unmanaged index that includes approximately
10% of the capitalization of U.S. equity securities. This index is comprised of
stocks in the middle capitalization range. Any midcap stocks already included in
the S&P 500 are excluded from this index.
The Lehman Aggregate Bond Index is a market capitalization-weighted
aggregate index that includes nearly all debt issued by the U.S. Treasury, U.S.
government agencies, U.S. corporations rated investment grade, and U.S. agency
debt backed by mortgage pools.
The Lehman U.S. Government Bond Index (the "Lehman Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury which
must have at least one year to final maturity; all publicly issued debt of all
agencies of the U.S. government and all quasi-federal corporations; and all
corporate debt guaranteed by the U.S. government.
The Lehman Intermediate U.S. Government Bond Index (the "Lehman Int.
Government Index") is a market capitalization-weighted and unmanaged index of
bonds issued by the U.S. government and its agencies having maturities between
one and ten years.
The Lehman Government/Corporate Bond Index (the "Lehman G/C Index")
includes securities in the Government and Corporate Indices. The Government
Index includes treasuries (i.e., public obligations of the U.S. Treasury that
have remaining maturities of more than one year) and agencies (i.e., publicly
issued debt of U.S. Government agencies, quasi-federal corporations, and
corporate or foreign debt guaranteed by the U.S. Government). The Corporate
Index includes publicly issued U.S. corporate and Yankee debentures and secured
notes that meet specified maturity, liquidity, and quality requirements.
The Lehman Intermediate Government/Corporate Bond Index (the "Lehman Int.
G/C Index") is a market capitalization-weighted and unmanaged index composed of
the Lehman Government and Corporate Bond indices which include bonds with
maturities of up to ten years.
The Lehman High Yield Corporate Bond Index is a market
capitalization-weighted and unmanaged index of fixed-rate, noninvestment grade,
and coupon-bearing bonds with an outstanding par value of at least $150 million.
Generally securities in the index must be rated Ba1 or lower by Moody's
Investors Service, including defaulted issues. If no Moody's rating is
available, bonds must be rated BB+ or lower by S&P; and if no S&P rating is
available, bonds must be rated below investment grade by Fitch Investor's
Service. A small number of unrated bonds is included in the index; to be
eligible they must have previously held a high yield rating or have been
associated with a high yield issuer, and must trade accordingly.
The Lehman Universal Bond Index is an unmanaged index representing 85% of
the return of the Lehman Brothers Aggregate Bond Index, 5% of the Lehman
Brothers High Yield Corporate Bond Index, 4% of the Lehman Brothers Emerging
Market Index, 5% of Eurodollar instruments and 1% of 144A Commercial Paper.
The Lehman Brothers Municipal Bond Index is a composite measure of the
total return performance of the municipal bond market. This index is computed
from prices on approximately 42,000 bonds.
The Lehman Mutual Fund Short (1-5) Investment Grade Debt Index is an
unmanaged index composed of publicly issued, fixed-rate, nonconvertible
investment grade domestic corporate debt with maturities of 1 to 5 years.
The Dow Jones Industrial Average is a market value-weighted and unmanaged
index of 30 large industrial stocks traded on the Exchange.
The Consumer Price Index, published by the U.S. Bureau of Labor
Statistics, is a statistical measure of changes, over time, in the prices of
goods and services in major expenditure groups.
The Funds may cite their ratings, recognition, or other mention by
Morningstar or any other entity. Morningstar's rating system is based on
risk-adjusted total return performance and is expressed in a star-rating format.
The risk-adjusted number is computed by subtracting a fund's risk score (which
is a function of the fund's monthly returns less the 3-month Treasury Bill
return) from the fund's load adjusted total return score. This numerical score
is then translated into rating categories with the top 10% labeled five star,
the next 22.5% labeled four star, the next 35% labeled three star, the next
22.5% labeled two star and the bottom 10% one star. A high rating reflects
either above-average returns or below-average risk or both. Each Fund may also
compare its performance or ranking against all funds tracked by Morningstar or
another independent service, including Lipper.
Lipper Indices and Averages are calculated and published by Lipper,
an independent service that monitors the performance of more than 1,000 funds.
The Funds may also use comparative performance as computed in a ranking by
Lipper or category averages and rankings provided by another independent
service. Should Lipper or another service reclassify a Fund to a different
category or develop (and place a Fund into) a new category, the Fund may compare
its performance or ranking against other funds in the newly assigned category,
as published by the service.
The Russell 3000 Index is a market capitalization-weighted index
which comprises 3,000 of the largest capitalized U.S. companies whose common
stock is traded in the United States on the Exchange, the American Stock
Exchange and NASDAQ. The Russell 2000 Index represents the smallest 2,000
companies within the Russell 3000 Index as measured by market capitalization.
The Russell 1000 Index represents the largest 1,000 companies within the Russell
3000 Index. The Russell 1000 Growth Index is an unmanaged subset of stocks from
the larger Russell 1000 Index, selected for their greater growth orientation.
The Russell 1000 Value Index is an unmanaged subset of stocks from the larger
Russell 1000 Index, selected for their greater value orientation.
The Morgan Stanley Capital International Europe, Australasia and Far East
Index (the "MSCI EAFE Index") is a market capitalization-weighted and unmanaged
index of common stocks traded outside the United States. The stocks in the index
are selected with reference to national and industry representation and weighted
in the EAFE Index according to their relative market values (market price per
share times the number of shares outstanding).
The Morgan Stanley Capital International Europe, Australasia and Far East
(Gross Domestic Product) Index (the "EAFE (GDP) Index") is a market
capitalization-weighted and unmanaged index of common stocks traded outside the
United States. The stocks in the index are selected with reference to national
and industry representation and weighted in the EAFE (GDP) Index according to
their relative market values. The relative market value of each country is
further weighted with reference to the country's relative gross domestic
product.
The Morgan Stanley Capital International World ND Index (the "MSCI World
Index") is a market capitalization-weighted and unmanaged index that includes
common stock from all 23 MSCI developed market countries. The "ND" indicates
that the index is listed in U.S. dollars, with net dividends reinvested.
International Equity and Star Worldwide Funds may compare their
performance to the Salomon-Russell Broad Market Index Global X-US and to
universes of similarly managed investment pools compiled by Frank Russell
Company and Intersec Research Corporation.
Advertising and promotional materials may refer to the maturity and
duration of the Bond Funds. Maturity refers to the period of time before a bond
or other debt instrument becomes due. Duration is a commonly used measure of the
price responsiveness of a fixed-income security to an interest rate change
(i.e., the change in price one can expect from a given change in yield).
Articles and releases, developed by the Funds and other parties, about the
Funds regarding performance, rankings, statistics and analyses of the individual
Funds' and the fund group's asset levels and sales volumes, numbers of
shareholders by Fund or in the aggregate for Nvest Funds, statistics and
analyses of industry sales volumes and asset levels, and other characteristics
may appear in advertising, promotional literature, publications, including, but
not limited to, those publications listed in Appendix B to this Statement, and
on various computer networks, for example, the Internet. In particular, some or
all of these publications may publish their own rankings or performance reviews
of mutual funds, including, but not limited to, Lipper and Morningstar.
References to these rankings or reviews or reprints of such articles may be used
in the Funds' advertising and promotional literature. Such advertising and
promotional material may refer to Nvest Companies, its structure, goals and
objectives and the advisory subsidiaries of Nvest Companies, including their
portfolio management responsibilities, portfolio managers and their categories
and background; their tenure, styles and strategies and their shared commitment
to fundamental investment principles and may identify specific clients, as well
as discuss the types of institutional investors who have selected the advisers
to manage their investment portfolios and the reasons for that selection. The
references may discuss the independent, entrepreneurial nature of each advisory
organization and allude to or include excerpts from articles appearing in the
media regarding Nvest Companies, its advisory subsidiaries and their personnel.
For additional information about the Funds' advertising and promotional
literature, see Appendix C.
The Funds may use the accumulation charts below in their advertisements to
demonstrate the benefits of monthly savings at an 8% and 10% rate of return,
respectively.
INVESTMENTS AT 8% RATE OF RETURN
5 YRS. 10 15 20 25 30
------------------------------------------------------------------
$50 3,698 9,208 17,417 29,647 47,868 75,015
75 5,548 13,812 26,126 44,471 71,802 112,522
100 7,396 18,417 34,835 59,295 95,737 150,029
150 11,095 27,625 52,252 88,942 143,605 225,044
200 14,793 36,833 69,669 118,589 191,473 300,059
500 36,983 92,083 174,173 296,474 478,683 750,148
INVESTMENTS AT 10% RATE OF RETURN
5 YRS. 10 15 20 25 30
------------------------------------------------------------------
$50 3,904 10,328 20,896 38,285 66,895 113,966
75 5,856 15,491 31,344 57,427 100,342 170,949
100 7,808 20,655 41,792 76,570 133,789 227,933
150 11,712 30,983 62,689 114,855 200,684 341,899
200 15,616 41,310 83,585 153,139 267,578 455,865
500 39,041 103,276 208,962 382,848 668,945 1,139,663
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. For example, the advertising and sales literature of any of
the Nvest Funds, but particularly that of Star Worldwide Fund and International
Equity Fund, may discuss all of the above international developments, including,
but not limited to, international developments involving Europe, North and South
America, Asia, the Middle East and Africa, as well as events and issues
affecting specific countries that directly or indirectly may have had
consequences for the Nvest Funds or may have influenced past performance or may
influence current or prospective performance of 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 honors bestowed on it by industry organizations and
other observers and raters including, but not limited to, Dalbar's Quality
Tested Service Seal and Key Honors Award. Such reference may explain the
criteria for the award, indicate the nature and significance of the honor and
provide statistical and other information about the award and the Distributor's
selection including, but not limited to, the scores and categories in which the
Distributor excelled, the names of funds and fund companies that have previously
won the award and comparative information and data about those against whom the
Distributor competed for the award, honor or citation.
The Distributor may publish, allude to or incorporate in its advertising
and sales literature testimonials from shareholders, clients, brokers who sell
or own shares, broker-dealers, industry organizations and officials and other
members of the public, including, but not limited to, Fund performance, features
and attributes, or service and assistance provided by departments within the
organization, employees or associates of the Distributor.
Advertising and sales literature may also refer to the beta coefficient of
the Nvest Funds. A beta coefficient is a measure of systematic or
undiversifiable risk of a stock. A beta coefficient of more than 1 means that
the company's stock has shown more volatility than the market index (e.g., the
S&P 500) to which it is being related. If the beta is less than 1, it is less
volatile than the market average to which it is being compared. If it equals 1,
its risk is the same as the market index. High variability in stock price may
indicate greater business risk, instability in operations and low quality of
earnings. The beta coefficients of the Nvest Funds may be compared to the beta
coefficients of other funds.
The Funds may enter into arrangements with banks exempted from
broker-dealer registration under the Securities Exchange Act of 1934.
Advertising and sales literature developed to publicize such arrangements will
explain the relationship of the bank to the 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 indices.
- --------------------------------------------------------------------------------
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
- --------------------------------------------------------------------------------
As described in the Prospectus, it is the policy of each Fund to pay its
shareholders, as dividends, substantially all net investment income and to
distribute annually all net realized long-term capital gains, if any, after
offsetting any capital loss carryovers.
Ordinary income dividends and capital gain distributions are payable in
full and fractional shares of the relevant class of the particular Fund based
upon the net asset value determined as of the close of the Exchangeon the record
date for each dividend or distribution. Shareholders, however, may elect to
receive their ordinary income dividends or capital gain distributions, or both,
in cash. The election may be made at any time by submitting a written request
directly to Nvest Funds. In order for a change to be in effect for any dividend
or distribution, it must be received by Nvest Funds on or before the record date
for such dividend or distribution.
If you elect to receive your dividends in cash and the dividend checks
sent to you are returned "undeliverable" to the Fund or remain uncashed for six
months, your cash election will automatically be changed and your future
dividends will be reinvested. No interest will accrue on amounts represented by
uncashed dividend or redemption checks.
As required by federal law, detailed federal tax information will be
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year.
Each Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order to qualify, each Fund must, among other
things, (i) derive at least 90% of its gross income in each taxable year from
dividends, interest, payments with respect to certain securities loans, gains
from the sale of securities or foreign currencies, or other income (including,
but not limited to, gains from options, futures or forward contracts) derived
with respect to its business of investing in such stock, securities or
currencies; (ii) distribute at least 90% of its dividend, interest and certain
other taxable income each year; and (iii) diversify its holdings so that at the
end of each fiscal quarter, (a) at least 50% of the value of its total assets
consists of cash, U.S. government securities, securities of other regulated
investment companies, and other securities limited generally, with respect to
any one issuer, to no more than 5% of the value of the Fund's total assets and
10% of the outstanding voting securities of such issuer, and (b) not more than
25% of the value of its assets is invested in the securities (other than those
of the U.S. government or other regulated investment companies) of any one
issuer or of two or more issuers which the Fund controls and which are engaged
in the same, similar or related trades or businesses. So long as it qualifies
for treatment as a regulated investment company, a Fund will not be subject to
federal income tax on income paid to its shareholders in the form of dividends
or capital gains distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any, of
each Fund's "required distribution" over its actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 (or December 31, if
the Fund is so permitted to elect and so elects) plus undistributed amounts from
prior years. Each Fund intends to make distributions sufficient to avoid
imposition of the excise tax. Distributions declared and payable by a Fund
during October, November or December to shareholders of record on a date in any
such month and paid by the Fund during the following January will be treated for
federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.
Fund distributions paid to you either in cash or reinvested in additional
shares (other than "exempt-interest dividends" paid by the Municipal Income,
Massachusetts and California Funds, as described in the relevant Prospectuses)
are generally taxable to you either as ordinary income or as capital gains.
Distributions derived from short-term capital gains or investment income are
generally taxable at ordinary income rates. If you are a corporation investing
in a Fund, a portion of these dividends may qualify for the dividends-received
deduction provided that you meet certain holding period requirements.
Distributions of net long-term capital gains (i.e., the excess of net gains from
capital assets held for more than one year over net losses from capital assets
held for not more than one year) that are designated by a Fund as capital gain
dividends will generally be taxable to a shareholder receiving such
distributions as long-term capital gain (generally taxed at a 20% tax rate for
noncorporate shareholders) regardless of how long the shareholder has held Fund
shares. To avoid an excise tax, each Fund intends to distribute dividends prior
to calendar year-end. Some dividends paid in January may be taxable as if they
were received in the previous December.
Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when a Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.
Under the Code, the interest on so-called "private activity" bonds is an
item of tax preference, which, depending on the shareholder's particular tax
situation, might subject the shareholder to an alternative minimum tax with a
maximum rate of 28%. The interest on tax exempt bonds issued after certain dates
in 1986 is retroactively taxable from the date of issuance if the issuer does
not comply with certain requirements concerning the use of bond proceeds and the
application of earnings on bond proceeds.
Each Fund's transactions, if any, in foreign currencies and foreign
currency denominated bonds and its hedging activities are likely to result in a
difference between the Fund's book income and taxable income. This difference
may cause a portion of the Fund's income distributions to constitute a return of
capital or capital gain for tax purposes or require the Fund to make
distributions exceeding book income to avoid excise tax liability and to qualify
as a regulated investment company.
Funds investing in foreign securities may own shares in certain foreign
investment entities, referred to as "passive foreign investment companies." In
order to avoid U.S. federal income tax, and an additional charge on a portion of
any "excess distribution" from such companies or gain from the disposition of
such shares, each Fund has elected to "mark to market" annually its investments
in such entities and to distribute any resulting net gain to shareholders. Each
Fund may also elect to treat the passive foreign investment company as a
"qualified electing fund." As a result, each Fund may be required to sell
securities it would have otherwise continued to hold in order to make
distributions to shareholders to avoid any Fund-level tax.
Funds investing in foreign securities may be liable to foreign governments
for taxes relating primarily to investment income or capital gains on foreign
securities in the Fund's portfolio. Each Fund may in some circumstances be
eligible to, and in its discretion may, make an election under the Code which
would allow Fund shareholders who are U.S. citizens or U.S. corporations to
claim a foreign tax credit or deduction (but not both) on their U.S. income tax
return. If a Fund makes the election, the amount of each shareholder's
distribution reported on the information returns filed by such Fund with the
Internal Revenue Service must be increased by the amount of the shareholder's
portion of the Fund's foreign tax paid.
Redemptions and exchanges of each Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions.
Currently, if shares have been held for more than one year, gain or loss
realized will be taxed at long-term federal tax rates (generally 20% for
noncorporate shareholders), provided the shareholder holds the shares as a
capital asset. Furthermore, no loss will be allowed on the sale of Fund shares
to the extent the shareholder acquired other shares of the same Fund within 30
days prior to the sale of the loss shares or 30 days after such sale.
A loss on the sale of shares held for six months or less will be
disallowed for federal income tax purposes to the extent of exempt-interest
dividends received with respect to such shares and thereafter treated as a
long-term capital loss to the extent of any long-term capital gain dividend paid
to the shareholder with respect to such shares.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and related regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative actions.
Dividends and distributions also may be subject to state and local taxes.
Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.
Each Fund (possibly excepting Municipal Income Fund, Massachusetts Fund
and California Fund) is required to withhold 31% of all income dividends and
capital gains distributions it pays to you if you do not provide a correct,
certified taxpayer identification number, if a Fund is notified that you have
underreported income in the past or if you fail to certify to a Fund that you
are not subject to such withholding. If you are a tax-exempt shareholder,
however, these backup withholding rules will not apply so long as you furnish
the Fund with an appropriate certification.
The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements of the Funds and the related reports of
independent accountants included in the Funds' annual reports for the year ended
December 31, 1999 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.
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS
STANDARD & POOR'S RATINGS GROUP
AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay interest and repay
principal.
AA -- Bonds rated AA also qualify as high quality debt obligations. Capacity to
pay interest and repay principal is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to repay principal and pay interest for
bonds in this category than for bonds in higher rated categories.
BB, B, CCC, CC, C -- Bonds rated BB, B, CCC, CC and C are regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI -- The rating CI is reserved for income bonds on which no interest is being
paid.
D -- Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-); The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC.
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large, or by an exceptionally
stable, margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds that are rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds that are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default of there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Should no rating be assigned by Moody's, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is not longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
Note:Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, and B1.
FITCH INVESTOR SERVICES, INC.
AAA -- This is the highest rating assigned by Fitch to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA -- Bonds rated AA also qualify as high quality debt obligations. Capacity to
pay interest and repay principal is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to repay principal and pay interest for
bonds in this category than for bonds in higher rated categories.
BB, B, CCC, CC, C -- Bonds rated BB, B, CCC, CC and C are regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI -- The rating CI is reserved for income bonds on which no interest is being
paid.
D -- Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-); The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
<PAGE>
APPENDIX B
MEDIA THAT MAY CONTAIN FUND INFORMATION
ABC and affiliates
Adam Smith's Money World
America OnLine
Anchorage Daily News
Arizona Republic
Atlanta Constitution
Atlanta Journal
Austin American Statesman
Baltimore Sun
Bank Investment Marketing
Barron's
Bergen County Record (NJ)
Bloomberg Business News
B'nai B'rith Jewish Monthly
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
Cincinnati Post
CNBC
CNN
Columbus Dispatch
CompuServe
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghues Money Fund Report
Dorfman, Dan (syndicated column)
Dow Jones News Service
Economist
FACS of the Week
Fee Adviser
Financial News Network
Financial Planning
Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World
Fitch Insights
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Fund Decoder
Global Finance
(the) Guarantor
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Individual Investor
Institutional Investor
International Herald Tribune
Internet Investment Advisor
Investment Company Institute
Investment Dealers Digest
Investment Profiles
Investment Vision
Investor's Business Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas City)
KOA-AM (Denver)
LA Times
Leckey, Andrew (syndicated column)
Lear's
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
Mutual Funds Magazine
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
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 C
ADVERTISING AND PROMOTIONAL LITERATURE
References may be included in Nvest Funds' advertising and promotional
literature to Nvest Companies and its affiliates that perform advisory and
subadvisory functions for Nvest Funds also including, but not limited to: Back
Bay Advisors, Harris Associates, Loomis Sayles, CGM, Westpeak, 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 Family of Funds advised by Harris
Associates.
References may be included in Nvest Funds' advertising and promotional
literature to other Nvest Companies affiliates including, but not limited to
Nvest Corporation, AEW Capital Management, L.P., Snyder Capital Management, L.P,
Reich & Tang Capital Management, Reich & Tang Funds and their fund groups.
References to subadvisers unaffiliated with Nvest Companies that perform
subadvisory functions on behalf of Nvest Funds and their respective fund groups
may be contained in Nvest Funds' advertising and promotional literature
including, but not limited to, Janus Capital, Montgomery and RS Investment
Management.
Nvest Funds' advertising and promotional material will include, but is not
limited to, discussions of the following information about both affiliated and
unaffiliated entities:
[] 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;
[] Specific and general investment emphasis, specialties, fields of expertise,
competencies, operations and functions;
[] Specific and general investment philosophies, strategies, processes,
techniques and types of analysis;
[] 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;
[] The corporate histories, founding dates and names of founders of the
entities;
[] Awards, honors and recognition given to the entities;
[] The names of those with ownership interest and the percentage of ownership
interest;
[] 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;
[] Current capitalizations, levels of profitability and other financial and
statistical information;
[] Identification of portfolio managers, researchers, economists, principals
and other staff members and employees;
[] 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;
[] Specific and general reference to past and present notable and renowned
individuals including reference to their field of expertise and/or specific
accomplishments;
[] Current and historical statistics regarding:
-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 sub-adviser;
[] The general and specific strategies applied by the advisers 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, the
strict buy/sell guidelines and focus on sound value it employs, and goals
and benchmarks that it establishes in management, e.g., CGM 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's efforts to identify overvalued and undervalued issues; and
[] 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 sub-advisers, including,
but not limited to, those provided by Morningstar, Lipper, Forbes and Worth.
In addition, communications and materials developed by Nvest Funds will
make reference to the following information about Nvest Companies and its
affiliates:
Nvest Companies is part of an affiliated group including Nvest, L.P. a
publicly traded company listed on theExchange. Nvest Companies has 18 principal
subsidiary or affiliated asset management firms, which collectively had $134
billion of assets under management as of March 31, 2000. In addition,
promotional materials may include:
[] Specific and general references to Nvest Funds multi-manager approach
through Nvest Companies affiliates and outside firms including, but not
limited to, the following:
-that each adviser/manager operates independently on a day-to-day basis
and maintains an image and identity separate from Nvest Companies and the
other investment 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.
Nvest Managed Account Services ("NMAS"), Nvest Advisor Services ("NAS")
and Nvest Retirement Services ("NRS"), divisions of Nvest Companies, may be
referenced in Fund advertising and promotional literature concerning the
marketing services it provides to Nvest Companies affiliated fund groups
including: Nvest Funds, Loomis Sayles Funds, Jurika & Voyles, Back Bay Advisors,
Oakmark Funds, Delafield Fund and Kobrick Funds.
NMAS, NAS and NRS will provide marketing support to Nvest Companies
affiliated fund groups targeting financial advisers, financial intermediaries
and institutional clients who may transact purchases and other fund-related
business directly with these fund groups. Communications will contain
information including, but not limited to: descriptions of clients and the
marketplaces to which it directs its efforts; the mission and goals of NAS and
NRS and the types of services it provides which may include: seminars; its 1-800
number, web site, Internet or other electronic facilities; qualitative
information about the funds' investment methodologies; information about
specific strategies and management techniques; performance data and features of
the funds; institutional oriented research and portfolio manager insight and
commentary. Additional information contained in advertising and promotional
literature may include: rankings and ratings of the funds including, but not
limited to, those of Morningstar and Lipper; 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 its 401(k) and retirement plans. The information may include,
but is not limited to:
[] 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.
[] 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.
[] 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.
[] Specific and general discussion of the benefits of 401(k) investment and
retirement plans, and, in particular, the Nvest Funds 401(k) and retirement
plans, to the participant and plan sponsor, including explanations,
statistics and other data, about:
-increased employee retention
-reinforcement or creation of morale
-deductibility of contributions for participants
-deductibility of expenses for employers
-tax deferred growth, including illustrations and charts
-loan features and exchanges among accounts
-educational services materials and efforts, including, but not limited
to, videos, slides, presentation materials, brochures, an investment
calculator, payroll stuffers, quarterly publications, releases and
information on a periodic basis and the availability of wholesalers and
other personnel.
[] Specific and general reference to the benefits of investing in mutual funds
for 401(k) and retirement plans, and Nvest Funds as a 401(k) or retirement
plan funding vehicle.
[] 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>
APPENDIX D
For the fiscal year ended December 31, 1999, Short Term Corporate Income
Fund invested 2.3%, and Balanced Fund invested 2.7%, of their respective
portfolios in securities rated below investment grade (those rated "BB" or lower
by Standard & Poor's or "Ba" or lower by Moody's). Massachusetts Tax Free Income
Fund, Intermediate Term Tax Free Fund of California and Limited Term U.S.
Government Fund did not invest in securities rated below investment grade for
the fiscal year ended December 31, 1999. The following tables show the portfolio
composition of those funds that invested at least 5% of their respective
portfolios in securities below investment grade for the fiscal year ended
December 31, 1999.
AVERAGE MONTHLY PORTFOLIO COMPOSITION TABLE OF THE
HIGH INCOME FUND FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
PERCENTAGE
SECURITY OF NET ASSETS
-------- -------------
Common Stock .......................... 0.0%
Preferred Stock ....................... 11.1%
Short-term Obligations and Other Assets 10.7%
Debt - Unrated ........................ 0.0%
Debt -- Standard and Poor's Rating
AAA ............................... 0.0%
BBB ............................... 0.0%
BB ................................ 15.4%
B ................................. 53.1%
CCC ............................... 8.8%
D ................................. 0.9%
The chart above indicates the composition of the High Income Fund for the fiscal
year ended December 31, 1999, with the debt securities rated by S&P separated
into the indicated categories. The percentages were calculated on a
dollar-weighted average basis by determining monthly the percentage of the High
Income Fund's net assets invested in each category as of the end of each month
during the year. Loomis Sayles does not rely primarily on ratings designed by
any rating agency in making investment decisions. The chart does not necessarily
indicate what the composition of the Fund's portfolio will be in subsequent
fiscal years.
AVERAGE MONTHLY PORTFOLIO COMPOSITION TABLE OF THE
STRATEGIC INCOME FUND FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
PERCENTAGE
SECURITY OF NET ASSETS
-------- -------------
Common Stock .......................... 5.7%
Preferred Stock ....................... 3.0%
Short-term Obligations and Other Assets 1.8%
Debt - Unrated ........................ 14.4%
Debt - Standard and Poor's Rating
AAA ............................... 6.0%
AA ................................ 11.8%
A ................................. 2.4%
BBB ............................... 12.0%
BB ................................ 13.6%
B ................................. 22.2%
CCC and lower ..................... 7.1%
The chart above indicates the composition of the Strategic Income Fund for the
fiscal year ended December 31, 1999, with the debt securities rated by S&P
separated into the indicated categories. The percentages were calculated on a
dollar-weighted average basis by determining monthly the percentage of the
Strategic Income Fund's net assets invested in each category as of the end of
each month during the year. Loomis Sayles does not rely primarily on ratings
designed by any rating agency in making investment decisions. The chart does not
necessarily indicate what the composition of the Fund's portfolio will be in
subsequent fiscal years.
AVERAGE MONTHLY PORTFOLIO COMPOSITION TABLE OF THE
BOND INCOME FUND FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
PERCENTAGE
OF NET
SECURITY ASSETS
-------- ------
Short-term Obligations and Other Assets 1.6%
Debt -- Unrated ....................... 2.7%
Debt -- Standard & Poor's Rating
AAA ............................... 20.9%
AA ................................ 9.4%
A ................................. 15.2%
BBB ............................... 34.5%
BB ................................ 14.0%
B ................................. 1.7%
CCC ............................... 0.0%
C/D ............................... 0.0%
The chart above indicates the composition of the Bond Income Fund for the fiscal
year ended December 31, 1999, with the debt securities rated by S&P separated
into the indicated categories. The percentages were calculated on a
dollar-weighted average basis by determining monthly the percentage of the
Fund's net assets invested in each category as of the end of each month during
the year. Back Bay Advisors does not rely primarily on ratings designed by any
rating agency in making investment decisions. The chart does not necessarily
indicate what the composition of the Fund's portfolio will be in subsequent
fiscal years.
AVERAGE MONTHLY PORTFOLIO COMPOSITION TABLE OF
MUNICIPAL INCOME FUND FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
PERCENTAGE
OF NET
SECURITY ASSETS
-------- ------
Common Stock .......................... 0.0%
Short-term Obligations and Other Assets 0.5%
Debt -- Unrated ....................... 5.0%
Debt -- Standard & Poor's Rating
AAA ............................... 19.4%
AA ................................ 6.0%
A ................................. 27.4%
BBB ............................... 35.7%
BB ................................ 6.0%
B ................................. 0.0%
CCC ............................... 0.0%
C/D ............................... 0.0%
The chart above indicates the composition of Municipal Income Fund for the
fiscal year ended December 31, 1999, with the debt securities rated by S&P
separated into the indicated categories. The percentages were calculated on a
dollar-weighted average basis by determining monthly the percentage of the
Fund's net assets invested in each category as of the end of each month during
the year. Back Bay does not rely primarily on ratings designed by any rating
agency in making investment decisions. The chart does not necessarily indicate
what the composition of the Fund's portfolio will be in subsequent fiscal years.
<PAGE>
Registration Nos. 2-98326
811-4323
NVEST FUNDS TRUST I
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) Articles of Incorporation.
(1) The Registrant's Amended and Restated Agreement and
Declaration of Trust dated January 24, 1992 (the
"Agreement and Declaration") is incorporated by
reference to exhibit 1(a) to Post-Effective
Amendment ("PEA") No. 31 to the Registration
Statement filed on April 12, 1996.
(2) Amendment No. 1 dated July 24, 1992 to the Agreement
and Declaration is filed herewith.
(3) Amendment No. 2 dated May 1, 1993 to the Agreement
and Declaration is filed herewith.
(4) Amendment No. 3 dated September 10, 1993 to the
Agreement and Declaration is filed herewith.
(5) Amendment No. 4 dated September 23, 1993 to the
Agreement and Declaration is filed herewith.
(6) Amendment No. 5 dated April 11, 1994 to the
Agreement and Declaration is incorporated by
reference to exhibit 1(b) to PEA No. 31 to the
Registration Statement filed on April 12, 1996.
(7) Amendment No. 6 dated May 19, 1994 to the Agreement
and Declaration is filed herewith.
(8) Amendment No. 7 dated May 2, 1995 to the Agreement
and Declaration is filed herewith.
(9) Amendment No. 8 dated November 3, 1995 to the
Agreement and Declaration is filed herewith.
(10) Amendment No. 9 dated January 2, 1996 to the
Agreement and Declaration is incorporated by
reference to exhibit 1(c) to PEA No. 31 to the
Registration Statement filed on April 12, 1996.
(11) Amendment No. 10 dated October 31, 1996 to the
Agreement and Declaration is incorporated by
reference to exhibit 1(d) to PEA No. 34 to the
Registration Statement filed on February 14, 1997.
(12) Amendment No. 11 dated February 1, 2000 to the
Agreement and Declaration is filed herewith.
(13) Amendment No. 12 dated February25, 2000 to the
Agreement and Declaration is filed herewith.
(b) By-Laws.
(1) The Registrant's By-laws are incorporated by
reference to exhibit 2(a) to PEA No. 32 to the
Registration Statement filed on July 30, 1996.
(2) Amendment to the By-laws is incorporated by
reference to exhibit 2(b) to PEA No. 32 to the
Registration Statement filed on July 30, 1996.
(c) Instruments Defining Rights of Security Holders.
Rights of shareholders are described in Article III,
Section 6 of the Registrant's Amended and Restated
Agreement and Declaration of Trust incorporated by
reference as exhibit 1(a) to PEA No. 31 to the
Registration
Statement filed on April 12, 1996.
(d) Investment Advisory Contracts.
(1) Advisory Agreement between the Registrant, on behalf
of its Nvest Growth Fund, and Capital Growth
Management Limited Partnership ("CGM") is
incorporated herein by reference to Post-Effective
Amendment No. 32 to this Registration Statement
filed on July 30, 1996.
(2) (i) Advisory Agreement dated August 30, 1996 as amended
May 1, 1998 between Registrant on behalf of Nvest
Capital Growth Fund and Nvest Funds Management L.P.
("NFM") is incorporated by reference to exhibit
(d)(2)(i) to PEA No. 41 to the Registration
Statement filed on February 18, 2000.
(ii) Advisory Agreement dated August 30, 1996 as amended
May 1, 1998 between Registrant on behalf of Nvest
Balanced Fund and NFM is incorporated by reference
to exhibit (d)(2)(ii) to PEA No. 41 to the
Registration Statement filed on February 18, 2000.
(iii) Advisory Agreement dated August 30, 1996 as amended
May 1, 1998 between Registrant on behalf of Nvest
International Equity Fund and NFM is incorporated by
reference to exhibit (d)(2)(iii) to PEA No. 41 to
the Registration Statement filed on February 18,
2000.
(iv) Advisory Agreement dated August 30, 1996 as amended
May 7, 1997 and May 1, 1998 between Registrant on
behalf of Nvest Star Advisers Fund and NFM is
incorporated by reference to exhibit (d)(2)(iv) to
PEA No. 41 to the Registration Statement filed on
February 18, 2000.
(v) Advisory Agreement dated August 30, 1996 as amended
May 1, 1998 between Registrant on behalf of Nvest
Value Fund and NFM is incorporated by reference to
exhibit (d)(2)(v) to PEA No. 41 to the Registration
Statement filed on February 18, 2000.
(vi) Advisory Agreement dated August 30, 1996 as amended
May 1, 1998 between Registrant on behalf of Nvest
Star Worldwide Fund and NFM is incorporated by
reference to exhibit (d)(2)(vi) to PEA No. 41 to the
Registration Statement filed on February 18, 2000.
(vii) Advisory Agreement dated August 30, 1996 as amended
May 1, 1998 between Registrant on behalf of Nvest
Government Securities Fund and NFM is incorporated
by reference to exhibit (d)(2)(vii) to PEA No. 41 to
the Registration Statement filed on February 18,
2000.
(viii) Advisory Agreement dated August 30, 1996 as amended
May 1, 1998 between Registrant on behalf of Nvest
Strategic Income Fund and NFM is incorporated by
reference to exhibit (d)(2)(viii) to PEA No. 41 to
the Registration Statement filed on February 18,
2000.
(ix) Advisory Agreement dated August 30, 1996 as amended
May 1, 1998 between Registrant on behalf of Nvest
Bond Income Fund and NFM is incorporated by
reference to exhibit (d)(2)(ix) to PEA No. 41 to the
Registration Statement filed on February 18, 2000.
(x) Advisory Agreement dated August 30, 1996 as amended
May 1, 1998 between Registrant on behalf of Nvest
Municipal Income Fund and NFM is incorporated by
reference to exhibit (d)(2)(x) to PEA No. 41 to the
Registration Statement filed on February 18, 2000.
(xi) Advisory Agreement dated December 31, 1996 as
amended May 1, 1998 between Registrant on behalf of
Nvest Star Small Cap Fund and NFM is incorporated by
reference to exhibit (d)(2)(xi) to PEA No. 41 to the
Registration Statement filed on February 18, 2000.
(3) (i) Sub-advisory Agreement dated April 17, 1998 among
Registrant on behalf of Nvest Capital Growth Fund,
NFM and Westpeak Investment Advisors, L.P.
("Westpeak") is filed herewith.
(ii) Sub-advisory Agreement dated August 30, 1996 as
amended May 1, 1998 among Registrant on behalf of
Nvest Balanced Fund, NFM and Loomis, Sayles &
Company, L.P. ("Loomis Sayles") is filed herewith.
(iii) Sub-advisory Agreement dated February 14, 1997 as
amended May 1, 1998 among Registrant on behalf of
Nvest International Equity Fund, NFM and Loomis
Sayles is filed herewith.
(iv) Sub-advisory Agreement dated October 17, 1997 as
amended May 1, 1998 among Registrant on behalf of
Nvest Star Advisers Fund, NFM and Loomis Sayles is
filed herewith.
(v) Sub-advisory Agreement among Registrant on behalf of
Nvest Star Advisers Fund, NFM and Janus Capital
Corporation ("Janus:) is to be filed by amendment.
(vi) Sub-advisory Agreement dated October 17, 1997 as
amended May 1, 1998 among Registrant on behalf of
Nvest Star Advisers Fund, NFM and Harris Associates
L.P. ("Harris Associates") is filed herewith.
(vii) Sub-advisory Agreement among Registrant on behalf of
Nvest Star Advisers Fund, NFM and Kobrick Funds LLC
("Kobrick") is to be filed by amendment.
(viii) Sub-advisory Agreement dated April 19, 2000 among
Registrant on behalf of Nvest Star Value Fund, NFM
and Loomis Sayles is to be filed by amendment.
(ix) Sub-advisory Agreement dated April 19, 2000 among
Registrant on behalf of Nvest Star Value Fund, NFM
and Harris Associates is to be filed by amendment.
(x) Sub-advisory Agreement dated April 19, 2000 among
Registrant on behalf of Nvest Star Value Fund, NFM
and Vaughan, Nelson, Scarborough & McCullough, L.P.
("Vaughan Nelson") is to be filed by amendment.
(xi) Sub-advisory Agreement dated April 19, 2000 among
Registrant on behalf of Nvest Star Value Fund, NFM
and Westpeak is to be filed by amendment.
(xii) Sub-advisory Agreement dated August 30, 1996 as
amended May 1, 1998 among Registrant on behalf of
Nvest Star Worldwide Fund, NFM and Harris Associates
is filed herewith.
(xiii) Sub-advisory Agreement dated April 14, 2000 among
Registrant on behalf of Nvest Star Worldwide Fund,
NFM and Loomis Sayles is to be filed by amendment.
(xiv) Sub-advisory Agreement dated August 3, 1998 among
Registrant on behalf of Nvest Star Worldwide Fund,
NFM and Montgomery Asset Management LLC
("Montgomery") is filed herewith.
(xv) Sub-advisory Agreement dated August 30, 1996 as
amended May 1, 1998 among Registrant on behalf of
Nvest Government Securities Fund, NFM and Back Bay
Advisors, L.P. ("Back Bay") is filed herewith.
(xvi) Sub-advisory Agreement dated August 30, 1996 as
amended May 1, 1998 among Registrant on behalf of
Nvest Strategic Income Fund, NFM and Loomis Sayles
is filed herewith.
(xvii) Sub-advisory Agreement dated August 30, 1996 as
amended May 1, 1998 among Registrant on behalf of
Nvest Bond Income Fund, NFM and Back Bay is filed
herewith.
(xviii) Sub-advisory Agreement dated August 30, 1996 as
amended May 1, 1998 among Registrant on behalf of
Nvest Municipal Income Fund, NFM and Back Bay is
filed herewith.
(xix) Sub-advisory Agreement dated among Registrant on
behalf of Nvest Star Small Cap Fund, NFM and Loomis
Sayles is filed herewith.
(xx) Sub-advisory Agreement dated December 31, 1996 as
amended May 1, 1998 among Registrant on behalf of
Nvest Star Small Cap Fund, NFM and Harris is filed
herewith.
(xxi) Sub-advisory Agreement dated July 31, 1997 among
Registrant on behalf of Nvest Star Small Cap Fund,
NFM and Montgomery is filed herewith.
(xxii) Sub-advisory Agreement dated December 31, 1996 as
amended May 1, 1998 among Registrant on behalf of
Nvest Star Small Cap Fund, NFM, RS Investment
Management, L.P. is filed herewith.
(e) Underwriting Contracts.
(1) Distribution Agreement dated August 30, 1996 between
the Registrant on behalf of Nvest Growth Fund and
Nvest Funds Distributor, L.P. is filed herewith.
(2) Distribution Agreement dated August 30, 1996 between
the Registrant on behalf of Nvest Capital Growth
Fund and Nvest Funds Distributor, L.P. is filed
herewith.
(3) Distribution Agreement dated August 30, 1996 between
the Registrant on behalf of Nvest Balanced Fund and
Nvest Funds Distributor, L.P. is filed herewith.
(4) Distribution Agreement dated August 30, 1996 between
the Registrant on behalf of Nvest International
Equity Fund and Nvest Funds Distributor, L.P. is
filed herewith.
(5) Distribution Agreement dated August 30, 1996 between
the Registrant on behalf of Nvest Star Advisers Fund
and Nvest Funds Distributor, L.P. is filed herewith.
(6) Distribution Agreement dated August 30, 1996 between
the Registrant on behalf of Nvest Star Value Fund
and Nvest Funds Distributor, L.P. is filed herewith.
(7) Distribution Agreement dated August 30, 1996 between
the Registrant on behalf of Nvest Star Worldwide
Fund and Nvest Funds Distributor, L.P. is filed
herewith.
(8) Distribution Agreement dated August 30, 1996 between
the Registrant on behalf of Nvest Government
Securities Fund and Nvest Funds Distributor, L.P. is
filed herewith.
(9) Distribution Agreement dated August 30, 1996 between
the Registrant on behalf of Nvest Strategic Income
Fund and Nvest Funds Distributor, L.P. is filed
herewith.
(10) Distribution Agreement dated August 30, 1996 between
the Registrant on behalf of Nvest Bond Income Fund
and Nvest Funds Distributor, L.P. is filed herewith.
(11) Distribution Agreement dated August 30, 1996 between
the Registrant on behalf of Nvest Municipal Income
Fund and Nvest Funds Distributor, L.P. is filed
herewith.
(12) Distribution Agreement dated December 31, 1996
between the Registrant on behalf of its Nvest Star
Small Cap Fund and Nvest Funds Distributor, L.P. is
incorporated by reference to exhibit 6(b) to PEA No.
34 to this Registration Statement filed on February
14, 1997.
(13) 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 Contract dated April 12, 1988 between the
Registrant and State Street Bank and Trust Company
("State Street Bank"), including form of
subcustodian agreement, is incorporated by reference
to exhibit 8(a) to PEA No. 32 to the Registration
Statement filed on July 30, 1996.
(2) Amendment No. 1 to Custodian Contract dated April
12, 1988 between the Registrant and State Street
Bank is incorporated by reference to exhibit 8(b) to
PEA No. 32 to the Registration Statement filed on
July 30, 1996.
(3) Letter Agreement between the Registrant and State
Street Bank relating to the applicability of the
Custodian Contract to Nvest International Equity
Fund is incorporated by reference to exhibit 8(c) to
PEA No. 34 to the Registration Statement filed on
February 14, 1997.
(4) Letter Agreement between the Registrant and State
Street Bank relating to the applicability of the
Custodian Contract to Nvest Capital Growth Fund is
incorporated by reference to exhibit 8(d) to PEA No.
34 to the Registration Statement filed on February
14, 1997.
(5) Letter Agreement between the Registrant and State
Street Bank relating to the applicability of the
Custodian Contract to Nvest Star Advisers Fund is
incorporated by reference to exhibit 8(e) to PEA No.
34 to the Registration Statement filed on February
14, 1997.
(6) Letter Agreement between the Registrant and State
Street Bank relating to the applicability of the
Custodian Contract to Nvest Strategic Income Fund is
incorporated by reference to exhibit 8(f) to PEA No.
34 to the Registration Statement filed on February
14, 1997.
(7) Letter Agreement between the Registrant and State
Street Bank relating to the applicability of the
Custodian Contract to Nvest Star Worldwide Fund is
incorporated by reference to exhibit 8(g) to PEA No.
34 to the Registration Statement filed on February
14, 1997.
(8) Letter Agreement between the Registrant and State
Street Bank relating to the applicability of the
Custodian Contract to Nvest Star Small Cap Fund is
incorporated by reference to exhibit 8(h) to PEA No.
34 to the Registration Statement filed on February
14, 1997.
(9) Amendment dated February 28, 2000 to the Custody
Contract dated April 12, 1988 is filed herewith.
(h) Other Material Contracts.
(1) Transfer Agency and Services Agreement dated
November 1, 1999 between the Registrant on behalf of
Nvest Growth Fund, Nvest Capital Growth Fund, Nvest
Balanced Fund, nvest International Equity Fund,
Nvest Star Advisers Fund, Nvest Star Value Fund,
Nvest Star Worldwide Fund, Nvest Government
Securities Fund, Nvest Strategic Income Fund, Nvest
Bond Income Fund, Nvest Municipal Income Fund and
Nvest Star Small Cap Fund and Nvest Services Company
is filed herewith.
(2) Organizational Expense Reimbursement Agreement
between the Registrant on behalf of Nvest Capital
Growth Fund and Nvest Funds Distributor, L.P. is
incorporated by reference to PEA No. 35 to the
Registration Statement filed on April 18, 1997.
(3) Organizational Expense Reimbursement Agreement
between the Registrant on behalf of its Nvest
Strategic Income Fund and Nvest Funds Distributor,
L.P. is incorporated by reference to PEA No. 31 to
the Registration Statement filed on April 12, 1996.
(4) Organizational Expense Reimbursement Agreement
between the Registrant on behalf of its Nvest Star
Worldwide Fund and Nvest Funds Distributor, L.P. is
incorporated by reference to exhibit 9(j) to PEA No.
31 to the Registration Statement filed April 12,
1996.
(5) Organizational Expense Reimbursement Agreement
between the Registrant on behalf of its Star Small
Cap Fund and Nvest Funds Distributor, L.P. is
incorporated by reference to exhibit 9(n) to PEA No.
34 to the Registration Statement filed on February
14, 1997.
(6) Administrative Services Agreement dated December 1,
1999 between Registrant on behalf of Nvest Growth
Fund, Nvest Capital Growth Fund, Nvest Balanced
Fund, nvest International Equity Fund, Nvest Star
Advisers Fund, Nvest Star Value Fund, Nvest Star
Worldwide Fund, Nvest Government Securities Fund,
Nvest Strategic Income Fund, Nvest Bond Income Fund,
Nvest Municipal Income Fund and Nvest Star Small Cap
Fund and Nvest Services Company, Inc. is filed
herewith.
(7) Expense Agreement between the Registrant on behalf
of its Strategic Income Fund and NFM is incorporated
by reference to exhibit 9(l) to PEA No. 32 to this
Registration Statement filed on July 30, 1996.
(8) Securities Lending Authorization Agreement between
the Registrant and its Series enumerated on schedule
C thereto is incorporated by reference to PEA No. 39
to the Registration Statement filed on February 16,
1999.
(9) NFM Fee Waiver/Reimbursement Undertaking between
the Registrant on behalf the named series and NFM is
incorporated by reference to PEA No. 39 to the
Registration Statement filed on February 16, 1999.
(10) NFM fee waiver/Reimbursement Undertaking dated May
1, 2000 between Registrant on behalf of its named
series and NFM is filed herewith.
(i) Legal Opinion.
(1) Opinion and consent of counsel relating to the
Registrant's Nvest Government Securities Fund is
incorporated by reference to PEA No. 35 to the
Registration Statement filed on April 18, 1997.
(2) Opinion and consent of counsel relating to the
Registrant's issuance of multiple classes of shares
is incorporated by reference to PEA No. 38 to the
Registration Statement filed on April 30, 1998.
(3) Opinion and consent of counsel relating to the
Registrant's Nvest Star Advisers Fund is
incorporated by reference to PEA No. 38 to the
Registration Statement filed on April 30, 1998.
(4) Opinion and consent of counsel relating to the
Registrant's Nvest Strategic Income Fund is
incorporated by reference to PEA No. 28 to the
Registration Statement filed on October 13, 1995.
(5) Opinion and consent of counsel relating to the
Registrant's Nvest Star Worldwide Fund is
incorporated by reference to exhibit 10(h) to PEA
No. 31 to the Registration Statement filed on April
12, 1996.
(6) Opinion and consent of counsel relating to the
Registrant's Nvest Star Small Cap Fund is
incorporated by reference to exhibit 10(i) to PEA
No. 34 to the Registration Statement filed on
February 14, 1997.
(j) Other Opinions.
Consent of PricewaterhouseCoopers LLP is filed
herewith.
(k) Omitted Financial Statements
Not applicable.
(l) Initial Capital Agreements.
Not applicable.
(m) Rule 12b-1 Plan.
(1) Form of Distribution Agreement for the Registrant's
Class B and Class C Series shares.
(2) Form of Service Plan for the Registrant's Class A
Series shares.
(3) Form of Distribution and Service Plan for the
Registrant's Class B Series shares.
(4) Form of Distribution and Service Plan for the
Registrant's Class C Series shares.
(n) Rule 18f-3 Plan
Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940 as amended effective January 31,
1997 is incorporated herein by reference to
Post-Effective Amendment No. 35 to this Registration
Statement, filed on April 18, 1997.
(p) Code of Ethics.
(1) Code of Ethics of Registrant is filed herewith.
(2) Code of Ethics dated August 1999 as revised March
2000 for NFM and Nvest Funds Distributor, L.P. is
filed herewith
(3) Code of Ethics dated March 1, 2000 of Capital Growth
Management Limited Partnership is filed herewith.
(4) Code of Ethics dated April 1, 1998 of Westpeak
Investment Advisors, L.P. is filed herewith.
(5) Code of Ethics of Loomis, Sayles & Company, L.P.
is filed herewith.
(6) Code of Ethics dated March 1, 2000 of Janus Capital
Corporation is filed herewith.
(7) Code of Ethics dated April 18, 2000 of Harris
Associates L.P. is filed herewith.
(8) Code of Ethics dated December 31, 1998 of Kobrick
Funds LLC is filed herewith.
(9) Code of Ethics dated April 1, 1999 of Vaughan,
Nelson, Scarborough and McCullough is filed
herewith.
(10) Code of Ethics dated October 1999 of Montgomery
Asset Management, LLC is filed herewith.
(11) Code of Ethics dated April 1, 2000 of Back Bay
Advisors, L.P. is filed herewith.
(12) Code of Ethics dated February 1, 2000 of RS
Investment Management, L.P. is filed herewith.
Item 24. Persons Controlled by or Under Common Control with the 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 Artcile 4 of the Registrant's By-laws contained in
the PEA No. 32 to the Registration Statement filed on July 30, 1996 as exhibit
2(a) and is incorporated by reference.
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
(a) Loomis Sayles, subadviser of the Registrant's Nvest Star Value Fund,
Nvest Star Advisers Fund, Nvest Star Small Cap Fund, Nvest Star
Worldwide Fund, Nvest International Equity Fund, Nvest Balanced Fund
and Nvest Strategic Income Fund, provides investment advice to a number
of other registered investment companies and to other organizations and
individuals.
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 Loomis Sayles during the past two years is
incorporated herein by reference to schedules A and D of Form ADV filed
by Loomis Sayles pursuant to the Investment Advisers Act of 1940 as
amended (the "Advisers Act") (SEC File No. 801-170).
(b) Capital Growth Management Limited Partnership ("CGM"), the adviser of
the Registrant's Nvest Growth Fund, provides investment advice to a
number of other registered investment companies and to other
organizations and individuals.
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 CGM during the past two years is
incorporated herein by reference to schedules A and D of Form ADV filed
by CGM pursuant to the Advisers Act (SEC File No. 801-35935).
(c) Back Bay Advisors is the subadviser of the Registrant's Nvest Bond
Income Fund, Nvest Government Securities Fund and Nvest Municipal
Income Fund. 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).
(d) Westpeak Investment Advisors, L.P. ("Westpeak") serves as subadviser to
the Registrant's Nvest Capital Growth Fund and Nvest Star Value Fund.
Organized in 1991, Westpeak provides investment management services to
other mutual funds and institutional clients.
The list required by this Item 26 regarding any other general 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 Westpeak pursuant to the Advisers Act (SEC File No.
801-39554).
(e) Kobrick Funds LLC ("Kobrick") serves as a subadviser to the
Registrant's Nvest Star Advisers Fund. Kobrick is a limited liability
company formed as an investment management firm.
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 Kobrick during the past two years is incorporated
herein by reference to schedules A and D of Form ADV filed by Kobrick
pursuant to the Advisers Act (SEC File No. 801-56691).
(f) Janus Capital Corporation, a subadviser to the Registrant's Nvest Star
Advisers Fund, serves as investment adviser to mutual funds and
individual, corporate, charitable and retirement accounts.
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 Janus Capital during the past two years is
incorporated herein by reference to schedules A and D of Form ADV filed
by Janus Capital pursuant to the Advisers Act (SEC File No. 801-13991).
(g) NFM, a wholly owned subsidiary of Nvest, L.P., serves as investment
adviser to all the series of the Registrant except Nvest Growth Fund.
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).
(h) Montgomery is a subadviser to the Registrant's Nvest Star Worldwide
Fund and Nvest Star Small Cap Fund.
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 Montgomery during the past two years is incorporated
herein by reference to schedules A and D of Form ADV filed by
Montgomery pursuant to the Advisers Act (SEC File No. 801-54803).
(i) Harris Associates L.P. serves as a subadviser to the Registrant's Nvest
Star Advisers Fund, Nvest Star Worldwide Fund, Nvest Star Value Fund
and Nvest Star Small Cap Fund. Harris serves as investment adviser to
mutual funds, individuals, trusts, retirement plans, endowments and
foundations, and manages several private partnerships, and is a
registered commodity trading adviser and commodity pool operator.
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 Harris during the past two years is incorporated
herein by reference to schedules A and D of Form ADV filed by Harris
pursuant to the Advisers Act (SEC File No. 801-50333).
(j) RS Investment Management, L.P., a subadviser to the Registrant's Star
Small Cap Fund, provides investment advice to various clients including
public mutual funds, private limited partnerships and separate
accounts.
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 RS Investment Management during the past two years is
incorporated herein by reference to schedules A and D of Form ADV filed
by RS Investment Management pursuant to the Advisers Act (SEC File No.
801-144125).
(i) Vaughan, Nelson, Scarborough & McCullough, L.P. subadviser to
Registrant's Nvest Star Value Fund, provides investment advice to a
number of other registered investment companies and to other
organizations and individuals.
The list required by this Item 26 regarding any other business,
profession, vocation or employment of a substantial nature engaged in
by officers and partners of VSNM during the past two years is
incorporated herein by reference to schedules A and D of Form ADV filed
by VNSM pursuant to the Advisers Act (File No. 801-51795).
Item 27. Principal Underwriter
(a) Nvest Funds Distributor, L.P., the principal underwriter of the
Registrant, also serves as principal underwriter for:
Nvest Tax Exempt Money Market Trust
Nvest Cash Management Trust
Nvest Funds Trust II
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 follows:
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
- ---------------------------- ---------------------------------------------- -----------------------------------
<S> <C> <C>
Nvest Distribution Corp. General Partner None
John T. Hailer President and Chief Executive Officer None
John E. Pelletier Senior Vice President, General Counsel, Secretary and Clerk
Secretary and Clerk
Scott E. Wennerholm Senior Vice President, Treasurer, Chief None
Financial Officer,and Chief Operating
Officer
Coleen D. Dinneen Vice President, Associate Counsel, Assistant Assistant Secretary
Secretary and Assistant Clerk
Kristin S. Vigneaux Vice President, Assistant Secretary and Assistant Secretary
Assistant Clerk
Beatriz Pina Smith Vice President and Assistant Treasurer None
Christine Howe Controller None
Frank S. Maselli Senior Vice President None
Caren I. Leedom 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:
(a) For all series of Registrant:
(i) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(ii) Nvest Funds Distributor, L.P.
399 Boylston Street
Boston, Massachusetts 02116
(iii) Nvest Funds Management, L.P.
399 Boylston Street
Boston, MA 02116
(excluding Growth Fund)
(b) For Nvest Growth Fund:
Capital Growth Management Limited Partnership
One International Place
Boston, Massachusetts 02110
(c) For series of the Registrant managed by Back Bay Advisors:
Back Bay Advisors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
(d) For the series of the Registrant managed by Harris:
Harris Associates L.P.
Two North LaSalle Street
Chicago, Illinois 60602
(e) For the series of the Registrant managed by Janus:
Janus Capital Corporation
100 Fillmore Street
Denver, CO 80206
(f) For the series of the Registrant managed by Kobrick:
Kobrick Funds LLC
101 Federal Street
Boston, Massachusetts 02110
(g) For the series of the Registrant managed by Loomis Sayles:
Loomis, Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02111
(h) For the series of the Registrant managed by Montgomery:
Montgomery Asset Management, LLC
600 Montgomery Street
San Francisco, California 94111
(i) For the series of the Registrant managed by RS Investment Management:
RS Investment Management
555 California Street
San Francisco, CA 94101
(j) For the series of the Registrant managed by Vaughan, Nelson
Scarborough & McCullough, L.P.:
Vaughan, Nelson, Scarborough & McCollough, L.P.
600 Travis
Suite 6300
Houston, TX 77002
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.
<PAGE>
NVEST FUNDS TRUST I
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. 42 to its
Registration Statement under Rule 485(b) under the Securities Act of 1933 and
has duly caused this Post-Effective Amendment No. 42 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
24th day of April, 2000.
Nvest Funds Trust I
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*
- --------------------------
Peter S. Voss Chairman of the Board; April 24, 2000
Chief Executive
Officer; Trustee
/s/ THOMAS CUNNINGHAM
- --------------------------
Thomas Cunningham Treasurer April 24, 2000
GRAHAM T. ALLISON, JR.*
- --------------------------
Graham T. Allison, Jr. Trustee April 24, 2000
DANIEL M. CAIN*
- --------------------------
Daniel M. Cain Trustee April 24, 2000
KENNETH J. COWAN*
- --------------------------
Kenneth J. Cowan Trustee April 24, 2000
RICHARD DARMAN*
- --------------------------
Richard Darman Trustee April 24, 2000
SANDRA O. MOOSE*
- --------------------------
Sandra O. Moose Trustee April 24, 2000
JOHN A. SHANE*
- --------------------------
John A. Shane Trustee April 24, 2000
PENDLETON P. WHITE*
- --------------------------
Pendleton P. White Trustee April 24, 2000
*By: /s/ JOHN E. PELLETIER
-----------------------
John E. Pelletier
Attorney-In-Fact**
April 24, 2000
**Powers of attorney are incorporated by reference to PEA No. 39 to the
Registration Statement filed on February 16, 1999.
<PAGE>
NVEST FUNDS TRUST I
EXHIBIT INDEX
EXHIBITS FOR ITEM 23 OF FORM N-1A
EXHIBIT DESCRIPTION
(a)(2) Amendment No. 1 to the Amended and Restated Agreement and
Declaration of Trust
(a)(3) Amendment No. 2 to the Amended and Restated Agreement and
Declaration of Trust
(a)(4) Amendment No. 3 to the Amended and Restated Agreement and
Declaration of Trust
(a)(5) Amendment No. 4 to the Amended and Restated Agreement and
Declaration of Trust
(a)(7) Amendment No. 6 to the Amended and Restated Agreement and
Declaration of Trust
(a)(8) Amendment No. 7 to the Amended and Restated Agreement and
Declaration of Trust
(a)(9) Amendment No. 8 to the Amended and Restated Agreement and
Declaration of Trust
(a)(12) Amendment No. 11 to the Amended and Restated Agreement and
Declaration of Trust
(a)(13) Amendment No. 12 to the Amended and Restated Agreement and
Declaration of Trust
(d)(3)(i) Sub-advisory Agreement of Nvest Capital Growth Fund
(d)(3)(ii) Sub-advisory Agreement of Nvest Balanced Fund
(d)(3)(iii) Sub-advisory Agreement of Nvest International Equity Fund
(d)(3)(iv) Sub-advisory Agreement of Nvest Star Advisers Fund with
Loomis Sayles
(d)(3)(vi) Sub-advisory Agreement of Nvest Star Advisers Fund with
Harris Associates
(d)(3)(xii) Sub-advisory Agreement of Nvest Star Worldwide Fund with
Harris Associates
(d)(3)(xiv) Sub-advisory Agreement of Nvest Star Worldwide Fund with
Montgomery
(d)(3)(xv) Sub-advisory Agreement of Nvest Government Securities Fund
(d)(3)(xvi) Sub-advisory Agreement of Nvest Strategic Income Fund
(d)(3)(xvii) Sub-advisory Agreement of Nvest Bond Income Fund
(d)(3)(xviii) Sub-advisory Agreement of Nvest Municipal Income Fund
(d)(3)(xix) Sub-advisory Agreement of Nvest Star Small Cap Fund with
Loomis Sayles
(d)(3)(xx) Sub-advisory Agreement of Nvest Star Small Cap Fund with
Harris Associates
(d)(3)(xxi) Sub-advisory Agreement of Nvest Star Small Cap Fund with
Montgomery
(d)(3)(xxii) Sub-advisory Agreement of Nvest Star Small Cap Fund with RS
Investment Management
(e)(1) Distribution Agreement for Nvest Growth Fund
(e)(2) Distribution Agreement for Nvest Capital Growth Fund
(e)(3) Distribution Agreement for Nvest Balanced Fund
(e)(4) Distribution Agreement for Nvest International Equity Fund
(e)(5) Distribution Agreement for Nvest Star Advisers Fund
(e)(6) Distribution Agreement for Nvest Star Value Fund
(e)(7) Distribution Agreement for Nvest Star Worldwide Fund
(e)(8) Distribution Agreement for Nvest Government Securities Fund
(e)(9) Distribution Agreement for Nvest Strategic Income Fund
(e)(10) Distribution Agreement for Nvest Bond Income Fund
(e)(11) Distribution Agreement for Nvest Municipal Income Fund
(e)(13) Form of Dealer Agreement used by Nvest Funds Distributor,
L.P.
(g)(9) Amendment dated February 28, 2000 to the Custody Contract
(h)(1) Transfer Agency and Service Agreement dated November 1, 1999
(h)(6) Administrative Services Agreement dated December 1, 1999
(h)(10) NFM Fee Waiver/Reimbursement Undertaking dated May 1, 2000
(j) Consent of PricewaterhouseCoopers LLP
(p)(1) Code of Ethics of Registrant
(p)(2) Code of Ethics of NFM and Nvest Funds Distributor
(p)(3) Code of Ethics of Capital Growth Management Limited
Partnership
(p)(4) Code of Ethics of Westpeak Investment Advisors, L.P.
(p)(5) Code of Ethics of Loomis, Sayles & Company, L.P.
(p)(6) Code of Ethics of Janus Capital Corporation
(p)(7) Code of Ethics of Harris Associates L.P.
(p)(8) Code of Ethics of Kobrick Funds LLC
(p)(9) Code of Ethics of Vaughan, Nelson, Scarborough & McCullough,
L.P.
(p)(10) Code of Ethics of Montgomery Asset Management LLC
(p)(11) Code of Ethics of Back Bay Advisors, L.P.
(p)(12) Code of Ethics of RS Investment Management L.P.
<PAGE>
Exhibit (a)(2)
THE NEW ENGLAND FUNDS
Amendment No. 1 to Amended and Restated Agreement
and Declaration of Trust
The undersigned, being at least a majority of the Trustees of The New
England Funds (the "Trust"), hereby consent to and adopt the following amendment
to the Trust's Agreement and Declaration of Trust (the "Declaration of Trust"),
a copy of which is on file in the office of the Secretary of State of The
Commonwealth of Massachusetts:
The undersigned Trustees having determined it to be consistent with the
fair and equitable treatment of all shareholders of the Trust, the first
sentence of Section 6 of Article III of the Declaration of Trust is hereby
amended to read in its entirety as follows:
Without limiting the authority of the Trustees set forth in Section 5,
inter alia, to establish and designate any further Series or classes or
to modify the rights and preferences of any Series or class, each of
the following Series shall be, and is hereby, established and
designated: (1) TNE Government Securities Fund, (2) TNE Growth Fund,
(3) TNE Balanced Fund, (4) TNE Retirement Equity Fund, (5)TNE Bond
Income Fund, (6) TNE Tax Exempt Income Fund, (7) TNE Global Government
Fund, (8) TNE International Equity Fund and (9) TNE Capital Growth
Fund; and the following Series shall be, and are hereby, designated as
Multi-Class Series: TNE International Equity Fund and TNE Capital
Growth Fund.
The foregoing amendment shall become effective as of the time it is
filed with the Secretary of State of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, we have hereunto set our hands for ourselves and
for our successors and assigns this 24th day of July, 1992.
/s/ Graham T. Allison /s/ Robert B. Kittredge
----------------- -------------------
Graham T. Allison Robert B. Kittredge
/s/ Laurens MacLure /s/ Sandra O. Moose
----------------- -------------------
Laurens MacLure Sandra O. Moose
/s/ James H. Scott /s/ Joseph F. Turley
----------------- -------------------
James H. Scott Joseph F. Turley
/s/ Ralph F. Verni
-----------------
Ralph F. Verni
<PAGE>
Exhibit (a)(3)
THE NEW ENGLAND FUNDS
Amendment No. 2 to Amended and Restated Agreement
and Declaration of Trust
The undersigned, being at least a majority of the Trustees of The New
England Funds (the "Trust"), hereby consent to and adopt the following amendment
to the Trust's Amended and Restated Agreement and Declaration of Trust (as
amended through Amendment No. 1 thereto, the "Declaration of Trust"), a copy of
which is on file in the office of the Secretary of State of The Commonwealth of
Massachusetts:
The undersigned Trustees having determined it to be consistent with the
fair and equitable treatment of all shareholders of the Trust, the first
sentence of Section 6 of Article III of the Declaration of Trust is hereby
amended to read in its entirety as follows:
Without limiting the authority of the Trustees set forth in Section 5,
inter alia, to establish and designate any further Series or classes or
to modify the rights and preferences of any Series or class, each of
the following Series shall be, and is hereby, established and
designated: (1) TNE Government Securities Fund, (2) TNE Growth Fund,
(3) TNE Balanced Fund, (4) TNE Value Fund, (5)TNE Bond Income Fund, (6)
TNE Tax Exempt Income Fund, (7) TNE Global Government Fund, (8) TNE
International Equity Fund and (9) TNE Capital Growth Fund; and the
following Series shall be, and are hereby, designated as Multi-Class
Series: TNE International Equity Fund and TNE Capital Growth Fund.
The foregoing amendment shall become effective on May 1, 1993.
IN WITNESS WHEREOF, we have hereunto set our hands for ourselves and
for our successors and assigns this 23rd day of April, 1993.
/s/ Robert B. Kittredge
----------------- ---------------------
Graham T. Allison Robert B. Kittredge
/s/ Laurens MacLure /s/ Sandra O. Moose
----------------- ---------------------
Laurens MacLure Sandra O. Moose
/s/ James H. Scott /s/ Joseph F. Turley
----------------- ---------------------
James H. Scott Joseph F. Turley
/s/ Peter S. Voss /s/ Henry L.P. Schmelzer
----------------- ---------------------
Peter S. Voss Henry L.P. Schmelzer
<PAGE>
Exhibit (a)(4)
THE NEW ENGLAND FUNDS
Amendment No. 3 to Amended and Restated Agreement
and Declaration of Trust
The undersigned, being at least a majority of the Trustees of The New
England Funds (the "Trust"), hereby consent to and adopt the following amendment
to the Trust's Amended and Restated Agreement and Declaration of Trust, as
amended by Amendments Nos. 1 and 2 thereto (the "Declaration of Trust"), a copy
of which is on file in the office of the Secretary of State of The Commonwealth
of Massachusetts:
WHEREAS, Section 8 of Article VIII of the Declaration of Trust provides
that the Declaration of Trust may be amended at any time by an instrument in
writing signed by a majority of the Trustees when authorized to do so by a
majority of the Shares entitled to vote;
WHEREAS, Section 6(e) of Article III of the Declaration of Trust
provides that the Shareholders of any particular Series or class shall not be
entitled to vote on any matters as to which such Series or class is not
affected;
WHEREAS, a majority of the Shares of each of TNE Balanced Fund, TNE
Value Fund, TNE Bond Income Fund, TNE Tax Exempt Income Fund and TNE Global
Government Fund (each a Series of the Trust) have authorized the Trustees to
amend the Declaration of Trust to permit each such Series to issue one or more
classes of shares of such Series having such preferences or special or relative
rights and privileges as the Trustees may determine;
WHEREAS, Section 6 of Article III of the Declaration of Trust further
provides that each class of a Multi-Class Series shall have such rights and
preferences relative to other classes of the same Series as are set forth in
such Section 6, together with such other rights and preferences relative to such
other classes as are set forth in any resolution of the Trustees establishing
and designating such class of Shares; and
WHEREAS, the Declaration of Trust currently designates each of TNE
International Equity Fund and TNE Capital Growth Fund as a Multi-Class Series;
NOW, THEREFORE, the first sentence of Section 6 of Article III of the
Declaration of Trust is hereby amended to read in its entirety as follows:
Without limiting the authority of the Trustees set forth in Section 5,
inter alia, to establish and designate any further Series or classes or
to modify the rights and preferences of any Series or class, each of
the following Series shall be, and is hereby, established and
designated: (1) TNE Government Securities Fund, (2) TNE Growth Fund,
(3) TNE Balanced Fund, (4) TNE Value Fund, (5) TNE Bond Income Fund,
(6) TNE Tax Exempt Income Fund, (7) TNE Global Government Fund, (8) TNE
International Equity Fund and (9) TNE Capital Growth Fund; and the
following Series shall be, and are hereby, designated as Multi-Class
Series: TNE Balanced Fund, TNE Value Fund, TNE Bond Income Fund, TNE
Tax Exempt Income Fund, TNE Global Government Fund, TNE International
Equity Fund and TNE Capital Growth Fund.
The foregoing amendment shall become effective as of the time it is
filed with the Secretary of State of The Commonwealth of Massachusetts.
[the balance of this page is intentionally blank]
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hands for ourselves and
for our successors and assigns as of this 10th day of September 1993.
/s/ Henry L.P. Schmelzer
-----------------------
Henry L. P. Schmelzer
/s/ Kenneth J. Cowan /s/ James H. Scott
------------------------ -----------------------
Kenneth J. Cowan James H. Scott
/s/ Joseph M. Hinchey /s/ John A. Shane
------------------------ -----------------------
Joseph M. Hinchey John A. Shane
/s/ Richard S. Humphrey, Jr. /s/ Joseph F. Turley
------------------------ -----------------------
Richard S. Humphrey, Jr. Joseph F. Turley
/s/ Robert B. Kittredge /s/ Peter S. Voss
------------------------ -----------------------
Robert B. Kittredge Peter S. Voss
/s/ Laurens MacLure /s/ Pendleton P. White
------------------------ -----------------------
Laurens MacLure Pendleton P. White
/s/ Sandra O. Moose
------------------------
Sandra O. Moose
<PAGE>
Exhibit (a)(5)
THE NEW ENGLAND FUNDS
Amendment No. 4 to Amended and Restated Agreement
and Declaration of Trust
The undersigned, being at least a majority of the Trustees of The New
England Funds (the "Trust"), hereby consent to and adopt the following amendment
to the Trust's Amended and Restated Agreement and Declaration of Trust, as
amended by Amendments Nos. 1, 2 and 3 thereto (the "Declaration of Trust"), a
copy of which is on file in the office of the Secretary of State of The
Commonwealth of Massachusetts:
WHEREAS, Section 8 of Article VIII of the Declaration of Trust provides
that the Declaration of Trust may be amended at any time by an instrument in
writing signed by a majority of the Trustees when authorized to do so by a
majority of the Shares entitled to vote;
WHEREAS, Section 6(e) of Article III of the Declaration of Trust
provides that the Shareholders of any particular Series or class shall not be
entitled to vote on any matters as to which such Series or class is not
affected;
WHEREAS, a majority of the Shares of the Trust's TNE Government
Securities Fund series have authorized the Trustees to amend the Declaration of
Trust to permit such Series to issue one or more classes of shares of such
Series having such preferences or special or relative rights and privileges as
the Trustees may determine;
WHEREAS, Section 6 of Article III of the Declaration of Trust further
provides that each class of a Multi-Class Series shall have such rights and
preferences relative to other classes of the same Series as are set forth in
such Section 6, together with such other rights and preferences relative to such
other classes as are set forth in any resolution of the Trustees establishing
and designating such class of Shares; and
WHEREAS, the Declaration of Trust currently designates each of TNE
Balanced Fund, TNE Value Fund, TNE Bond Income Fund, TNE Tax Exempt Income Fund,
TNE Global Government Fund, TNE International Equity Fund and TNE Capital Growth
Fund as a Multi-Class Series;
NOW, THEREFORE, the first sentence of Section 6 of Article III of the
Declaration of Trust is hereby amended to read in its entirety as follows:
Without limiting the authority of the Trustees set forth in Section 5,
inter alia, to establish and designate any further Series or classes or
to modify the rights and preferences of any Series or class, each of
the following Series shall be, and is hereby, established and
designated: (1) TNE Government Securities Fund, (2) TNE Growth Fund,
(3) TNE Balanced Fund, (4) TNE Value Fund, (5) TNE Bond Income Fund,
(6) TNE Tax Exempt Income Fund, (7) TNE Global Government Fund, (8) TNE
International Equity Fund and (9) TNE Capital Growth Fund; and the
following Series shall be, and are hereby, designated as Multi-Class
Series: TNE Government Securities Fund, TNE Balanced Fund, TNE Value
Fund, TNE Bond Income Fund, TNE Tax Exempt Income Fund, TNE Global
Government Fund, TNE International Equity Fund and TNE Capital Growth
Fund.
The foregoing amendment shall become effective as of the time it is
filed with the Secretary of State of The Commonwealth of Massachusetts.
[the balance of this page is intentionally blank]
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hands for ourselves and
for our successors and assigns as of this 22nd day of September 1993.
/s/ Henry L.P. Schmelzer
----------------------
Henry L. P. Schmelzer
/s/ Kenneth J. Cowan /s/ James H. Scott
------------------------ ----------------------
Kenneth J. Cowan James H. Scott
/s/ Joseph M. Hinchey /s/ John A. Shane
------------------------ ----------------------
Joseph M. Hinchey John A. Shane
/s/ Richard S. Humphrey, Jr. /s/ Joseph F. Turley
------------------------ ----------------------
Richard S. Humphrey, Jr. Joseph F. Turley
/s/ Robert B. Kittredge /s/ Peter S. Voss
------------------------ ----------------------
Robert B. Kittredge Peter S. Voss
/s/ Laurens MacLure /s/ Pendleton P. White
------------------------ ----------------------
Laurens MacLure Pendleton P. White
/s/ Sandra O. Moose
------------------------
Sandra O. Moose
<PAGE>
Exhibit (a)(7)
NEW ENGLAND FUNDS TRUST I
Amendment No. 6 to Amended and Restated Agreement
and Declaration of Trust
The undersigned, being at least a majority of the Trustees of New
England Funds Trust I (the "Trust"), having determined it to be consistent with
the fair and equitable treatment of all shareholders of the Trust, hereby amend
the Trust's Amended and Restated Agreement and Declaration of Trust, as amended
by Amendments Nos. 1, 2, 3, 4 and 5 thereto (the "Declaration of Trust"), a copy
of which is on file in the office of the Secretary of State of The Commonwealth
of Massachusetts, as follows:
1. The first sentence of Section 6 of Article III of the Declaration of
Trust is hereby amended to read in its entirety as follows:
Without limiting the authority of the Trustees set forth in Section 5,
inter alia, to establish and designate any further Series or classes or
to modify the rights and preferences of any Series or class, each of
the following Series shall be, and is hereby, established and
designated: (1) New England Government Securities Fund, (2) New England
Growth Fund, (3) New England Balanced Fund, (4) New England Value Fund,
(5) New England Bond Income Fund, (6) New England Tax Exempt Income
Fund, (7) New England Global Government Fund, (8) New England
International Equity Fund, (9) New England Capital Growth Fund and (10)
New England Star Advisers Fund; and the following Series shall be, and
are hereby, designated as Multi-Class Series: New England Government
Securities Fund, New England Balanced Fund, New England Value Fund, New
England Bond Income Fund, New England Tax Exempt Income Fund, New
England Global Government Fund, New England International Equity Fund,
New England Capital Growth Fund and New England Star Advisers Fund.
The foregoing amendment shall become effective as of the time it is
filed with the Secretary of State of The Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hands for ourselves and
for our successors and assigns as of this 19th day of May, 1994.
/s/ Kenneth J. Cowan /s/ Henry L.P. Schmelzer
------------------------ -------------------------
Kenneth J. Cowan Henry L.P. Schmelzer
/s/ Joseph M. Hinchey /s/ James H. Scott
------------------------ -------------------------
Joseph M. Hinchey James H. Scott
/s/ Richard S. Humphrey, Jr. /s/ John A. Shane
------------------------ -------------------------
Richard S. Humphrey, Jr. John A. Shane
/s/ Robert B. Kittredge /s/ Joseph F. Turley
------------------------ -------------------------
Robert B. Kittredge Joseph F. Turley
/s/ Laurens MacLure /s/ Peter S. Voss
------------------------ -------------------------
Laurens MacLure Peter S. Voss
/s/ Sandra O. Moose /s/ Pendleton P. White
------------------------ -------------------------
Sandra O. Moose Pendleton P. White
<PAGE>
Exhibit (a)(8)
NEW ENGLAND FUNDS TRUST I
Amendment No. 7 to Amended and Restated Agreement
and Declaration of Trust
The undersigned, being at least a majority of the Trustees of New
England Funds Trust I (the "Trust"), having determined it to be consistent with
the fair and equitable treatment of all shareholders of the Trust, hereby amend
the Trust's Amended and Restated Agreement and Declaration of Trust, as amended
by Amendments Nos. 1, 2, 3, 4, 5 and 6 thereto (the "Declaration of Trust"), a
copy of which is on file in the office of the Secretary of State of The
Commonwealth of Massachusetts, as follows:
1. The first sentence of Section 6 of Article III of the Declaration of
Trust is hereby amended to read in its entirety as follows:
Without limiting the authority of the Trustees set forth in Section 5,
inter alia, to establish and designate any further Series or classes or
to modify the rights and preferences of any Series or class, each of
the following Series shall be, and is hereby, established and
designated:
(1) New England Government Securities Fund, (2) New England Growth
Fund, (3) New England Balanced Fund, (4) New England Value Fund, (5)
New England Bond Income Fund, (6) New England Tax Exempt Income Fund,
(7) New England International Equity Fund, (8) New England Capital
Growth Fund, (9) New England Star Advisers Fund and (10) New England
Strategic Income Fund; and the following Series shall be, and are
hereby, designated a Multi-Class Series: New England Government
Securities Fund, New England Balanced Fund, New England Value Fund, New
England Bond Income Fund, New England Tax Exempt Income Fund, New
England International Equity Fund, New England Capital Growth Fund, New
England Star Advisers Fund and New England Strategic Income Fund.
The foregoing amendment shall become effective as of the time it is
filed with the Secretary of State of The Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hand for ourselves and for
our successors and assigns as of this 28th day of April, 1995.
/s/ Graham T. Allison, Jr. /s/ Kenneth J. Cowan
---------------------- --------------------
Graham T. Allison, Jr. Kenneth J. Cowan
/s/ Sandra O. Moose /s/ Henry L.P. Schemlzer
---------------------- --------------------
Sandra O. Moose Henry L.P. Schemlzer
/s/ James H. Scott /s/ John A. Shane
---------------------- --------------------
James H. Scott John A. Shane
/s/ Peter S. Voss /s/ Pendleton P. White
---------------------- --------------------
Peter S. Voss Pendleton P. White
<PAGE>
Exhibit (a)(9)
NEW ENGLAND FUNDS TRUST I
Amendment No. 8 to Amended and Restated Agreement
and Declaration of Trust
The undersigned, being at least a majority of the Trustees of New
England Funds Trust I (the "Trust"), having determined it to be consistent with
the fair and equitable treatment of all shareholders of the Trust, hereby amend
the Trust's Amended and Restated Agreement and Declaration of Trust, as amended
by Amendments Nos. 1, 2, 3, 4, 5, 6 and 7 thereto (the "Declaration of Trust"),
a copy of which is on file in the office of the Secretary of State of The
Commonwealth of Massachusetts, as follows:
1. The first sentence of Section 6 of Article III of the Declaration of
Trust is hereby amended to read in its entirety as follows:
Without limiting the authority of the Trustees set forth in Section 5,
inter alia, to establish and designate any further Series or classes or
to modify the rights and preferences of any Series or class, each of
the following Series shall be, and is hereby, established and
designated:
(1) New England Government Securities Fund, (2) New England Growth
Fund, (3) New England Balanced Fund, (4) New England Value Fund, (5)
New England Bond Income Fund, (6) New England Tax Exempt Income Fund,
(7) New England International Equity Fund, (8) New England Capital
Growth Fund, (9) New England Star Advisers Fund, (10) New England
Strategic Income Fund and (11) New England Star Worldwide Fund; and the
following Series shall be, and are hereby, designated Multi-Class
Series: New England Government Securities Fund, New England Balanced
Fund, New England Value Fund, New England Bond Income Fund, New England
Tax Exempt Income Fund, New England International Equity Fund, New
England Capital Growth Fund, New England Star Advisers Fund, New
England Strategic Income Fund and New England Star Worldwide Fund.
The foregoing amendment shall become effective as of the time it is
filed with the Secretary of State of The Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hand for ourselves and for
our successors and assigns as of this 31st day of October, 1995.
/s/ Kenneth J. Cowan
---------------------- ---------------------
Graham T. Allison, Jr. Kenneth J. Cowan
/s/ Henry L.P. Schemlzer
---------------------- ---------------------
Sandra O. Moose Henry L.P. Schemlzer
---------------------- ---------------------
James H. Scott John A. Shane
/s/ Peter S. Voss
---------------------- ---------------------
Peter S. Voss Pendleton P. White
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hand for ourselves and for
our successors and assigns as of this 31st day of October, 1995.
/s/ Graham T. Allison, Jr.
---------------------- ---------------------
Graham T. Allison, Jr. Kenneth J. Cowan
---------------------- ---------------------
Sandra O. Moose Henry L.P. Schemlzer
---------------------- ---------------------
James H. Scott John A. Shane
---------------------- ---------------------
Peter S. Voss Pendleton P. White
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hand for ourselves and for
our successors and assigns as of this 31st day of October, 1995.
---------------------- ---------------------
Graham T. Allison, Jr. Kenneth J. Cowan
/s/ Sandra O. Moose
---------------------- ---------------------
Sandra O. Moose Henry L.P. Schemlzer
---------------------- ---------------------
James H. Scott John A. Shane
---------------------- ---------------------
Peter S. Voss Pendleton P. White
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hand for ourselves and for
our successors and assigns as of this 31st day of October, 1995.
---------------------- ---------------------
Graham T. Allison, Jr. Kenneth J. Cowan
---------------------- ---------------------
Sandra O. Moose Henry L.P. Schemlzer
/s/ John A. Shane
---------------------- ---------------------
James H. Scott John A. Shane
---------------------- ---------------------
Peter S. Voss Pendleton P. White
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hand for ourselves and for
our successors and assigns as of this 31st day of October, 1995.
---------------------- ---------------------
Graham T. Allison, Jr. Kenneth J. Cowan
---------------------- ---------------------
Sandra O. Moose Henry L.P. Schemlzer
/s/ James H. Scott
---------------------- ---------------------
James H. Scott John A. Shane
---------------------- ---------------------
Peter S. Voss Pendleton P. White
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hand for ourselves and for
our successors and assigns as of this 31st day of October, 1995.
---------------------- ---------------------
Graham T. Allison, Jr. Kenneth J. Cowan
---------------------- ---------------------
Sandra O. Moose Henry L.P. Schemlzer
---------------------- ---------------------
James H. Scott John A. Shane
/s/ Pendleton P. White
---------------------- ---------------------
Peter S. Voss Pendleton P. White
<PAGE>
Exhibit (a)(12)
NEW ENGLAND FUNDS TRUST I
Amendment No. 11 to Amended and Restated Agreement
Declaration of Trust
The undersigned, being at least a majority of the Trustees of New
England Funds Trust I (the "Trust"), having determined it to be consistent with
the fair and equitable treatment of all shareholders of the Trust, hereby amend
the Trust's Amended and Restated Agreement and Declaration of Trust, as amended
by Amendments Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 thereto (the "Declaration of
Trust"), a copy of which is on file in the office of the Secretary of State of
The Commonwealth of Massachusetts, as follows:
1. The name of the Trust is hereby amended to be "Nvest Funds Trust I."
2. The first sentence of Section 6 of Article III of the Declaration of
Trust is hereby amended to read in its entirety as follows:
Without limiting the authority of the Trustees set forth in Section 5,
inter alia, to establish and designate any further Series or classes
or to modify the rights and preferences of any Series or class, each
of the following Series shall be, and is hereby, established and
designated as a Multi-Class Series: (1) Nvest Government Securities
Fund, (2) Nvest Growth Fund, (3) Nvest Balanced Fund, (4) Nvest Value
Fund, (5) Nvest Bond Income Fund, (6) Nvest Municipal Income Fund, (7)
Nvest International Equity Fund, (8) Nvest Capital Growth Fund, (9)
Nvest Star Advisers Fund, (10) Nvest Strategic Income Fund, (11) Nvest
Star Worldwide Fund and (12) Nvest Star Small Cap Fund.
The foregoing amendment shall be effective as of the time it is filed
with the Secretary of State of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, we have hereunto set our hand for ourselves and for
our successors and assigns as of the 12th day of November, 1999.
/s/ Graham T. Allison, Jr. /s/ Daniel M. Cain
---------------------- --------------------
Graham T. Allison, Jr. Daniel M. Cain
/s/ Kenneth J. Cowan /s/ Richard Darman
---------------------- --------------------
Kenneth J. Cowan Richard Darman
/s/ Sandra O. Moose /s/ John A. Shane
---------------------- --------------------
Sandra O. Moose John A. Shane
/s/ Peter S. Voss /s/ Pendleton P. White
---------------------- --------------------
Peter S. Voss Pendleton P. White
<PAGE>
Exhibit (a)(13)
NVEST FUNDS TRUST I
Amendment No. 12 to Amended and Restated Agreement
Declaration of Trust
The undersigned, being at least a majority of the Trustees of Nvest
Funds Trust I (the "Trust"), having determined it to be consistent with the fair
and equitable treatment of all shareholders of the Trust, hereby amend the
Trust's Amended and Restated Agreement and Declaration of Trust, as amended by
Amendments Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11 thereto (the "Declaration
of Trust"), a copy of which is on file in the office of the Secretary of State
of The Commonwealth of Massachusetts, as follows:
1. The first sentence of Section 6 of Article III of the Declaration of
Trust is hereby amended to read in its entirety as follows:
Without limiting the authority of the Trustees set forth in Section 5,
inter alia, to establish and designate any further Series or classes
or to modify the rights and preferences of any Series or class, each
of the following Series shall be, and is hereby, established and
designated as a Multi-Class Series: (1) Nvest Government Securities
Fund, (2) Nvest Growth Fund, (3) Nvest Balanced Fund, (4) Nvest Star
Value Fund, (5) Nvest Bond Income Fund, (6) Nvest Municipal Income
Fund, (7) Nvest International Equity Fund, (8) Nvest Capital Growth
Fund, (9) Nvest Star Advisers Fund, (10) Nvest Strategic Income Fund,
(11) Nvest Star Worldwide Fund and (12) Nvest Star Small Cap Fund.
The foregoing amendment shall be effective as of the time it is filed
with the Secretary of State of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, we have hereunto set our hand for ourselves and for
our successors and assigns as of the 25th day of February, 2000.
/s/ Graham T. Allison, Jr. /s/ Daniel M. Cain
---------------------- -------------------
Graham T. Allison, Jr. Daniel M. Cain
/s/ Kenneth J. Cowan /s/ Richard Darman
---------------------- -------------------
Kenneth J. Cowan Richard Darman
/s/ Sandra O. Moose /s/ John A. Shane
---------------------- -------------------
Sandra O. Moose John A. Shane
/s/ Peter S. Voss /s/ Pendleton P. White
---------------------- -------------------
Peter S. Voss Pendleton P. White
<PAGE>
Exhibit (d)(3)(i)
NEW ENGLAND CAPITAL GROWTH FUND
SUB-ADVISORY AGREEMENT
(WESTPEAK INVESTMENT ADVISORS, L.P.)
Sub-Advisory Agreement (this "Agreement") entered into as of April 17,
1998, by and among New England Funds Trust I, a Massachusetts business trust
(the "Trust"), with respect to its New England Capital Growth Fund series (the
"Series"), New England Funds Management, L.P., a Delaware limited partnership
(the "Manager"), and Westpeak Investment Advisors, L.P., a Delaware limited
partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
August 30, 1996 (the "Advisory Agreement") with the Trust, relating to the
provision of portfolio management and administrative services to the Series;
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust, the Manager and the Sub-Adviser agree as
follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets
of the Series, and have the authority on behalf of the Series to vote
all proxies and exercise all other rights of the Series as a security
holder of companies in which the Series from time to time invests. The
Sub-Adviser shall manage the Series in conformity with (1) the
investment objective, policies and restrictions of the Series set forth
in the Trust's prospectus and statement of additional information
relating to the Series, (2) any additional policies or guidelines
established by the Manager or by the Trust's trustees that have been
furnished in writing to the Sub-Adviser and (3) the provisions of the
Internal Revenue Code (the "Code") applicable to "regulated investment
companies" (as defined in Section 851 of the Code), all as from time to
time in effect (collectively, the "Policies"), and with all applicable
provisions of law, including without limitation all applicable
provisions of the Investment Company Act of 1940 (the "1940 Act") and
the rules and regulations thereunder. Subject to the foregoing, the
Sub-Adviser is authorized, in its discretion and without prior
consultation with the Manager, to buy, sell, lend and otherwise trade
in any stocks, bonds and other securities and investment instruments on
behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover
or any tax considerations; and the majority or the whole of the Series
may be invested in such proportions of stocks, bonds, other securities
or investment instruments, or cash, as the Sub-Adviser shall determine.
b. The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning
portfolio transactions and performance of the Series in such form as
may be mutually agreed upon, and agrees to review the Series and
discuss the management of it. The Sub-Adviser shall permit all books
and records with respect to the Series to be inspected and audited by
the Manager and the Administrator at all reasonable times during normal
business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may
reasonably be requested by the Manager from time to time, including
without limitation all material requested by or required to be
delivered to the Trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to
have authorized to give written and/or oral instructions to custodians
of assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Series' Custodian
(as defined in Section 3 hereof) to provide) timely information to the
Sub-Adviser regarding such matters as the composition of assets of the
Series, cash requirements and cash available for investment in the
Series, and all other information as may be reasonably necessary for
the Sub-Adviser to perform its responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or supplements thereto at, or, if
practicable, before the time the revisions or supplements become
effective. The Manager agrees to furnish the Sub-Adviser with minutes
of meetings of the trustees of the Trust applicable to the Series to
the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its
functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Series shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name "Westpeak Investment Advisors, L.P."
and that all use of any designation consisting in whole or part of "Westpeak
Investment Advisors, L.P." under this Agreement shall inure to the benefit of
the Sub-Adviser. The Manager on its own behalf and on behalf of the Series
agrees not to use any such designation in any advertisement or sales literature
or other materials promoting the Series, except with the prior written consent
of the Sub-Adviser. Without the prior written consent of the Sub-Adviser, the
Manager shall not, and the Manager shall use its best efforts to cause the
Series not to, make representations regarding the Sub-Adviser in any disclosure
document, advertisement or sales literature or other materials relating to the
Series. Upon termination of this Agreement for any reason, the Manager shall
cease, and the Manager shall use its best efforts to cause the Series to cease,
all use of any such designation as soon as reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
for the purchase and sale of securities for the Series with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940
Act in all respects. To the extent consistent with applicable law, purchase or
sell orders for the Series may be aggregated with contemporaneous purchase or
sell orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its
best efforts to obtain execution of transactions for the Series at prices which
are advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Series.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Sub-Adviser shall be paid at the annual rate of 0.40% of the
first $200 million of the average daily net assets of the Series, 0.35% of the
next $300 million of the average daily net assets, and 0.30% in excess of $500
million of such assets (or such lesser amount as the Sub-Adviser may from time
to time agree to receive). Such compensation shall be paid by the Trust (except
to the extent that the Trust, the Sub-Adviser and the Manager otherwise agree in
writing from time to time). Such compensation shall be payable monthly in
arrears or at such other intervals, not less frequently than quarterly, as the
Manager is paid by the Series pursuant to the Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser under this
Agreement.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Series, and (ii)
by vote of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such
approval;
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
c. this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
and
d. this Agreement may be terminated by the Sub-Adviser on
ninety days' written notice to the Manager and the Trust, or by the
Manager on ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall
not be entitled to the advice, recommendation or judgment of any
specific person; provided, however, that the persons identified in the
prospectus of the Series shall perform the day-to-day portfolio
management duties described therein until the Sub-Adviser notifies the
Manager that one or more other employees, officers or agents of the
Sub-Adviser, identified in such notice, shall assume such duties as of
a specific date.
b. If any term or provision of this Agreement or the
application thereof to any person or circumstances is held to be
invalid or unenforceable to any extent, the remainder of this Agreement
or the application of such provision to other persons or circumstances
shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.
c. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
<PAGE>
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By:/s/ Frank Nesvet
- -----------------------------
Name: Frank Nesvet
Title: Managing Director, Senior Vice President & Fund Treasurer
WESTPEAK INVESTMENT ADVISORS, L.P.
By Westpeak Investment Advisors, Inc., its general partner
By: /s/ Gerald H. Scriver
- -----------------------------
Name: Gerald H. Scriver
Title: President and CEO
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Capital Growth Fund series
By: /s/ Henry L.P. Schmelzer
- -----------------------------
Name: Henry L.P. Schmelzer
Title: President
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust establishing New
England Funds Trust I (the "Fund") is on file with the Secretary of The
Commonwealth of Massachusetts, and notice is hereby given that this Agreement is
executed with respect to the Fund's New England Capital Growth Fund series (the
"Series") on behalf of the Fund by officers of the Fund as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
<PAGE>
Exhibit (d)(3)(ii)
NEW ENGLAND BALANCED FUND
SUB-ADVISORY AGREEMENT
(LOOMIS SAYLES)
Sub-Advisory Agreement (this "Agreement") entered into as of August 30,
1996, and amended this 1st day of May, 1998, by and among New England Funds
Trust I, a Massachusetts business trust (the "Trust"), with respect to its New
England Balanced Fund series (the "Series"), New England Funds Management, L.P.,
a Delaware limited partnership (the "Manager"), and Loomis, Sayles & Company,
L.P., a Delaware limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
August 30, 1996 (the "Advisory Agreement") with the Trust, relating to the
provision of portfolio management and administrative services to the Series;
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust, the Manager and the Sub-Adviser agree as
follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets
of the Series, and have the authority on behalf of the Series to vote
all proxies and exercise all other rights of the Series as a security
holder of companies in which the Series from time to time invests. The
Sub-Adviser shall manage the Series in conformity with (1) the
investment objective, policies and restrictions of the Series set forth
in the Trust's prospectus and statement of additional information
relating to the Series, (2) any additional policies or guidelines
established by the Manager or by the Trust's trustees that have been
furnished in writing to the Sub-Adviser and (3) the provisions of the
Internal Revenue Code (the "Code") applicable to "regulated investment
companies" (as defined in Section 851 of the Code), all as from time to
time in effect (collectively, the "Policies"), and with all applicable
provisions of law, including without limitation all applicable
provisions of the Investment Company Act of 1940 (the "1940 Act") and
the rules and regulations thereunder. Subject to the foregoing, the
Sub-Adviser is authorized, in its discretion and without prior
consultation with the Manager, to buy, sell, lend and otherwise trade
in any stocks, bonds and other securities and investment instruments on
behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover
or any tax considerations; and the majority or the whole of the Series
may be invested in such proportions of stocks, bonds, other securities
or investment instruments, or cash, as the Sub-Adviser shall determine.
b. The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning
portfolio transactions and performance of the Series in such form as
may be mutually agreed upon, and agrees to review the Series and
discuss the management of it. The Sub-Adviser shall permit all books
and records with respect to the Series to be inspected and audited by
the Manager and the Administrator at all reasonable times during normal
business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may
reasonably be requested by the Manager from time to time, including
without limitation all material requested by or required to be
delivered to the Trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to
have authorized to give written and/or oral instructions to custodians
of assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Series' Custodian
(as defined in Section 3 hereof) to provide) timely information to the
Sub-Adviser regarding such matters as the composition of assets of the
Series, cash requirements and cash available for investment in the
Series, and all other information as may be reasonably necessary for
the Sub-Adviser to perform its responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or supplements thereto at, or, if
practicable, before the time the revisions or supplements become
effective. The Manager agrees to furnish the Sub-Adviser with minutes
of meetings of the trustees of the Trust applicable to the Series to
the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its
functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Series shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name "Loomis, Sayles & Company, L.P." and
that all use of any designation consisting in whole or part of "Loomis, Sayles &
Company, L.P." under this Agreement shall inure to the benefit of the
Sub-Adviser. The Manager on its own behalf and on behalf of the Series agrees
not to use any such designation in any advertisement or sales literature or
other materials promoting the Series, except with the prior written consent of
the Sub-Adviser. Without the prior written consent of the Sub-Adviser, the
Manager shall not, and the Manager shall use its best efforts to cause the
Series not to, make representations regarding the Sub-Adviser in any disclosure
document, advertisement or sales literature or other materials relating to the
Series. Upon termination of this Agreement for any reason, the Manager shall
cease, and the Manager shall use its best efforts to cause the Series to cease,
all use of any such designation as soon as reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
for the purchase and sale of securities for the Series with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940
Act in all respects. To the extent consistent with applicable law, purchase or
sell orders for the Series may be aggregated with contemporaneous purchase or
sell orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its
best efforts to obtain execution of transactions for the Series at prices which
are advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Series.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Sub-Adviser shall be paid at the annual rate of 0.535% of the
first $200 million of the average daily net assets of the Series, 0.350% of the
next $300 million of the average daily net assets of the Series and 0.300% in
excess of $500 million of such assets, respectively (or such lesser amount as
the Sub-Adviser may from time to time agree to receive). Such compensation shall
be paid by the Trust (except to the extent that the Trust, the Sub-Adviser and
the Manager otherwise agree in writing from time to time). Such compensation
shall be payable monthly in arrears or at such other intervals, not less
frequently than quarterly, as the Manager is paid by the Series pursuant to the
Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser under this
Agreement.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Series, and (ii)
by vote of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such
approval;
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
c. this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
and
d. this Agreement may be terminated by the Sub-Adviser on
ninety days' written notice to the Manager and the Trust, or by the
Manager on ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall
not be entitled to the advice, recommendation or judgment of any
specific person; provided, however, that the persons identified in the
prospectus of the Series shall perform the day-to-day portfolio
management duties described therein until the Sub-Adviser notifies the
Manager that one or more other employees, officers or agents of the
Sub-Adviser, identified in such notice, shall assume such duties as of
a specific date.
b. If any term or provision of this Agreement or the
application thereof to any person or circumstances is held to be
invalid or unenforceable to any extent, the remainder of this Agreement
or the application of such provision to other persons or circumstances
shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.
c. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
<PAGE>
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/ John E. Pelletier
------------------------
Name: John E. Pelletier
Title: Managing Director, Senior Vice President, General Counsel,
Secretary & Clerk
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Balanced Fund series
By: /s/ Henry L.P. Schmelzer
------------------------
Name: Henry L.P. Schmelzer
Title: President
LOOMIS SAYLES & COMPANY, L.P.
By Loomis, Sayles & Company, Incorporated, its general partner
By: /s/ Sheila M. Barry
------------------------
Name: Sheila M. Barry
Title: Assistant General Counsel and Vice President
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust establishing New
England Funds Trust I (the "Fund") is on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that his Agreement is
executed with respect to the Fund's New England Balanced Fund series (the
"Series") on behalf of the Fund by officers of the Fund as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
<PAGE>
Exhibit (d)(3)(iii)
NEW ENGLAND INTERNATIONAL EQUITY FUND
SUB-ADVISORY AGREEMENT
(LOOMIS, SAYLES & COMPANY, L.P.)
Sub-Advisory Agreement (this "Agreement") entered into as of February
14, 1997, and amended this 1st day of May, 1998, by and among New England Funds
Trust I, a Massachusetts business trust (the "Trust"), with respect to its New
England International Equity Fund series (the "Series"), New England Funds
Management, L.P., a Delaware limited partnership (the "Manager"), and Loomis,
Sayles & Company, L.P., a Delaware limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
August 30, 1996 (the "Advisory Agreement") with the Trust, relating to the
provision of portfolio management and administrative services to the Series;
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the Trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust, the Manager and the Sub-Adviser agree as
follows:
1. Sub-Advisory Services.
(a) The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets
of the Series. The Sub-Adviser shall manage the Series in conformity
with (1) the investment objective, policies and restrictions of the
Series set forth in the Trust's prospectus and statement of additional
information relating to the Series, (2) any additional policies or
guidelines established by the Manager or by the Trust's trustees that
have been furnished in writing to the Sub-Adviser and (3) the
provisions of the Internal Revenue Code (the "Code") applicable to
"regulated investment companies" (as defined in Section 851 of the
Code), all as from time to time in effect (collectively, the
"Policies"), and with all applicable provisions of law, including
without limitation all applicable provisions of the Investment Company
Act of 1940 (the "1940 Act") and the rules and regulations thereunder.
Subject to the foregoing, the Sub-Adviser is authorized, in its
discretion and without prior consultation with the Manager, to buy,
sell, lend and otherwise trade in any stocks, bonds and other
securities and investment instruments on behalf of the Series, without
regard to the length of time the securities have been held and the
resulting rate of portfolio turnover or any tax considerations; and the
majority or the whole of the Series may be invested in such proportions
of stocks, bonds, other securities or investment instruments, or cash,
as the Sub-Adviser shall determine.
(b) The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning
portfolio transactions and performance of the Series in such form as
may be mutually agreed upon, and agrees to review the Series and
discuss the management of it. The Sub-Adviser shall permit all books
and records with respect to the Series to be inspected and audited by
the Manager and the Administrator at all reasonable times during normal
business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may
reasonably be requested by the Manager from time to time, including
without limitation all material requested by or required to be
delivered to the Trustees of the Trust.
(c) The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to
have authorized to give written and/or oral instructions to custodians
of assets of the Series.
2. Obligations of the Manager.
(a) The Manager shall provide (or cause the Fund's custodian
to provide) timely information to the Sub-Adviser regarding such
matters as the composition of assets of the Series, cash requirements
and cash available for investment in the Series, and all other
information as may be reasonably necessary for the Sub-Adviser to
perform its responsibilities hereunder.
(b) The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or supplements thereto at, or, if
practicable, before the time the revisions or supplements become
effective. The Manager agrees to furnish the Sub-Adviser with minutes
of meetings of the Trustees of the Trust applicable to the Series to
the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its
functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series' agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Series shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name and mark "Loomis, Sayles & Company,
L.P." and that all use of any designation consisting in whole or part of
"Loomis, Sayles & Company, L.P." (a "Loomis Sayles Mark") under this Agreement
shall inure to the benefit of the Sub-Adviser. The Manager on its own behalf and
on behalf of the Series agrees not to use any Loomis Sayles Mark in any
advertisement or sales literature or other materials promoting the Series,
except with the prior written consent of the Sub-Adviser. Without the prior
written consent of the Sub-Adviser, the Manager shall not, and the Manager shall
use its best efforts to cause the Series not to, make representations regarding
the Sub-Adviser in any disclosure document, advertisement or sales literature or
other materials relating to the Series. Upon termination of this Agreement for
any reason, the Manager shall cease, and the Manager shall use its best efforts
to cause the Series to cease, all use of any Loomis Sayles Mark(s) as soon as
reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
for the purchase and sale of securities for the Series with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940
Act in all respects. To the extent consistent with applicable law, purchase or
sell orders for the Series may be aggregated with contemporaneous purchase or
sell orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its
best efforts to obtain execution of transactions for the Series at prices which
are advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Series.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Sub-Adviser shall be paid at the annual rate of 0.40 % of the
first $200 million of the average daily net assets of the Series that the
Sub-Adviser manages and 0.35 % of the amount in excess of $200 million. Such
compensation shall be paid by the Trust (except to the extent the Trust, the
Sub-Adviser and the Manager otherwise agree in writing from time to time). Such
compensation shall be payable monthly in arrears or at such other intervals, not
less frequently than quarterly, as the Manager is paid by the Series pursuant to
the Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, employees or agents (the "Indemnified Parties") shall be subject to
any liability to the Manager, the Trust, the Series or any shareholder of the
Series for any error of judgment, any mistake of law or any loss arising out of
any investment or other act or omission in the course of, connected with, or
arising out of any service to be rendered under this Agreement, except by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties or by reason of reckless disregard by the Sub-Adviser of
its obligations and duties. The Manager shall hold harmless and indemnify the
Sub-Adviser for any loss, liability, cost, damage or expense (including
reasonable attorneys fees and costs) arising from any claim or demand by any
past or present shareholder of the Series that is not based upon the obligations
of the Sub-Adviser under this Agreement.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
(a) unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Series, and (ii)
by vote of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such
approval;
(b) this Agreement may at any time be terminated on sixty
days' written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
and
(d) this Agreement may be terminated by the Sub-Adviser on
ninety days' written notice to the Manager and the Trust, or by the
Manager on ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
(a) The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall
not be entitled to the advice, recommendation or judgment of any
specific person; provided, however, that the persons identified in the
prospectus of the Series shall perform the portfolio management duties
described therein until the Sub-Adviser notifies the Manager that one
or more other employees, officers or agents of the Sub-Adviser,
identified in such notice, shall assume such duties as of a specific
date.
(b) If any term or provision of this Agreement or the
application thereof to any person or circumstances is held to be
invalid or unenforceable to any extent, the remainder of this Agreement
or the application of such provision to other persons or circumstances
shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.
(c) This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
<PAGE>
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/ John E. Pelletier
---------------------
Name: John E. Pelletier
Title: Managing Director, Senior Vice President, General Counsel,
Secretary & Clerk
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England International Equity Fund series
By: /s/ Henry L.P. Schmelzer
---------------------
Name: Henry L.P. Schmelzer
Title: President
LOOMIS SAYLES & COMPANY, L.P.
By Loomis, Sayles & Company, Incorporated, its general partner
By: /s/ Sheila M. Barry
---------------------
Name: Sheila M. Barry
Title: Assistant General Counsel and Vice President
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust establishing New
England Funds Trust I (the "Fund") is on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that his Agreement is
executed with respect to the Fund's New England International Equity Fund series
(the "Series") on behalf of the Fund by officers of the Fund as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
<PAGE>
Exhibit (d)(3)(iv)
NEW ENGLAND STAR ADVISERS FUND
SUB-ADVISORY AGREEMENT
LOOMIS, SAYLES & COMPANY, L.P.
Sub-Advisory Agreement (this "Agreement") entered into as of October
17, 1997, and amended this 1st day of May, 1998, by and among New England Funds
Trust I, a Massachusetts business trust (the "Trust"), with respect to its New
England Star Advisers Fund series (the "Series"), New England Funds Management,
L.P., a Delaware limited partnership (the "Manager"), and Loomis, Sayles &
Company, L.P., a Delaware limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
August 30, 1996 (the "Advisory Agreement") with the Trust, relating to the
provision of portfolio management and administrative services to the Series;
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust, the Manager and the Sub-Adviser agree as
follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the Manager and
of any administrator appointed by the Manager (the "Administrator"), manage the
investment and reinvestment of such portion of the assets of the Series as the
Manager may from time to time allocate to the Sub-Adviser for management (such
portion, the "Segment"). The Sub-Adviser shall manage the Segment in conformity
with (1) the investment objective, policies and restrictions of the Series set
forth in the Trust's prospectus and statement of additional information relating
to the Series, (2) any additional policies or guidelines established by the
Manager or by the Trust's trustees that have been furnished in writing to the
Sub-Adviser and (3) the provisions of the Internal Revenue Code (the "Code")
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), all as from time to time in effect (collectively, the "Policies"), and
with all applicable provisions of law, including without limitation all
applicable provisions of the Investment Company Act of 1940 (the "1940 Act") and
the rules and regulations thereunder. For purposes of compliance with the
Policies, the Sub-Adviser shall be entitled to treat the Segment as though the
Segment constituted the entire Series, and the Sub-Adviser shall not be
responsible in any way for the compliance of any assets of the Series, other
than the Segment, with the Policies, or for the compliance of the Series, taken
as a whole, with the Policies. Subject to the foregoing, the Sub-Adviser is
authorized, in its discretion and without prior consultation with the Manager,
to buy, sell, lend and otherwise trade in any stocks, bonds and other securities
and investment instruments on behalf of the Series, without regard to the length
of time the securities have been held and the resulting rate of portfolio
turnover or any tax considerations; and the majority or the whole of the Segment
may be invested in such proportions of stocks, bonds, other securities or
investment instruments, or cash, as the Sub-Adviser shall determine.
Notwithstanding the foregoing provisions of this Section 1.a, however, the
Sub-Adviser shall, upon written instructions from the Manager, effect such
portfolio transactions for the Segment as the Manager shall determine are
necessary in order for the Series to comply with the Policies.
b. The Sub-Adviser shall furnish the Manager and the Administrator
monthly, quarterly and annual reports concerning transactions and performance of
the Segment in such form as may be mutually agreed upon, and agrees to review
the Segment and discuss the management of it. The Sub-Adviser shall permit all
books and records with respect to the Segment to be inspected and audited by the
Manager and the Administrator at all reasonable times during normal business
hours, upon reasonable notice. The Sub-Adviser shall also provide the Manager
with such other information and reports as may reasonably be requested by the
Manager from time to time, including without limitation all material requested
by or required to be delivered to the Trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange Commission and
a list of the persons whom the Sub-Adviser wishes to have authorized to give
written and/or oral instructions to custodians of assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Series' Custodian (as
defined in Section 3 hereof) to provide) timely information to the Sub-Adviser
regarding such matters as the composition of assets in the Segment, cash
requirements and cash available for investment in the Segment, and all other
information as may be reasonably necessary for the Sub-Adviser to perform its
responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the prospectus
and statement of additional information of the Series and agrees during the
continuance of this Agreement to furnish the Sub-Adviser copies of any revisions
or supplements thereto at, or, if practicable, before the time the revisions or
supplements become effective. The Manager agrees to furnish the Sub-Adviser with
minutes of meetings of the trustees of the Trust applicable to the Series to the
extent they may affect the duties of the Sub-Adviser, and with copies of any
financial statements or reports made by the Series to its shareholders, and any
further materials or information which the Sub-Adviser may reasonably request to
enable it to perform its functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of the
Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Segment shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Segment shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the Sub-Adviser
is the sole owner of the name "Loomis,Sayles & Company, L.P." and that all use
of any designation consisting in whole or part of "Loomis,Sayles & Company,
L.P." under this Agreement shall inure to the benefit of the Sub-Adviser. The
Manager on its own behalf and on behalf of the Series agrees not to use any such
designation in any advertisement or sales literature or other materials
promoting the Series, except with the prior written consent of the Sub-Adviser.
Without the prior written consent of the Sub-Adviser, the Manager shall not, and
the Manager shall use its best efforts to cause the Series not to, make
representations regarding the Sub-Adviser in any disclosure document,
advertisement or sales literature or other materials relating to the Series.
Upon termination of this Agreement for any reason, the Manager shall cease, and
the Manager shall use its best efforts to cause the Series to cease, all use of
any such designation as soon as reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be paid by
the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for any
organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. Absent instructions from the Manager to the
contrary, the Sub-Adviser shall place all orders for the purchase and sale of
securities for the Segment with brokers or dealers selected by the Sub-Adviser,
which may include brokers or dealers affiliated with the Sub-Adviser, provided
such orders comply with Rule 17e-1 under the 1940 Act in all respects. To the
extent consistent with applicable law, purchase or sell orders for the Segment
may be aggregated with contemporaneous purchase or sell orders of other clients
of the Sub-Adviser. The Sub-Adviser shall use its best efforts to obtain
execution of transactions for the Segment at prices which are advantageous to
the Series and at commission rates that are reasonable in relation to the
benefits received. However, the Sub-Adviser may select brokers or dealers on the
basis that they provide brokerage, research or other services or products to the
Series and/or other accounts serviced by the Sub-Adviser. To the extent
consistent with applicable law, the Sub-Adviser may pay a broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Segment.
7. Compensation of the Sub-Adviser. As full compensation for all services
rendered, facilities furnished and expenses borne by the Sub-Adviser hereunder,
the Sub-Adviser shall be paid at the annual rate of 0.55% of the first $50
million of the average daily net assets (including cash or cash equivalents) of
the Segment; 0.50% of the next $200 million of such assets and 0.475% of such
assets in excess of $250 million (or such lesser amount as the Sub-Adviser may
from time to time agree to receive). Such compensation shall be paid by the
Trust (except to the extent that the Trust, the Sub-Adviser and the Manager
otherwise agree in writing from time to time). Such compensation shall be
payable monthly in arrears or at such other intervals, not less frequently than
quarterly, as the Manager is paid by the Series pursuant to the Advisory
Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services of the
Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and its
affiliates are free to act as investment manager and provide other services to
various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or other
federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, employees or agents (the "Indemnified Parties") shall be subject to
any liability to the Manager, the Trust, the Series or any shareholder of the
Series for any error of judgment, any mistake of law or any loss arising out of
any investment or other act or omission in the course of, connected with, or
arising out of any service to be rendered under this Agreement, except by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties or by reason of reckless disregard by the Sub-Adviser of
its obligations and duties hereunder. The Manager shall hold harmless and
indemnify the Sub-Adviser for any loss, liability, cost, damage or expense
(including reasonable attorneys fees and costs) arising from any claim or demand
by any past or present shareholder of the Series that is not based upon the
obligations of the Sub-Adviser with respect to the Segment under this Agreement.
Without limiting the foregoing, it is expressly understood and agreed
that the Manager and the Series shall hold harmless and indemnify the
Indemnified Parties for any loss arising out of any act or omission of any other
sub-adviser to the Series, or for any loss arising out of the failure of the
Series to comply with the Policies, except for losses arising out of the
Sub-Adviser's failure to comply with the Policies with respect to the Segment.
The Manager acknowledges and agrees that the Sub-Adviser makes no representation
or warranty, express or implied, that any level of performance or investment
results will be achieved by the Series or the Segment or that the Series or the
Segment will perform comparably with any standard or index, including other
clients of the Sub-Adviser, whether public or private.
10. Effective Date and Termination. This Agreement shall become effective
as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue in effect
for two years from the date of execution, and from year to year thereafter so
long as such continuance is specifically approved at least annually (i) by the
Board of Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series, and (ii) by vote of a majority of the trustees
of the Trust who are not interested persons of the Trust, the Manager or the
Sub-Adviser, cast in person at a meeting called for the purpose of voting on
such approval;
b. this Agreement may at any time be terminated on sixty days' written
notice to the Sub-Adviser either by vote of the Board of Trustees of the Trust
or by vote of a majority of the outstanding voting securities of the Series;
c. this Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Advisory Agreement; and
d. this Agreement may be terminated by the Sub-Adviser on sixty days'
written notice to the Manager and the Trust, or by the Manager on sixty days'
written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual consent of
the Manager and the Sub-Adviser, provided that, if required by law, such
amendment shall also have been approved by vote of a majority of the outstanding
voting securities of the Series and by vote of a majority of the trustees of the
Trust who are not interested persons of the Trust, the Manager or the
Sub-Adviser, cast in person at a meeting called for the purpose of voting on
such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms "vote of a
majority of the outstanding voting securities," "interested person," "affiliated
person" and "assignment" shall have their respective meanings defined in the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any employee,
officer or agent of the Sub-Adviser, and the Manager shall not be entitled to
the advice, recommendation or judgment of any specific person; provided,
however, that the persons identified in the prospectus of the Series shall
perform the portfolio management duties described therein until the Sub-Adviser
notifies the Manager that one or more other employees, officers or agents of the
Sub-Adviser, identified in such notice, shall assume such duties as of a
specific date.
b. If any term or provision of this Agreement or the application
thereof to any person or circumstances is held to be invalid or unenforceable to
any extent, the remainder of this Agreement or the application of such provision
to other persons or circumstances shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.
c. This Agreement shall be governed by and interpreted in accordance
with the laws of the Commonwealth of Massachusetts.
<PAGE>
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/ John E. Pelletier
-------------------------
Name: John E. Pelletier
Title: Managing Director, Senior Vice President, General Counsel,
Secretary & Clerk
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Star Advisers Fund series
By: /s/ Henry L.P. Schmelzer
-------------------------
Name: Henry L.P. Schmelzer
Title: President
LOOMIS SAYLES & COMPANY, L.P.
By Loomis, Sayles & Company, Incorporated, its general partner
By: /s/ Sheila M. Barry
-------------------------
Name: Sheila M. Barry
Title: Assistant General Counsel and Vice President
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust establishing New
England Funds Trust I (the "Fund") is on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that his Agreement is
executed with respect to the Fund's New England Star Advisers Fund series (the
"Series") on behalf of the Fund by officers of the Fund as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
<PAGE>
Exhibit (d)(3)(vi)
NEW ENGLAND STAR ADVISERS FUND
SUB-ADVISORY AGREEMENT
(HARRIS ASSOCIATES L.P.)
Sub-Advisory Agreement (this "Agreement") is entered into as of October
17, 1997, and amended this 1st day of May, 1998, by and among New England Funds
Trust I, a Massachusetts business trust (the "Trust"), with respect to its New
England Star Advisers Fund series (the "Series"), New England Funds Management,
L.P., a Delaware limited partnership (the "Manager"), and Harris Associates
L.P., a Delaware limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
August 30, 1996 (the "Advisory Agreement") with the Trust, relating to the
provision of portfolio management and administrative services the Series;
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust, the Manager and the Sub-Adviser agree as
follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the "Administrator"),
manage the investment and reinvestment of such portion of the assets of the
Series as the Manager may from time to time allocate to the Sub-Adviser for
management (such portion, the "Segment"), and the Sub-Adviser shall have the
authority on behalf of the Series to vote all proxies and exercise all other
rights of the Series as a security holder of companies in which the Segment from
time to time invests. The Sub-Adviser shall manage the Segment in conformity
with (1) the investment objective, policies and restrictions of the Series set
forth in the Trust's prospectus and statement of additional information relating
to the Series, (2) any additional policies or guidelines established by the
Manager or by the Trust's trustees that have been furnished in writing to the
Sub-Adviser and (3) the provisions of the Internal Revenue Code (the "Code")
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), all as from time to time in effect (collectively, the "Policies"), and
with all applicable provisions of law, including without limitation all
applicable provisions of the Investment Company Act of 1940 (the "1940 Act") and
the rules and regulations thereunder. For purposes of compliance with the
Policies, the Sub-Adviser shall be entitled to treat the Segment as though the
Segment constituted the entire Series, and the Sub-Adviser shall not be
responsible in any way for the compliance of any assets of the Series, other
than the Segment, with the Policies, or for the compliance of the Series, taken
as a whole, with the Policies. Subject to the foregoing, the Sub-Adviser is
authorized, in its discretion and without prior consultation with the Manager,
to buy, sell, lend and otherwise trade in any stocks, bonds and other securities
and investment instruments on behalf of the Series, without regard to the length
of time the securities have been held and the resulting rate of portfolio
turnover or any tax considerations; and the majority or the whole of the Segment
may be invested in such proportions of stocks, bonds, other securities or
investment instruments, or cash, as the Sub-Adviser shall determine.
Notwithstanding the foregoing provisions of this Section 1.a, however, the
Sub-Adviser shall, upon written instructions from the Manager, effect such
portfolio transactions for the Segment as the Manager shall determine are
necessary in order for the Series to comply with the Policies.
b. The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning transactions and
performance of the Segment in such form as may be mutually agreed upon, and
agrees to review the Segment and discuss the management of it. The Sub-Adviser
shall permit all books and records with respect to the Segment to be inspected
and audited by the Manager and the Administrator at all reasonable times during
normal business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may reasonably be
requested by the Manager from time to time, including without limitation all
material requested by or required to be delivered to the Trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange Commission and
a list of the persons whom the Sub-Adviser wishes to have authorized to give
written and/or oral instructions to custodians of assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Series' Custodian
(as defined in Section 3 hereof) to provide) timely information to the
Sub-Adviser regarding such matters as the composition of assets in the Segment,
cash requirements and cash available for investment in the Segment, and all
other information as may be reasonably necessary for the Sub-Adviser to perform
its responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and agrees
during the continuance of this Agreement to furnish the Sub-Adviser copies of
any revisions or supplements thereto at, or, if practicable, before the time the
revisions or supplements become effective. The Manager agrees to furnish the
Sub-Adviser with minutes of meetings of the trustees of the Trust applicable to
the Series to the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the Sub-Adviser may
reasonably request to enable it to perform its functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Segment shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Segment shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name "Harris Associates L.P." and "Oakmark"
and that all use of any designation consisting in whole or part of "Harris
Associates L.P." or "Oakmark" (a "Harris/Oakmark Mark") under this Agreement
shall inure to the benefit of the Sub-Adviser. The Manager on its own behalf and
on behalf of the Series agrees not to use any Harris Mark in any advertisement
or sales literature or other materials promoting the Series, except with the
prior written consent of the Sub-Adviser. Without the prior written consent of
the Sub-Adviser, the Manager shall not, and the Manager shall use its best
efforts to cause the Series not to, make representations regarding the
Sub-Adviser or the Oakmark Funds in any disclosure document, advertisement or
sales literature or other materials relating to the Series. Upon termination of
this Agreement for any reason, the Manager shall cease, and the Manager shall
use its best efforts to cause the Series to cease, all use of any Harris/Oakmark
Mark(s) as soon as reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. Absent instructions from the Manager to
the contrary, the Sub-Adviser shall place all orders for the purchase and sale
of securities for the Segment with brokers or dealers selected by the
Sub-Adviser, which may include brokers or dealers affiliated with the
Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940 Act in
all respects. To the extent consistent with applicable law, purchase or sell
orders for the Segment may be aggregated with contemporaneous purchase or sell
orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its best
efforts to obtain execution of transactions for the Segment at prices which are
advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Segment.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Sub-Adviser shall be paid at the annual rate of 0.65% of the
first $50 million of the average daily net assets (including cash or cash
equivalents) of the Segment for such period as compensation is payable, 0.60% of
the next $50 million of such assets and 0.55% of such assets in excess of $100
million. Such compensation shall by paid by the Trust (except to the extent that
the Trust, the Sub-Advisor and the Manager otherwise agree in writing from time
to time). Such compensation shall be payable monthly in arrears or at such other
intervals, not less frequently than quarterly, as the Manager is paid by the
Series pursuant to the Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser with
respect to the Segment under this Agreement.
Without limiting the foregoing, it is expressly understood and agreed
that the Manager and the Series shall hold harmless and indemnify the
Indemnified Parties for any loss arising out of any act or omission of any other
sub-adviser to the Series, or for any loss arising out of the failure of the
Series to comply with the Policies, except for losses arising out of the
Sub-Adviser's failure to comply with the Policies with respect to the Segment.
The Manager acknowledges and agrees that the Sub-Adviser makes no representation
or warranty, express or implied, that any level of performance or investment
results will be achieved by the Series or the Segment or that the Series or the
Segment will perform comparably with any standard or index, including other
clients of the Sub-Adviser, whether public or private.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority of
the outstanding voting securities of the Series, and (ii) by vote of a majority
of the trustees of the Trust who are not interested persons of the Trust, the
Manager or the Sub-Adviser, cast in person at a meeting called for the purpose
of voting on such approval;
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Series;
c. this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement; and
d. this Agreement may be terminated by the Sub-Adviser on
sixty days' written notice to the Manager and the Trust, or by the Manager on
sixty days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall not be
entitled to the advice, recommendation or judgment of any specific person;
provided, however, that the persons identified in the prospectus of the Series
shall perform the portfolio management duties described therein until the
Sub-Adviser notifies the Manager that one or more other employees, officers or
agents of the Sub-Adviser, identified in such notice, shall assume such duties
as of a specific date.
b. If any term or provision of this Agreement or the
application thereof to any person or circumstances is held to be invalid or
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to other persons or circumstances shall not be affected
thereby and shall be enforced to the fullest extent permitted by law.
c. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/ John E. Pelletier
---------------------
Name: John E. Pelletier
Title: Managing Director, Senior Vice President, General Counsel,
Secretary & Clerk
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Star Advisers Fund series
By: /s/ Henry L.P. Schmelzer
---------------------
Name: Henry L.P. Schmelzer
Title: President
HARRIS ASSOCIATES, L.P.
By Harris Associates, Incorporated, its general partner
By: /s/ Robert M. Levy
---------------------
Name: Robert M. Levy
Title: President
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust establishing New
England Funds Trust I (the "Fund") is on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that this Agreement is
executed with respect to the Fund's New England Star Advisers Fund series (the
"Series") on behalf of the Fund by officers of the Fund as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
<PAGE>
Exhibit (d)(3)(xii)
NEW ENGLAND STAR WORLDWIDE FUND
SUB-ADVISORY AGREEMENT
HARRIS ASSOCIATES L.P.
Sub-Advisory Agreement (this "Agreement") entered into as of August 30,
1996, and amended this 1st day of May, 1998, by and among New England Funds
Trust I, a Massachusetts business trust (the "Trust"), with respect to its New
England Star Worldwide Fund series (the "Series"), New England Funds Management,
L.P., a Delaware limited partnership (the "Manager"), and Harris Associates
L.P., a Delaware limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
August 30, 1996 (the "Advisory Agreement") with the Trust, relating to the
provision of portfolio management and administrative services to the Series;
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust, the Manager and the Sub-Adviser agree as
follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the "Administrator"),
manage the investment and reinvestment of such portion of the assets of the
Series, consisting of two separate portfolios, as the Manager may from time to
time allocate to the Sub-Adviser for management (such portfolios, the "Segments"
and each, a "Segment"), and the Sub-Adviser shall have the authority on behalf
of the Series to vote all proxies and exercise all other rights of the Series as
a security holder of companies in which the Segments from time to time invest.
The Sub-Adviser shall manage the Segments in conformity with (1) the investment
objective, policies and restrictions of the Series set forth in the Trust's
prospectus and statement of additional information relating to the Series, (2)
any additional policies or guidelines established by the Manager or by the
Trust's trustees that have been furnished in writing to the Sub-Adviser and (3)
the provisions of the Internal Revenue Code (the "Code") applicable to
"regulated investment companies" (as defined in Section 851 of the Code), all as
from time to time in effect (collectively, the "Policies"), and with all
applicable provisions of law, including without limitation all applicable
provisions of the Investment Company Act of 1940 (the "1940 Act") and the rules
and regulations thereunder. For purposes of compliance with the Policies, the
Sub-Adviser shall be entitled to treat the Segments as though the Segments
constituted the entire Series, and the Sub-Adviser shall not be responsible in
any way for the compliance of any assets of the Series, other than the Segments,
with the Policies, or for the compliance of the Series, taken as a whole, with
the Policies. Subject to the foregoing, the Sub-Adviser is authorized, in its
discretion and without prior consultation with the Manager, to buy, sell, lend
and otherwise trade in any stocks, bonds and other securities and investment
instruments on behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover or any
tax considerations; and the majority or the whole of each Segment may be
invested in such proportions of stocks, bonds, other securities or investment
instruments, or cash, as the Sub-Adviser shall determine. Notwithstanding the
foregoing provisions of this Section 1.a, however, the Sub-Adviser shall, upon
written instructions from the Manager, effect such portfolio transactions for
each Segment as the Manager shall determine are necessary in order for the
Series to comply with the Policies.
b. The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning transactions and
performance of each Segment in such form as may be mutually agreed upon, and
agrees to review each Segment and discuss the management of it. The Sub-Adviser
shall permit all books and records with respect to each Segment to be inspected
and audited by the Manager and the Administrator at all reasonable times during
normal business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may reasonably be
requested by the Manager from time to time, including without limitation all
material requested by or required to be delivered to the trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange Commission and
a list of the persons whom the Sub-Adviser wishes to have authorized to give
written and/or oral instructions to custodians of assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Series' Custodian
(as defined in Section 3 hereof) to provide) timely information to the
Sub-Adviser regarding such matters as the composition of assets in each Segment,
cash requirements and cash available for investment in each Segment, and all
other information as may be reasonably necessary for the Sub-Adviser to perform
its responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and agrees
during the continuance of this Agreement to furnish the Sub-Adviser copies of
any revisions or supplements thereto at, or, if practicable, before the time the
revisions or supplements become effective. The Manager agrees to furnish the
Sub-Adviser with minutes of meetings of the trustees of the Trust applicable to
the Series to the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the Sub-Adviser may
reasonably request to enable it to perform its functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Segments shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Segments shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the names and marks "Harris Associates L.P."
and "Oakmark" and that all use of any designation consisting in whole or part of
"Harris Associates L.P." or "Oakmark" (a "Harris/Oakmark Mark") under this
Agreement shall inure to the benefit of the Sub-Adviser. The Manager on its own
behalf and on behalf of the Series agrees not to use any Harris Mark in any
advertisement or sales literature or other materials promoting the Series,
except with the prior written consent of the Sub-Adviser. Without the prior
written consent of the Sub-Adviser, the Manager shall not, and the Manager shall
use its best efforts to cause the Series not to, make representations regarding
the Sub-Adviser or the Oakmark Funds in any disclosure document, advertisement
or sales literature or other materials relating to the Series. Upon termination
of this Agreement for any reason, the Manager shall cease, and the Manager shall
use its best efforts to cause the Series to cease, all use of any Harris/Oakmark
Mark(s) as soon as reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. Absent instructions from the Manager to
the contrary, the Sub-Adviser shall place all orders for the purchase and sale
of securities for the Segments with brokers or dealers selected by the
Sub-Adviser, which may include brokers or dealers affiliated with the
Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940 Act in
all respects. To the extent consistent with applicable law, purchase or sell
orders for the Segments may be aggregated with contemporaneous purchase or sell
orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its best
efforts to obtain execution of transactions for the Segments at prices which are
advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Segments.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Sub-Adviser shall be paid at the annual rate of 0.65% of the
first $50 million of the average daily net assets (including cash or cash
equivalents) of each Segment for such period as compensation is payable, 0.60%
of the next $50 million of such assets and 0.55% of such assets in excess of
$100 million. Such compensation shall be paid by the Trust (except to the extent
that the Trust, the Sub-Advisor and the Manager otherwise agree in writing from
time to time). Such compensation shall be payable monthly in arrears or at such
other intervals, not less frequently than quarterly, as the Manager is paid by
the Series pursuant to the Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser with
respect to the Segments under this Agreement.
Without limiting the foregoing, it is expressly understood and agreed
that the Manager and the Series shall hold harmless and indemnify the
Indemnified Parties for any loss arising out of any act or omission of any other
sub-adviser to the Series, or for any loss arising out of the failure of the
Series to comply with the Policies, except for losses arising out of the
Sub-Adviser's failure to comply with the Policies with respect to the Segments.
The Manager acknowledges and agrees that the Sub-Adviser makes no representation
or warranty, express or implied, that any level of performance or investment
results will be achieved by the Series or the Segments or that the Series or the
Segments will perform comparably with any standard or index, including other
clients of the Sub-Adviser, whether public or private.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a majority of
the outstanding voting securities of the Series, and (ii) by vote of a majority
of the trustees of the Trust who are not interested persons of the Trust, the
Manager or the Sub-Adviser, cast in person at a meeting called for the purpose
of voting on such approval;
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Series;
c. this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement; and
d. this Agreement may be terminated by the Sub-Adviser on
ninety days' written notice to the Manager and the Trust, or by the Manager on
ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall not be
entitled to the advice, recommendation or judgment of any specific person;
provided, however, that the persons identified in the prospectus of the Series
shall perform the day-to-day portfolio management duties described therein until
the Sub-Adviser notifies the Manager that one or more other employees, officers
or agents of the Sub-Adviser, identified in such notice, shall assume such
duties as of a specific date.
b. If any term or provision of this Agreement or the
application thereof to any person or circumstances is held to be invalid or
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to other persons or circumstances shall not be affected
thereby and shall be enforced to the fullest extent permitted by law.
c. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
<PAGE>
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/ John E. Pelletier
------------------------
Name: John E. Pelletier
Title: Managing Director, Senior Vice President, General Counsel,
Secretary & Clerk
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Star Worldwide Fund series
By: /s/ Henry L.P. Schmelzer
------------------------
Name: Henry L.P. Schmelzer
Title: President
HARRIS ASSOCIATES, L.P.
By Harris Associates, Incorporated, its general partner
By: /s/ Robert M. Levy
------------------------
Name: Robert M. Levy
Title: President
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust establishing New
England Funds Trust I (the "Fund") is on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that his Agreement is
executed with respect to the Fund's New England Star Worldwide Fund series (the
"Series") on behalf of the Fund by officers of the Fund as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
<PAGE>
Exhibit (d)(3)(xiv)
NEW ENGLAND STAR WORLDWIDE FUND
SUB-ADVISORY AGREEMENT
MONTGOMERY ASSET MANAGEMENT, L.L.C.
This Sub-Advisory Agreement (this "Agreement") is entered into as of
August 3,1998 by and between New England Funds Management, L.P., a Delaware
limited partnership (the "Manager"), and Montgomery Asset Management, L.L.C., a
Delaware limited liability corporation (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
August 30, 1996, and amended as of May 1, 1998 (the "Advisory Agreement") with
New England Funds Trust I (the "Trust"), pursuant to which the Manager provides
portfolio management and administrative services to New England Star Worldwide
Fund, a series of the Trust (the "Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the Trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. Sub-Advisory Services.
(a) The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of Such
portion of the assets of the Series as the Manager may from time to
time allocate to the Sub-Adviser for management (such portion, the
"Segment"). The Sub-Adviser shall manage the Segment in conformity with
(1) the investment objective, policies and restrictions of the Series
set forth in the Trust's prospectus and statement of additional
information relating to the Series, (2) any additional policies or
guidelines established by the Manager or by the Trust's Trustees that
have been furnished in writing to the Sub-Adviser and (3) the
provisions of the Internal Revenue Code (the "Code") applicable to
"regulated investment companies" (as defined in Section 851 of the
Code), all as from time to time in effect (collectively, the
"Policies"), and with all applicable provisions of law, including
without limitation all applicable provisions of the Investment Company
Act of 1940 (the "1940 Act") and the rules and regulations thereunder.
For purposes of compliance with the Policies, the Sub-Adviser shall be
entitled to treat the Segment as though the Segment constituted the
entire Series, and the Sub-Adviser shall not be responsible in any way
for the compliance of any assets of the Series, other than the Segment,
with the Policies, or for the compliance of the Series, taken as a
whole, with the Policies. Subject to the foregoing, the Sub-Adviser is
authorized, in its discretion and without prior consultation with the
Manager, to buy, sell, lend and otherwise trade in any stocks, bonds
and other securities and investment instruments on behalf of the
Series, without regard to the length of time the securities have been
held and the resulting rate of portfolio turnover or any tax
considerations; and the majority or the whole of the Segment may be
invested in such proportions of stocks, bonds, other securities or
investment instruments, or cash, as the Sub-Adviser shall determine.
Notwithstanding the foregoing provisions of this Section 1.a; however,
the Sub-Adviser shall, upon written instructions from the Manager,
effect such portfolio transactions for the Segment as the Manager shall
determine are necessary in order for the Series to comply with the
Policies.
(b) The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning
portfolio transactions and performance of the Segment in such form as
may be mutually agreed upon, and agrees to review the Segment and
discuss the management of it. The Sub-Adviser shall permit all books
and records with respect to the Segment to be inspected and audited by
the Manager and the Administrator at all reasonable times during normal
business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may
reasonably be requested by the Manager from time to time, including
without limitation all material requested by or required to be
delivered to the Trustees of the Trust.
(c) The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to
have authorized to give written and/or oral instructions to custodians
of assets of the Series.
2. Obligations of the Manager.
(a) The Manager shall provide (or cause the Series' Custodian
(as defined in Section 3 hereof) to provide) timely information to the
Sub-Adviser regarding such matters as the composition of assets of the
Segment, cash requirements and cash available for investment in the
Segment, and all other information as may be reasonably necessary for
the Sub-Adviser to perform its responsibilities hereunder.
(b) The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or supplements thereto at, or, if
practicable, before the time the revisions or supplements become
effective. The Manager agrees to furnish the Sub-Adviser with minutes
of meetings of the Trustees of the Trust applicable to the Series to
the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its
functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series' agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Segment shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Segment shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name and mark "Montgomery Asset Management,
L.L.C." and that all use of any designation consisting in whole or part of
"Montgomery Asset Management, L.L.C." (a "Montgomery Mark") under this Agreement
shall inure to the benefit of the Sub-Adviser. The Manager on its own behalf and
on behalf of the Series agrees not to use any Montgomery Mark in any
advertisement or sales literature or other materials promoting the Series,
except with the prior written consent of the Sub-Adviser. Without the prior
written consent of the Sub-Adviser, the Manager shall not, and the Manager shall
use its best efforts to cause the Series not to, make representations regarding
the Sub-Adviser in any disclosure document, advertisement or sales literature or
other materials relating to the Series. Upon termination of this Agreement for
any reason, the Manager shall cease, and the Manager shall use its best efforts
to cause the Series to cease, all use of any Montgomery Mark(s) as soon as
reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or Trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. Absent instructions from the Manager to
the contrary, the Sub-Adviser shall place all orders for the purchase and sale
of securities for the Segment with brokers or dealers selected by the
Sub-Adviser, which may include brokers or dealers affiliated with the
Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940 Act in
all respects. To the extent consistent with applicable law, purchase or sell
orders for the Segment may be aggregated with contemporaneous purchase or sell
orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its best
efforts to obtain execution of transactions for the Segment at prices which are
advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Segment.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-Adviser compensation at the annual rate
of 0.850% of the first $25 million of the average daily net assets (including
cash or cash equivalents) of the Segment, 0.650% of the next $25 million of such
assets and 0.55% of such assets in excess of $50 million. Such compensation
shall be payable monthly in arrears or at such other intervals, not less
frequently than quarterly, as the Manager is paid by the Series pursuant to the
Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, employees or agents (the "Indemnified Parties") shall be subject to
any liability to the Manager, the Trust, the Series or any shareholder of the
Series for any error of judgment, any mistake of law or any loss arising out of
any investment or other act or omission in the course of, connected with, or
arising out of any service to be rendered under this Agreement, except by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties or by reason of reckless disregard by the Sub-Adviser of
its obligations and duties. The Manager shall hold harmless and indemnify the
Sub-Adviser for any loss, liability, cost, damage or expense (including
reasonable attorneys fees and costs) arising from any claim or demand by any
past or present shareholder of the Series that is not based upon the obligations
of the Sub-Adviser with respect to the Segment under this Agreement.
Without limiting the foregoing, it is expressly understood and agreed
that the Manager and the Series shall hold harmless and indemnify the
Indemnified Parties for any loss arising out of any act or omission of any other
sub-adviser to the Series, or for any loss arising out of the failure of the
Series to comply with the Policies, except for losses arising out of the
Sub-Adviser's failure to comply with the Policies with respect to the Segment.
The Manager acknowledges and agrees that the Sub-Adviser makes no representation
or warranty, express or implied, that any level of performance or investment
results will be achieved by the Series or the Segment or that the Series or the
Segment will perform comparably with any standard or index, including other
client of the Sub-Adviser, whether public or private.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
(a) unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Series, and (ii)
by vote of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such
approval;
(b) this Agreement may at any time be terminated on sixty
days' written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
(d) this Agreement may be terminated by the Sub-Adviser on
ninety days' written notice to the Manager and the Trust, or by the
Manager on ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
(a) The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall
not be entitled to the advice, recommendation or judgment of any
specific person; provided, however, that the persons identified in the
prospectus of the Series shall perform the portfolio management duties
described therein until the Sub-Adviser notifies the Manager that one
or more other employees, officers or agents of the Sub-Adviser,
identified in such notice, shall assume such duties as of a specific
date.
(b) If any term or provision or this Agreement or the
application thereof to any person or circumstances is held to be
invalid or unenforceable to any extent, the remainder of this Agreement
or the application of such provision to other persons or circumstances
shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.
(c) This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By: /s/ John E. Pelletier
------------------------
Name: John E. Pelletier
Title: Managing Director, Senior Vice President,
General Counsel, Secretary & Clerk
`
MONTGOMERY ASSET MANAGEMENT, L.L.C.
By: /s/ Dana Schmidt
------------------------
Name: Dana Schmidt
Title: Principal
<PAGE>
Exhibit (d)(3)(xv)
NEW ENGLAND GOVERNMENT SECURITIES FUND
SUB-ADVISORY AGREEMENT
(BACK BAY ADVISORS, L.P.)
Sub-Advisory Agreement (this "Agreement") entered into as of August 30,
1996, and amended this 1st day of May, 1998, by and among New England Funds
Trust I, a Massachusetts business trust (the "Trust"), with respect to its New
England Government Securities Fund series (the "Series"), New England Funds
Management, L.P., a Delaware limited partnership (the "Manager"), and Back Bay
Advisors, L.P., a Delaware limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
August 30, 1996 (the "Advisory Agreement") with the Trust, relating to the
provision of portfolio management and administrative services to the Series;
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust, the Manager and the Sub-Adviser agree as
follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets
of the Series, and have the authority on behalf of the Series to vote
all proxies and exercise all other rights of the Series as a security
holder of companies in which the Series from time to time invests. The
Sub-Adviser shall manage the Series in conformity with (1) the
investment objective, policies and restrictions of the Series set forth
in the Trust's prospectus and statement of additional information
relating to the Series, (2) any additional policies or guidelines
established by the Manager or by the Trust's trustees that have been
furnished in writing to the Sub-Adviser and (3) the provisions of the
Internal Revenue Code (the "Code") applicable to "regulated investment
companies" (as defined in Section 851 of the Code), all as from time to
time in effect (collectively, the "Policies"), and with all applicable
provisions of law, including without limitation all applicable
provisions of the Investment Company Act of 1940 (the "1940 Act") and
the rules and regulations thereunder. Subject to the foregoing, the
Sub-Adviser is authorized, in its discretion and without prior
consultation with the Manager, to buy, sell, lend and otherwise trade
in any stocks, bonds and other securities and investment instruments on
behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover
or any tax considerations; and the majority or the whole of the Series
may be invested in such proportions of stocks, bonds, other securities
or investment instruments, or cash, as the Sub-Adviser shall determine.
b. The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning
portfolio transactions and performance of the Series in such form as
may be mutually agreed upon, and agrees to review the Series and
discuss the management of it. The Sub-Adviser shall permit all books
and records with respect to the Series to be inspected and audited by
the Manager and the Administrator at all reasonable times during normal
business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may
reasonably be requested by the Manager from time to time, including
without limitation all material requested by or required to be
delivered to the Trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to
have authorized to give written and/or oral instructions to custodians
of assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Series' Custodian
(as defined in Section 3 hereof) to provide) timely information to the
Sub-Adviser regarding such matters as the composition of assets of the
Series, cash requirements and cash available for investment in the
Series, and all other information as may be reasonably necessary for
the Sub-Adviser to perform its responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or supplements thereto at, or, if
practicable, before the time the revisions or supplements become
effective. The Manager agrees to furnish the Sub-Adviser with minutes
of meetings of the trustees of the Trust applicable to the Series to
the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its
functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Series shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name "Back Bay Advisors, L.P." and that all
use of any designation consisting in whole or part of "Back Bay Advisors, L.P."
under this Agreement shall inure to the benefit of the Sub-Adviser. The Manager
on its own behalf and on behalf of the Series agrees not to use any such
designation in any advertisement or sales literature or other materials
promoting the Series, except with the prior written consent of the Sub-Adviser.
Without the prior written consent of the Sub-Adviser, the Manager shall not, and
the Manager shall use its best efforts to cause the Series not to, make
representations regarding the Sub-Adviser in any disclosure document,
advertisement or sales literature or other materials relating to the Series.
Upon termination of this Agreement for any reason, the Manager shall cease, and
the Manager shall use its best efforts to cause the Series to cease, all use of
any such designation as soon as reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
for the purchase and sale of securities for the Series with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940
Act in all respects. To the extent consistent with applicable law, purchase or
sell orders for the Series may be aggregated with contemporaneous purchase or
sell orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its
best efforts to obtain execution of transactions for the Series at prices which
are advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Series.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Sub-Adviser shall be paid at the annual rate of 0.3250% of the
first $200 million of the average daily net assets of the Series, 0.3125% of the
next $300 million of the average daily net assets of the Series and 0.300% in
excess of $500 million of such assets, respectively (or such lesser amount as
the Sub-Adviser may from time to time agree to receive). Such compensation shall
be paid by the Trust (except to the extent that the Trust, the Sub-Advisor and
the Manager otherwise agree in writing from time to time). Such compensation
shall be payable monthly in arrears or at such other intervals, not less
frequently than quarterly, as the Manager is paid by the Series pursuant to the
Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser under this
Agreement.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Series, and (ii)
by vote of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such
approval;
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
c. this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
and
d. this Agreement may be terminated by the Sub-Adviser on
ninety days' written notice to the Manager and the Trust, or by the
Manager on ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of
voting on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall
not be entitled to the advice, recommendation or judgment of any
specific person; provided, however, that the persons identified in the
prospectus of the Series shall perform the day-to-day portfolio
management duties described therein until the Sub-Adviser notifies the
Manager that one or more other employees, officers or agents of the
Sub-Adviser, identified in such notice, shall assume such duties as of
a specific date.
b. If any term or provision of this Agreement or the
application thereof to any person or circumstances is held to be
invalid or unenforceable to any extent, the remainder of this Agreement
or the application of such provision to other persons or circumstances
shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.
c. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
<PAGE>
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/ John E. Pelletier
--------------------------
Name: John E. Pelletier
Title: Managing Director, Senior Vice President, General Counsel,
Secretary & Clerk
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Government Securities Fund series
By: /s/ Henry L.P. Schmelzer
--------------------------
Name: Henry L.P. Schmelzer
Title: President
BACK BAY ADVISORS, L.P.
By Back Bay Advisors, Incorporated, its general partner
By: /s/ Charles T. Wallis
--------------------------
Name: Charles T. Wallis
Title: President
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust establishing New
England Funds Trust I (the "Fund") is on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that his Agreement is
executed with respect to the Fund's New England Government Securities Fund
series (the "Series") on behalf of the Fund by officers of the Fund as officers
and not individually and that the obligations of or arising out of this
Agreement are not binding upon any of the trustees, officers or shareholders
individually but are binding only upon the assets and property belonging to the
Series.
<PAGE>
Exhibit (d)(3)(xvi)
NEW ENGLAND STRATEGIC INCOME FUND
SUB-ADVISORY AGREEMENT
(LOOMIS SAYLES)
Sub-Advisory Agreement (this "Agreement") entered into as of August 30,
1996, and amended this 1st day of May, 1998, by and among New England Funds
Trust I, a Massachusetts business trust (the "Trust"), with respect to its New
England Strategic Income Fund series (the "Series"), New England Funds
Management, L.P., a Delaware limited partnership (the "Manager"), and Loomis,
Sayles & Company, L.P., a Delaware limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
August 30, 1996 (the "Advisory Agreement") with the Trust, relating to the
provision of portfolio management and administrative services to the Series;
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust, the Manager and the Sub-Adviser agree as
follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets
of the Series, and have the authority on behalf of the Series to vote
all proxies and exercise all other rights of the Series as a security
holder of companies in which the Series from time to time invests. The
Sub-Adviser shall manage the Series in conformity with (1) the
investment objective, policies and restrictions of the Series set forth
in the Trust's prospectus and statement of additional information
relating to the Series, (2) any additional policies or guidelines
established by the Manager or by the Trust's trustees that have been
furnished in writing to the Sub-Adviser and (3) the provisions of the
Internal Revenue Code (the "Code") applicable to "regulated investment
companies" (as defined in Section 851 of the Code), all as from time to
time in effect (collectively, the "Policies"), and with all applicable
provisions of law, including without limitation all applicable
provisions of the Investment Company Act of 1940 (the "1940 Act") and
the rules and regulations thereunder. Subject to the foregoing, the
Sub-Adviser is authorized, in its discretion and without prior
consultation with the Manager, to buy, sell, lend and otherwise trade
in any stocks, bonds and other securities and investment instruments on
behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover
or any tax considerations; and the majority or the whole of the Series
may be invested in such proportions of stocks, bonds, other securities
or investment instruments, or cash, as the Sub-Adviser shall determine.
b. The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning
portfolio transactions and performance of the Series in such form as
may be mutually agreed upon, and agrees to review the Series and
discuss the management of it. The Sub-Adviser shall permit all books
and records with respect to the Series to be inspected and audited by
the Manager and the Administrator at all reasonable times during normal
business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may
reasonably be requested by the Manager from time to time, including
without limitation all material requested by or required to be
delivered to the Trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to
have authorized to give written and/or oral instructions to custodians
of assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Series' Custodian
(as defined in Section 3 hereof) to provide) timely information to the
Sub-Adviser regarding such matters as the composition of assets of the
Series, cash requirements and cash available for investment in the
Series, and all other information as may be reasonably necessary for
the Sub-Adviser to perform its responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or supplements thereto at, or, if
practicable, before the time the revisions or supplements become
effective. The Manager agrees to furnish the Sub-Adviser with minutes
of meetings of the trustees of the Trust applicable to the Series to
the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its
functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Series shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name "Loomis, Sayles & Company, L.P." and
that all use of any designation consisting in whole or part of "Loomis, Sayles &
Company, L.P." under this Agreement shall inure to the benefit of the
Sub-Adviser. The Manager on its own behalf and on behalf of the Series agrees
not to use any such designation in any advertisement or sales literature or
other materials promoting the Series, except with the prior written consent of
the Sub-Adviser. Without the prior written consent of the Sub-Adviser, the
Manager shall not, and the Manager shall use its best efforts to cause the
Series not to, make representations regarding the Sub-Adviser in any disclosure
document, advertisement or sales literature or other materials relating to the
Series. Upon termination of this Agreement for any reason, the Manager shall
cease, and the Manager shall use its best efforts to cause the Series to cease,
all use of any such designation as soon as reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
for the purchase and sale of securities for the Series with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940
Act in all respects. To the extent consistent with applicable law, purchase or
sell orders for the Series may be aggregated with contemporaneous purchase or
sell orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its
best efforts to obtain execution of transactions for the Series at prices which
are advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Series.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Sub-Adviser shall be paid at the annual rate of 0.35% of the
first $200 million of the average daily net assets of the Series and 0.30% in
excess of $200 million of such assets, respectively (or such lesser amount as
the Sub-Adviser may from time to time agree to receive). Such compensation shall
be paid by the Trust (except to the extent that the Trust, the Sub-Adviser and
the Manager otherwise agree in writing from time to time). Such compensation
shall be payable monthly in arrears or at such other intervals, not less
frequently than quarterly, as the Manager is paid by the Series pursuant to the
Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser under this
Agreement.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Series, and (ii)
by vote of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such
approval;
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
c. this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
and
d. this Agreement may be terminated by the Sub-Adviser on
ninety days' written notice to the Manager and the Trust, or by the
Manager on ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of
voting on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall
not be entitled to the advice, recommendation or judgment of any
specific person; provided, however, that the persons identified in the
prospectus of the Series shall perform the day-to-day portfolio
management duties described therein until the Sub-Adviser notifies the
Manager that one or more other employees, officers or agents of the
Sub-Adviser, identified in such notice, shall assume such duties as of
a specific date.
b. If any term or provision of this Agreement or the
application thereof to any person or circumstances is held to be
invalid or unenforceable to any extent, the remainder of this Agreement
or the application of such provision to other persons or circumstances
shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.
c. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
<PAGE>
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/ John E. Pelletier
-------------------------
Name: John E. Pelletier
Title: Managing Director, Senior Vice President, General Counsel,
Secretary & Clerk
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Strategic Income Fund series
By: /s/ Henry L.P. Schmelzer
-------------------------
Name: Henry L.P. Schmelzer
Title: President
LOOMIS SAYLES & COMPANY, L.P.
By Loomis, Sayles & Company, Incorporated, its general partner
By: /s/ Sheila M. Barry
-------------------------
Name: Sheila M. Barry
Title: Assistant General Counsel and Vice President
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust establishing New
England Funds Trust I (the "Fund") is on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that his Agreement is
executed with respect to the Fund's New England Strategic Income Fund series
(the "Series") on behalf of the Fund by officers of the Fund as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
<PAGE>
Exhibit (d)(3)(xvii)
NEW ENGLAND BOND INCOME FUND
SUB-ADVISORY AGREEMENT
(BACK BAY ADVISORS, L.P.)
Sub-Advisory Agreement (this "Agreement") entered into as of August 30,
1996, and amended this 1st day of May, 1998, by and among New England Funds
Trust I, a Massachusetts business trust (the "Trust"), with respect to its New
England Bond Income Fund series (the "Series"), New England Funds Management,
L.P., a Delaware limited partnership (the "Manager"), and Back Bay Advisors,
L.P., a Delaware limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
August 30, 1996 (the "Advisory Agreement") with the Trust, relating to the
provision of portfolio management and administrative services to the Series;
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust, the Manager and the Sub-Adviser agree as
follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets
of the Series, and have the authority on behalf of the Series to vote
all proxies and exercise all other rights of the Series as a security
holder of companies in which the Series from time to time invests. The
Sub-Adviser shall manage the Series in conformity with (1) the
investment objective, policies and restrictions of the Series set forth
in the Trust's prospectus and statement of additional information
relating to the Series, (2) any additional policies or guidelines
established by the Manager or by the Trust's trustees that have been
furnished in writing to the Sub-Adviser and (3) the provisions of the
Internal Revenue Code (the "Code") applicable to "regulated investment
companies" (as defined in Section 851 of the Code), all as from time to
time in effect (collectively, the "Policies"), and with all applicable
provisions of law, including without limitation all applicable
provisions of the Investment Company Act of 1940 (the "1940 Act") and
the rules and regulations thereunder. Subject to the foregoing, the
Sub-Adviser is authorized, in its discretion and without prior
consultation with the Manager, to buy, sell, lend and otherwise trade
in any stocks, bonds and other securities and investment instruments on
behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover
or any tax considerations; and the majority or the whole of the Series
may be invested in such proportions of stocks, bonds, other securities
or investment instruments, or cash, as the Sub-Adviser shall determine.
b. The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning
portfolio transactions and performance of the Series in such form as
may be mutually agreed upon, and agrees to review the Series and
discuss the management of it. The Sub-Adviser shall permit all books
and records with respect to the Series to be inspected and audited by
the Manager and the Administrator at all reasonable times during normal
business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may
reasonably be requested by the Manager from time to time, including
without limitation all material requested by or required to be
delivered to the Trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to
have authorized to give written and/or oral instructions to custodians
of assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Series' Custodian
(as defined in Section 3 hereof) to provide) timely information to the
Sub-Adviser regarding such matters as the composition of assets of the
Series, cash requirements and cash available for investment in the
Series, and all other information as may be reasonably necessary for
the Sub-Adviser to perform its responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or supplements thereto at, or, if
practicable, before the time the revisions or supplements become
effective. The Manager agrees to furnish the Sub-Adviser with minutes
of meetings of the trustees of the Trust applicable to the Series to
the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its
functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Series shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name "Back Bay Advisors, L.P." and that all
use of any designation consisting in whole or part of "Back Bay Advisors, L.P."
under this Agreement shall inure to the benefit of the Sub-Adviser. The Manager
on its own behalf and on behalf of the Series agrees not to use any such
designation in any advertisement or sales literature or other materials
promoting the Series, except with the prior written consent of the Sub-Adviser.
Without the prior written consent of the Sub-Adviser, the Manager shall not, and
the Manager shall use its best efforts to cause the Series not to, make
representations regarding the Sub-Adviser in any disclosure document,
advertisement or sales literature or other materials relating to the Series.
Upon termination of this Agreement for any reason, the Manager shall cease, and
the Manager shall use its best efforts to cause the Series to cease, all use of
any such designation as soon as reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
for the purchase and sale of securities for the Series with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940
Act in all respects. To the extent consistent with applicable law, purchase or
sell orders for the Series may be aggregated with contemporaneous purchase or
sell orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its
best efforts to obtain execution of transactions for the Series at prices which
are advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Series.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Sub-Adviser shall be paid at the annual rate of 0.2500% of the
first $100 million of the average daily net assets of the Series and 0.1875% in
excess of $100 million of such assets, respectively (or such lesser amount as
the Sub-Adviser may from time to time agree to receive). Such compensation shall
be paid by the Trust (except to the extent the Trust, the Sub-Advisor and the
Manager otherwise agree in writing from time to time). Such compensation shall
be payable monthly in arrears or at such other intervals, not less frequently
than quarterly, as the Manager is paid by the Series pursuant to the Advisory
Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser under this
Agreement.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Series, and (ii)
by vote of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such
approval;
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
c. this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
and
d. this Agreement may be terminated by the Sub-Adviser on
ninety days' written notice to the Manager and the Trust, or by the
Manager on ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of
voting on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall
not be entitled to the advice, recommendation or judgment of any
specific person; provided, however, that the persons identified in the
prospectus of the Series shall perform the day-to-day portfolio
management duties described therein until the Sub-Adviser notifies the
Manager that one or more other employees, officers or agents of the
Sub-Adviser, identified in such notice, shall assume such duties as of
a specific date.
b. If any term or provision of this Agreement or the
application thereof to any person or circumstances is held to be
invalid or unenforceable to any extent, the remainder of this Agreement
or the application of such provision to other persons or circumstances
shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.
c. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
<PAGE>
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/ John E. Pelletier
-------------------------
Name: John E. Pelletier
Title: Managing Director, Senior Vice President, General Counsel,
Secretary & Clerk
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Bond Income Fund series
By: /s/ Henry L.P. Schmelzer
-------------------------
Name: Henry L.P. Schmelzer
Title: President
BACK BAY ADVISORS, L.P.
By Back Bay Advisors, Incorporated, its general partner
By: /s/ Charles T. Wallis
-------------------------
Name: Charles T. Wallis
Title: President
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust establishing New
England Funds Trust I (the "Fund") is on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that his Agreement is
executed with respect to the Fund's New England Bond Income Fund series (the
"Series") on behalf of the Fund by officers of the Fund as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
<PAGE>
Exhibit (d)(3)(xviii)
NEW ENGLAND MUNICIPAL INCOME FUND
SUB-ADVISORY AGREEMENT
(BACK BAY ADVISORS, L.P.)
Sub-Advisory Agreement (this "Agreement") entered into as of August 30,
1996 and amended this 1st day of May, 1998, by and among New England Funds Trust
I, a Massachusetts business trust (the "Trust"), with respect to its New England
Municipal Income Fund series (the "Series"), New England Funds Management, L.P.,
a Delaware limited partnership (the "Manager"), and Back Bay Advisors, L.P., a
Delaware limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
August 30, 1996 (the "Advisory Agreement") with the Trust, relating to the
provision of portfolio management and administrative services to the Series;
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust, the Manager and the Sub-Adviser agree as
follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets
of the Series, and have the authority on behalf of the Series to vote
all proxies and exercise all other rights of the Series as a security
holder of companies in which the Series from time to time invests. The
Sub-Adviser shall manage the Series in conformity with (1) the
investment objective, policies and restrictions of the Series set forth
in the Trust's prospectus and statement of additional information
relating to the Series, (2) any additional policies or guidelines
established by the Manager or by the Trust's trustees that have been
furnished in writing to the Sub-Adviser and (3) the provisions of the
Internal Revenue Code (the "Code") applicable to "regulated investment
companies" (as defined in Section 851 of the Code), all as from time to
time in effect (collectively, the "Policies"), and with all applicable
provisions of law, including without limitation all applicable
provisions of the Investment Company Act of 1940 (the "1940 Act") and
the rules and regulations thereunder. Subject to the foregoing, the
Sub-Adviser is authorized, in its discretion and without prior
consultation with the Manager, to buy, sell, lend and otherwise trade
in any stocks, bonds and other securities and investment instruments on
behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover
or any tax considerations; and the majority or the whole of the Series
may be invested in such proportions of stocks, bonds, other securities
or investment instruments, or cash, as the Sub-Adviser shall determine.
b. The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning
portfolio transactions and performance of the Series in such form as
may be mutually agreed upon, and agrees to review the Series and
discuss the management of it. The Sub-Adviser shall permit all books
and records with respect to the Series to be inspected and audited by
the Manager and the Administrator at all reasonable times during normal
business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may
reasonably be requested by the Manager from time to time, including
without limitation all material requested by or required to be
delivered to the Trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to
have authorized to give written and/or oral instructions to custodians
of assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Series' Custodian
(as defined in Section 3 hereof) to provide) timely information to the
Sub-Adviser regarding such matters as the composition of assets of the
Series, cash requirements and cash available for investment in the
Series, and all other information as may be reasonably necessary for
the Sub-Adviser to perform its responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or supplements thereto at, or, if
practicable, before the time the revisions or supplements become
effective. The Manager agrees to furnish the Sub-Adviser with minutes
of meetings of the trustees of the Trust applicable to the Series to
the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its
functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Series shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name "Back Bay Advisors, L.P." and that all
use of any designation consisting in whole or part of "Back Bay Advisors, L.P."
under this Agreement shall inure to the benefit of the Sub-Adviser. The Manager
on its own behalf and on behalf of the Series agrees not to use any such
designation in any advertisement or sales literature or other materials
promoting the Series, except with the prior written consent of the Sub-Adviser.
Without the prior written consent of the Sub-Adviser, the Manager shall not, and
the Manager shall use its best efforts to cause the Series not to, make
representations regarding the Sub-Adviser in any disclosure document,
advertisement or sales literature or other materials relating to the Series.
Upon termination of this Agreement for any reason, the Manager shall cease, and
the Manager shall use its best efforts to cause the Series to cease, all use of
any such designation as soon as reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 6 hereof).
6. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
for the purchase and sale of securities for the Series with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940
Act in all respects. To the extent consistent with applicable law, purchase or
sell orders for the Series may be aggregated with contemporaneous purchase or
sell orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its
best efforts to obtain execution of transactions for the Series at prices which
are advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Series.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Sub-Adviser shall be paid at the annual rate of 0.250% of the
first $100 million of the average daily net assets of the Series and 0.1875% in
excess of $100 million of such assets, respectively (or such lesser amount as
the Sub-Adviser may from time to time agree to receive). Such compensation shall
be paid by the Trust (except to the extent that the Trust, the Sub-Advisor and
the Manager otherwise agree in writing from time to time). Such compensation
shall be payable monthly in arrears or at such other intervals, not less
frequently than quarterly, as the Manager is paid by the Series pursuant to the
Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser under this
Agreement.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Series, and (ii)
by vote of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such
approval;
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
c. this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
and
d. this Agreement may be terminated by the Sub-Adviser on
ninety days' written notice to the Manager and the Trust, or by the
Manager on ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of
voting on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall
not be entitled to the advice, recommendation or judgment of any
specific person; provided, however, that the persons identified in the
prospectus of the Series shall perform the day-to-day portfolio
management duties described therein until the Sub-Adviser notifies the
Manager that one or more other employees, officers or agents of the
Sub-Adviser, identified in such notice, shall assume such duties as of
a specific date.
b. If any term or provision of this Agreement or the
application thereof to any person or circumstances is held to be
invalid or unenforceable to any extent, the remainder of this Agreement
or the application of such provision to other persons or circumstances
shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.
c. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
<PAGE>
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/ John E. Pelletier
-------------------------
Name: John E. Pelletier
Title: Managing Director, Senior Vice President, General Counsel,
Secretary & Clerk
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Municipal Income Fund series
By: /s/ Henry L.P. Schmelzer
-------------------------
Name: Henry L.P. Schmelzer
Title: President
BACK BAY ADVISORS, L.P.
By Back Bay Advisors, Incorporated, its general partner
By: /s/ Charles T. Wallis
-------------------------
Name: Charles T. Wallis
Title: President
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust establishing New
England Funds Trust I (the "Fund") is on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that his Agreement is
executed with respect to the Fund's New England Municipal Income Fund series
(the "Series") on behalf of the Fund by officers of the Fund as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
<PAGE>
Exhibit (d)(3)(xix)
NEW ENGLAND STAR SMALL CAP FUND
SUB-ADVISORY AGREEMENT
(LOOMIS, SAYLES & COMPANY, L.P.)
Sub-Advisory Agreement (this "Agreement") entered into as of December
31,1996, and amended this 1st day of May, 1998, by and among New England Funds
Trust I, a Massachusetts business trust (the "Trust"), with respect to its New
England Star Advisers Fund sereis (the "Series"), New England Funds Management,
L.P., a Delaware limited partnership (the "Manager"), and Loomis, Sayles &
Company, L.P., a Delaware limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
December 31, 1996 (the "Advisory Agreement") with the Trust, relating to the
provision of portfolio management and administrative services to the Series;
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the Trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust, the Manager and the Sub-Adviser agree as
follows:
1. Sub-Advisory Services.
(a) The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets
of the Series. The Sub-Adviser shall manage the Series in conformity
with (1) the investment objective, policies and restrictions of the
Series set forth in the Trust's prospectus and statement of additional
information relating to the Series, (2) any additional policies or
guidelines established by the Manager or by the Trust's trustees that
have been furnished in writing to the Sub-Adviser and (3) the
provisions of the Internal Revenue Code (the "Code") applicable to
"regulated investment companies" (as defined in Section 851 of the
Code), all as from time to time in effect (collectively, the
"Policies"), and with all applicable provisions of law, including
without limitation all applicable provisions of the Investment Company
Act of 1940 (the "1940 Act") and the rules and regulations thereunder.
Subject to the foregoing, the Sub-Adviser is authorized, in its
discretion and without prior consultation with the Manager, to buy,
sell, lend and otherwise trade in any stocks, bonds and other
securities and investment instruments on behalf of the Series, without
regard to the length of time the securities have been held and the
resulting rate of portfolio turnover or any tax considerations; and the
majority or the whole of the Series may be invested in such proportions
of stocks, bonds, other securities or investment instruments, or cash,
as the Sub-Adviser shall determine.
(b) The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning
portfolio transactions and performance of the Series in such form as
may be mutually agreed upon, and agrees to review the Series and
discuss the management of it. The Sub-Adviser shall permit all books
and records with respect to the Series to be inspected and audited by
the Manager and the Administrator at all reasonable times during normal
business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may
reasonably be requested by the Manager from time to time, including
without limitation all material requested by or required to be
delivered to the Trustees of the Trust.
(c) The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to
have authorized to give written and/or oral instructions to custodians
of assets of the Series.
2. Obligations of the Manager.
(a) The Manager shall provide (or cause the Fund's custodian
to provide) timely information to the Sub-Adviser regarding such
matters as the composition of assets of the Series, cash requirements
and cash available for investment in the Series, and all other
information as may be reasonably necessary for the Sub-Adviser to
perform its responsibilities hereunder.
(b) The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or supplements thereto at, or, if
practicable, before the time the revisions or supplements become
effective. The Manager agrees to furnish the Sub-Adviser with minutes
of meetings of the Trustees of the Trust applicable to the Series to
the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its
functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series' agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Series shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name and mark "Loomis, Sayles & Company,
L.P." and that all use of any designation consisting in whole or part of
"Loomis, Sayles & Company, L.P." (a "Loomis Sayles Mark") under this Agreement
shall inure to the benefit of the Sub-Adviser. The Manager on its own behalf and
on behalf of the Series agrees not to use any Loomis Sayles Mark in any
advertisement or sales literature or other materials promoting the Series,
except with the prior written consent of the Sub-Adviser. Without the prior
written consent of the Sub-Adviser, the Manager shall not, and the Manager shall
use its best efforts to cause the Series not to, make representations regarding
the Sub-Adviser in any disclosure document, advertisement or sales literature or
other materials relating to the Series. Upon termination of this Agreement for
any reason, the Manager shall cease, and the Manager shall use its best efforts
to cause the Series to cease, all use of any Loomis Sayles Mark(s) as soon as
reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
for the purchase and sale of securities for the Series with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940
Act in all respects. To the extent consistent with applicable law, purchase or
sell orders for the Series may be aggregated with contemporaneous purchase or
sell orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its
best efforts to obtain execution of transactions for the Series at prices which
are advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Series.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Sub-Adviser shall be paid at the annual rate of 0.55% of the
first $50 million of the average daily net assets of the segment of the Series
that the Sub-Adviser manages and 0.50% of such assets in excess of $50 million.
Such compensation shall be paid by the Trust (except to the extent that the
Trust, the Sub-Adviser and the Manager otherwise agree in writing from time to
time). Such compensation shall be payable monthly in arrears or at such other
intervals, not less frequently than quarterly, as the Manager is paid by the
Series pursuant to the Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, employees or agents (the "Indemnified Parties") shall be subject to
any liability to the Manager, the Trust, the Series or any shareholder of the
Series for any error of judgment, any mistake of law or any loss arising out of
any investment or other act or omission in the course of, connected with, or
arising out of any service to be rendered under this Agreement, except by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties or by reason of reckless disregard by the Sub-Adviser of
its obligations and duties. The Manager shall hold harmless and indemnify the
Sub-Adviser for any loss, liability, cost, damage or expense (including
reasonable attorneys fees and costs) arising from any claim or demand by any
past or present shareholder of the Series that is not based upon the obligations
of the Sub-Adviser under this Agreement.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
(a) unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Series, and (ii)
by vote of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such
approval;
(b) this Agreement may at any time be terminated on sixty
days' written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
and
(d) this Agreement may be terminated by the Sub-Adviser on
ninety days' written notice to the Manager and the Trust, or by the
Manager on ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
(a) The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall
not be entitled to the advice, recommendation or judgment of any
specific person; provided, however, that the persons identified in the
prospectus of the Series shall perform the portfolio management duties
described therein until the Sub-Adviser notifies the Manager that one
or more other employees, officers or agents of the Sub-Adviser,
identified in such notice, shall assume such duties as of a specific
date.
(b) If any term or provision or this Agreement or the
application thereof to any person or circumstances is held to be
invalid or unenforceable to any extent, the remainder of this Agreement
or the application of such provision to other persons or circumstances
shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.
(c) This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
<PAGE>
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/ John E. Pelletier
---------------------------
Name: John E. Pelletier
Title: Managing Director, Senior Vice President, General Counsel,
Secretary & Clerk
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Star Small Cap Fund series
By: /s/ Henry L.P. Schmelzer
---------------------------
Name: Henry L.P. Schmelzer
Title: President
LOOMIS SAYLES & COMPANY, L.P.
By Loomis, Sayles & Company, Incorporated, its general partner
By: /s/ Sheila M. Barry
---------------------------
Name: Sheila M. Barry
Title: Assistant General Counsel and Vice President
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust establishing New
England Funds Trust I (the "Fund") is on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that his Agreement is
executed with respect to the Fund's New England Star Small Cap Fund series (the
"Series") on behalf of the Fund by officers of the Fund as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
<PAGE>
Exhibit (d)(3)(xx)
NEW ENGLAND STAR SMALL CAP FUND
SUB-ADVISORY AGREEMENT
(HARRIS ASSOCIATES, L.P.)
Sub-Advisory Agreement (this "Agreement") entered into as of December
31, 1996, and amended this 1st day of May, 1998, by and among New England Funds
Trust I, a Massachusetts business trust (the "Trust"), with respect to its New
England Star Small Cap Fund series (the "Series"), New England Funds Management,
L.P., a Delaware limited partnership (the "Manager"), and Harris Associates,
L.P., a Delaware limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
December 31, 1996 (the "Advisory Agreement") with the Trust, relating to the
provision of portfolio management and administrative services to the Series;
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the Trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust, the Manager and the Sub-Adviser agree as
follows:
1. Sub-Advisory Services.
(a) The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets
of the Series. The Sub-Adviser shall manage the Series in conformity
with (1) the investment objective, policies and restrictions of the
Series set forth in the Trust's prospectus and statement of additional
information relating to the Series, (2) any additional policies or
guidelines established by the Manager or by the Trust's trustees that
have been furnished in writing to the Sub-Adviser and (3) the
provisions of the Internal Revenue Code (the "Code") applicable to
"regulated investment companies" (as defined in Section 851 of the
Code), all as from time to time in effect (collectively, the
"Policies"), and with all applicable provisions of law, including
without limitation all applicable provisions of the Investment Company
Act of 1940 (the "1940 Act") and the rules and regulations thereunder.
Subject to the foregoing, the Sub-Adviser is authorized, in its
discretion and without prior consultation with the Manager, to buy,
sell, lend and otherwise trade in any stocks, bonds and other
securities and investment instruments on behalf of the Series, without
regard to the length of time the securities have been held and the
resulting rate of portfolio turnover or any tax considerations; and the
majority or the whole of the Series may be invested in such proportions
of stocks, bonds, other securities or investment instruments, or cash,
as the Sub-Adviser shall determine.
(b) The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning
portfolio transactions and performance of the Series in such form as
may be mutually agreed upon, and agrees to review the Series and
discuss the management of it. The Sub-Adviser shall permit all books
and records with respect to the Series to be inspected and audited by
the Manager and the Administrator at all reasonable times during normal
business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may
reasonably be requested by the Manager from time to time, including
without limitation all material requested by or required to be
delivered to the Trustees of the Trust.
(c) The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to
have authorized to give written and/or oral instructions to custodians
of assets of the Series.
2. Obligations of the Manager.
(a) The Manager shall provide (or cause the Fund's custodian
to provide) timely information to the Sub-Adviser regarding such
matters as the composition of assets of the Series, cash requirements
and cash available for investment in the Series, and all other
information as may be reasonably necessary for the Sub-Adviser to
perform its responsibilities hereunder.
(b) The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or supplements thereto at, or, if
practicable, before the time the revisions or supplements become
effective. The Manager agrees to furnish the Sub-Adviser with minutes
of meetings of the Trustees of the Trust applicable to the Series to
the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its
functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series' agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Series shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name and mark "Harris Associates, L.P. and
"Oakmark" and that all use of any designation consisting in whole or part of
"Harris Associates, Inc." or "Oakmark" (a "Harris/Oakmark Mark") under this
Agreement shall inure to the benefit of the Sub-Adviser. The Manager on its own
behalf and on behalf of the Series agrees not to use any Harris/Oakmark Mark in
any advertisement or sales literature or other materials promoting the Series,
except with the prior written consent of the Sub-Adviser. Without the prior
written consent of the Sub-Adviser, the Manager shall not, and the Manager shall
use its best efforts to cause the Series not to, make representations regarding
the Sub-Adviser in any disclosure document, advertisement or sales literature or
other materials relating to the Series. Upon termination of this Agreement for
any reason, the Manager shall cease, and the Manager shall use its best efforts
to cause the Series to cease, all use of any Harris/Oakmark Mark(s) as soon as
reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
for the purchase and sale of securities for the Series with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940
Act in all respects. To the extent consistent with applicable law, purchase or
sell orders for the Series may be aggregated with contemporaneous purchase or
sell orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its
best efforts to obtain execution of transactions for the Series at prices which
are advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Series.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Sub-Adviser shall be paid at the annual rate of 0.70% of the
average daily net assets of the segment of the Series that the Sub-Adviser
manages. Such compensation shall be paid by the Trust (except to the extent that
the Trust, the Sub-Adviser and the Manager otherwise agree in writing from time
to time). Such compensation shall be payable monthly in arrears or at such other
intervals, not less frequently than quarterly, as the Manager is paid by the
Series pursuant to the Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, employees or agents (the "Indemnified Parties") shall be subject to
any liability to the Manager, the Trust, the Series or any shareholder of the
Series for any error of judgment, any mistake of law or any loss arising out of
any investment or other act or omission in the course of, connected with, or
arising out of any service to be rendered under this Agreement, except by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties or by reason of reckless disregard by the Sub-Adviser of
its obligations and duties. The Manager shall hold harmless and indemnify the
Sub-Adviser for any loss, liability, cost, damage or expense (including
reasonable attorneys fees and costs) arising from any claim or demand by any
past or present shareholder of the Series that is not based upon the obligations
of the Sub-Adviser under this Agreement.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
(a) unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Series, and (ii)
by vote of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such
approval;
(b) this Agreement may at any time be terminated on sixty
days' written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
and
(d) this Agreement may be terminated by the Sub-Adviser on
ninety days' written notice to the Manager and the Trust, or by the
Manager on ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
(a) The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall
not be entitled to the advice, recommendation or judgment of any
specific person; provided, however, that the persons identified in the
prospectus of the Series shall perform the portfolio management duties
described therein until the Sub-Adviser notifies the Manager that one
or more other employees, officers or agents of the Sub-Adviser,
identified in such notice, shall assume such duties as of a specific
date.
(b) If any term or provision or this Agreement or the
application thereof to any person or circumstances is held to be
invalid or unenforceable to any extent, the remainder of this Agreement
or the application of such provision to other persons or circumstances
shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.
(c) This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
<PAGE>
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By NEF Corporation, its general partner
By: /s/ John E. Pelletier
-----------------------------
Name: John E. Pelletier
Title: Managing Director, Senior Vice President, General Counsel,
Secretary & Clerk
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Star Small Cap Fund series
By: /s/ Henry L.P. Schmelzer
-----------------------------
Name: Henry L.P. Schmelzer
Title: President
HARRIS ASSOCIATES, L.P.
By Harris Associates, Incorporated, its general partner
By: /s/ Robert M. Levy
-----------------------------
Name: Robert M. Levy
Title: President
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust establishing New
England Funds Trust I (the "Fund") is on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that his Agreement is
executed with respect to the Fund's New England Star Small Cap Fund series (the
"Series") on behalf of the Fund by officers of the Fund as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
<PAGE>
Exhibit (d)(3)(xxi)
NEW ENGLAND STAR SMALL CAP FUND
SUB-ADVISORY AGREEMENT
MONTGOMERY ASSET MANAGEMENT, L.L.C.
This Sub-Advisory Agreement (this "Agreement") is entered into as of
July 31, 1997 by and between New England Funds Management, L.P., a Delaware
limited partnership (the "Manager"), and Montgomery Asset Management, L.L.C., a
Delaware limited liability corporation (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
December 31, 1996 (the "Advisory Agreement") with New England Funds Trust I (the
"Trust"), pursuant to which the Manager provides portfolio management and
administrative services to Star Small Cap Fund, a series of the Trust (the
"Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the Trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. Sub-Advisory Services.
(a) The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of Such
portion of the assets of the Series as the Manager may from time to
time allocate to the Sub-Adviser for management (such portion, the
"Segment"). The Sub-Adviser shall manage the Segment in conformity with
(1) the investment objective, policies and restrictions of the Series
set forth in the Trust's prospectus and statement of additional
information relating to the Series, (2) any additional policies or
guidelines established by the Manager or by the Trust's Trustees that
have been furnished in writing to the Sub-Adviser and (3) the
provisions of the Internal Revenue Code (the "Code") applicable to
"regulated investment companies" (as defined in Section 851 of the
Code), all as from time to time in effect (collectively, the
"Policies"), and with all applicable provisions of law, including
without limitation all applicable provisions of the Investment Company
Act of 1940 (the "1940 Act") and the rules and regulations thereunder.
For purposes of compliance with the Policies, the Sub-Adviser shall be
entitled to treat the Segment as though the Segment constituted the
entire Series, and the Sub-Adviser shall not be responsible in any way
for the compliance of any assets of the Series, other than the Segment,
with the Policies, or for the compliance of the Series, taken as a
whole, with the Policies. Subject to the foregoing, the Sub-Adviser is
authorized, in its discretion and without prior consultation with the
Manager, to buy, sell, lend and otherwise trade in any stocks, bonds
and other securities and investment instruments on behalf of the
Series, without regard to the length of time the securities have been
held and the resulting rate of portfolio turnover or any tax
considerations; and the majority or the whole of the Segment may be
invested in such proportions of stocks, bonds, other securities or
investment instruments, or cash, as the Sub-Adviser shall determine.
Notwithstanding the foregoing provisions of this Section 1.a; however,
the Sub-Adviser shall, upon written instructions from the Manager,
effect such portfolio transactions for the Segment as the Manager shall
determine are necessary in order for the Series to comply with the
Policies.
(b) The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning
portfolio transactions and performance of the Segment in such form as
may be mutually agreed upon, and agrees to review the Segment and
discuss the management of it. The Sub-Adviser shall permit all books
and records with respect to the Segment to be inspected and audited by
the Manager and the Administrator at all reasonable times during normal
business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may
reasonably be requested by the Manager from time to time, including
without limitation all material requested by or required to be
delivered to the Trustees of the Trust.
(c) The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to
have authorized to give written and/or oral instructions to custodians
of assets of the Series.
2. Obligations of the Manager.
(a) The Manager shall provide (or cause the Series' Custodian
(as defined in Section 3 hereof) to provide) timely information to the
Sub-Adviser regarding such matters as the composition of assets of the
Segment, cash requirements and cash available for investment in the
Segment, and all other information as may be reasonably necessary for
the Sub-Adviser to perform its responsibilities hereunder.
(b) The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or supplements thereto at, or, if
practicable, before the time the revisions or supplements become
effective. The Manager agrees to furnish the Sub-Adviser with minutes
of meetings of the Trustees of the Trust applicable to the Series to
the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its
functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series' agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Segment shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Segment shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name and mark "Montgomery Asset Management,
L.L.C." and that all use of any designation consisting in whole or part of
"Montgomery Asset Management, L.L.C." (a "Montgomery Mark") under this Agreement
shall inure to the benefit of the Sub-Adviser. The Manager on its own behalf and
on behalf of the Series agrees not to use any Montgomery Mark in any
advertisement or sales literature or other materials promoting the Series,
except with the prior written consent of the Sub-Adviser. Without the prior
written consent of the Sub-Adviser, the Manager shall not, and the Manager shall
use its best efforts to cause the Series not to, make representations regarding
the Sub-Adviser in any disclosure document, advertisement or sales literature or
other materials relating to the Series. Upon termination of this Agreement for
any reason, the Manager shall cease, and the Manager shall use its best efforts
to cause the Series to cease, all use of any Montgomery Mark(s) as soon as
reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, and (c) custodian fees and
expenses. Any reimbursement of advisory fees required by any expense limitation
provision of any law shall be the sole responsibility of the Manager. The
Manager and the Sub-Adviser shall not be considered as partners or participants
in a joint venture. The Sub-Adviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement. Neither
the Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or Trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. Absent instructions from the Manager to
the contrary, the Sub-Adviser shall place all orders for the purchase and sale
of securities for the Segment with brokers or dealers selected by the
Sub-Adviser, which may include brokers or dealers affiliated with the
Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940 Act in
all respects. To the extent consistent with applicable law, purchase or sell
orders for the Segment may be aggregated with contemporaneous purchase or sell
orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its best
efforts to obtain execution of transactions for the Segment at prices which are
advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other services
or products to the Series and/or other accounts serviced by the Sub-Adviser. To
the extent consistent with applicable law, the Sub-Adviser may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser in
managing the Segment.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-Adviser compensation at the annual rate
of 0.65% of the first $50 million of the average daily net assets (including
cash or cash equivalents) of the Segment and 0.50% of such assets in excess of
$50 million. Such compensation shall be payable monthly in arrears or at such
other intervals, not less frequently than quarterly, as the Manager is paid by
the Series pursuant to the Advisory Agreement.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. The Sub-Adviser shall for all purposes hereof
be deemed to be an independent contractor and shall, unless otherwise provided
or authorized, have no authority to act for or represent the Series or the
Manager in any way or otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, employees or agents (the "Indemnified Parties") shall be subject to
any liability to the Manager, the Trust, the Series or any shareholder of the
Series for any error of judgment, any mistake of law or any loss arising out of
any investment or other act or omission in the course of, connected with, or
arising out of any service to be rendered under this Agreement, except by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties or by reason of reckless disregard by the Sub-Adviser of
its obligations and duties. The Manager shall hold harmless and indemnify the
Sub-Adviser for any loss, liability, cost, damage or expense (including
reasonable attorneys fees and costs) arising from any claim or demand by any
past or present shareholder of the Series that is not based upon the obligations
of the Sub-Adviser with respect to the Segment under this Agreement.
Without limiting the foregoing, it is expressly understood and agreed
that the Manager and the Series shall hold harmless and indemnify the
Indemnified Parties for any loss arising out of any act or omission of any other
sub-adviser to the Series, or for any loss arising out of the failure of the
Series to comply with the Policies, except for losses arising out of the
Sub-Adviser's failure to comply with the Policies with respect to the Segment.
The Manager acknowledges and agrees that the Sub-Adviser makes no representation
or warranty, express or implied, that any level of performance or investment
results will be achieved by the Series or the Segment or that the Series or the
Segment will perform comparably with any standard or index, including other
client of the Sub-Adviser, whether public or private.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
(a) unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Series, and (ii)
by vote of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such
approval;
(b) this Agreement may at any time be terminated on sixty
days' written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
(d) this Agreement may be terminated by the Sub-Adviser on
ninety days' written notice to the Manager and the Trust, or by the
Manager on ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
(a) The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall
not be entitled to the advice, recommendation or judgment of any
specific person; provided, however, that the persons identified in the
prospectus of the Series shall perform the portfolio management duties
described therein until the Sub-Adviser notifies the Manager that one
or more other employees, officers or agents of the Sub-Adviser,
identified in such notice, shall assume such duties as of a specific
date.
(b) If any term or provision or this Agreement or the
application thereof to any person or circumstances is held to be
invalid or unenforceable to any extent, the remainder of this Agreement
or the application of such provision to other persons or circumstances
shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.
(c) This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By: /s/ BRUCE R. SPECA
--------------------
Name: Bruce R. Speca
Title: Managing Director and Executive Vice President
MONTGOMERY ASSET MANAGEMENT, L.L.C.
By: /s/ DANA SCHMIDT
--------------------
Name: Dana Schmidt
Title: Principal
<PAGE>
Exhibit (d)(3)(xxii)
NEW ENGLAND STAR SMALL CAP FUND
SUB-ADVISORY AGREEMENT
RS INVESTMENT MANAGEMENT, L.P.
This Sub-Advisory Agreement (this "Agreement") is entered into as of
February 26, 1999 by and between New England Funds Management, L.P., a Delaware
limited partnership (the "Manager"), and RS Investment Management, L.P., a
California limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
December 31,1996 (the "Advisory Agreement") with New England Funds Trust I (the
"Trust"), pursuant to which the Manager provides portfolio management and
administrative services to New England Star Small Cap Fund (the "Fund"), a
series of the Trust (the "Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the Trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. Sub-Advisory Services.
(a) The Sub-Adviser shall, subject to the supervision of the
Manager and of any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of a segment
of the assets of the Series (the "Portfolio"). The Sub-Adviser shall
manage the Series in conformity with (1) the investment objective,
policies and restrictions of the Series set forth in the Trust's
prospectus and statement of additional information relating to the
Series, (2) any additional policies or guidelines established by the
Manager or by the Trust's trustees that have been furnished in writing
to the Sub-Adviser and (3) the provisions of the Internal Revenue Code
(the "Code") applicable to "regulated investment companies" (as defined
in Section 851 of the Code), all as from time to time in effect
(collectively, the "Policies"), and with all applicable provisions of
law, including without limitation all applicable provisions of the
Investment Company Act of 1940 (the "1940 Act") and the rules and
regulations thereunder. The Fund is the owner of all cash, securities
and other assets in the Portfolio, and, except as may otherwise be
provided be the 1940 or other federal laws, there are no restrictions
on the pledge, hypothecation, transfer or sale of such cash,
securities, or assets. Subject to the foregoing, the Sub-Adviser is
authorized, in its sole and exclusive discretion and without prior
consultation with the Manager, to buy, sell, lend and otherwise trade
in any stocks, bonds and other securities and investment instruments on
behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover
or any tax considerations; and the majority or the whole of the Series
may be invested in such proportions of stocks, bonds, other securities
or investment instruments, or cash, as the Sub-Adviser shall determine.
(b) The Sub-Adviser shall furnish the Manager and the
Administrator monthly, quarterly and annual reports concerning
portfolio transactions and performance of the Series in such form as
may be mutually agreed upon, and agrees to review the Series and
discuss the management of it. The Sub-Adviser shall permit all books
and records with respect to the Series to be inspected and audited by
the Manager and the Administrator at all reasonable times during normal
business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may
reasonably be requested by the Manager from time to time, including
without limitation all material requested by or required to be
delivered to the Trustees of the Trust.
(c) The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to
have authorized to give written and/or oral instructions to custodians
of assets of the Series.
2. Obligations of the Manager.
(a) The Manager shall provide (or cause the Fund's custodian
to provide) timely information to the Sub-Adviser regarding such
matters as the composition of assets of the Series, cash requirements
and cash available for investment in the Series, and all other
information as may be reasonably necessary for the Sub-Adviser to
perform its responsibilities hereunder.
(b) The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or supplements thereto at, or, if
practicable, before the time the revisions or supplements become
effective. The Manager agrees to furnish the Sub-Adviser with minutes
of meetings of the Trustees of the Trust applicable to the Series to
the extent they may affect the duties of the Sub-Adviser, and with
copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its
functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series' agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian, unless such act or omission is taken in reliance upon instruction
given to the Custodian by a representative of the Sub-Adviser properly
authorized to give such instruction under the Custody Agreement. Any assets
added to the Series shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name and mark "RS Investment Management,
L.P." and that all use of any designation consisting in whole or part of "RS
Investment Management, L.P." (a "RS Mark") under this Agreement shall inure to
the benefit of the Sub-Adviser. The Manager on its own behalf and on behalf of
the Series agrees not to use any RS Mark in any advertisement or sales
literature or other materials promoting the Series, except with the prior
written consent of the Sub-Adviser. Without the prior written consent of the
Sub-Adviser, the Manager shall not, and the Manager shall use its best efforts
to cause the Series not to, make representations regarding the Sub-Adviser in
any disclosure document, advertisement or sales literature or other materials
relating to the Series. Upon termination of this Agreement for any reason, the
Manager shall cease, and the Manager shall use its best efforts to cause the
Series to cease, all use of any Robertson Stephens Mark(s) as soon as reasonably
practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage commissions
and other costs in connection with the purchase or sale of securities or other
investment instruments with respect to the Series, (c) custodian, independent
auditors, legal counsel fees and expenses, (d) settlement charges, and (e)
expenses of preparing, printing and distributing all prospectuses, proxy
material, reports and notices to shareholders of the Fund, and other incidental
costs of the Portfolio. Any reimbursement of advisory fees required by any
expense limitation provision of any law shall be the sole responsibility of the
Manager. The Manager and the Sub-Adviser shall not be considered as partners or
participants in a joint venture. The Sub-Adviser will pay its own expenses
incurred in furnishing the services to be provided by it pursuant to this
Agreement. Neither the Sub-Adviser nor any affiliated person thereof shall be
entitled to any compensation from the Manager or the Trust with respect to
service by any affiliated person of the Sub-Adviser as an officer or trustee of
the Trust (other than the compensation to the Sub-Adviser payable by the Manager
pursuant to Section 7 hereof).
6. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
for the purchase and sale of securities for the Series with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940
Act in all respects. To the extent consistent with applicable law, purchase or
sell orders for the Series may be aggregated with contemporaneous purchase or
sell orders of other clients of the Sub-Adviser. Except as may otherwise be
provided by the 1940 or other federal laws, such transactions may be made at
slightly different prices, due to the volume of the securities purchased or
sold. In such event, the average price of all securities purchased or sold in
such transactions may be determined, and the Portfolio may be charged or
credited, as the case may be, the average transaction price. The Sub-Adviser
shall use its best efforts to obtain execution of transactions for the Series at
prices which are advantageous to the Series and at commission rates that are
reasonable in relation to the benefits received. However, the Sub-Adviser may
select brokers or dealers on the basis that they provide brokerage, research or
other services or products to the Series and/or other accounts serviced by the
Sub-Adviser. To the extent consistent with applicable law, the Sub-Adviser may
pay a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission or dealer spread another
broker or dealer would have charged for effecting that transaction if the
Sub-Adviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research products
and/or services provided by such broker or dealer. This determination, with
respect to brokerage and research services or products, may be viewed in terms
of either that particular transaction or the overall responsibilities which the
Sub-Adviser and its affiliates have with respect to the Series or to accounts
over which they exercise investment discretion. Not all such services or
products need be used by the Sub-Adviser in managing the Series.
7. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-Adviser compensation at the annual rate
of 0.55% of the first $50 million of the average daily net assets of the
Portfolio and 0.50% of such assets in excess of $50 million. Such compensation
shall be payable monthly in arrears or at such other intervals, not less
frequently than quarterly, as the Manager is paid by the Series pursuant to the
Advisory Agreement. The daily fee accruals will be computed on the basis of the
valuations of the total net assets of the Portfolio as of the close of business
each day. For purposes of determining the daily fee accruals, the assets of the
Portfolio shall be valued by the Manager in good faith to reflect the fair
market value thereof. The net market value of securities held short by the
Portfolio shall be treated a liability of the Account, and, together with the
amount of any margin or other loans owned by the Account, shall be subtracted in
determining net market value. If this Agreement begins on a date other than the
first day of a quarter or terminates on a date other than the last day of a
quarter, the sub-advisory fee payable with respect to either such quarter shall
be prorated.
8. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other services
to various investment companies and other managed accounts, except as the
Sub-Adviser and the Manager or the Administrator may otherwise agree from time
to time in writing before or after the date hereof. This Agreement shall not in
any way limit or restrict the Sub-Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities do not
adversely affect or otherwise impair the performance by the Sub-Adviser of its
duties and obligations under this Agreement. The Manager and the Series
recognize and agree that the Sub-Adviser may provide advice to or take action
with respect to other clients, which advice or action, including the timing and
nature of such action, may differ from or be identical to advice given or action
taken with respect to the Series. This will create conflicts of interest with
the Portfolio over the Sub-Adviser's time devoted to managing the Portfolio and
the allocation of investment opportunities among accounts (including the
Portfolio) managed by the Sub-Adviser. The Sub-Adviser will attempt to resolve
all such conflicts in a manner that is generally fair to all of its clients.
Nothing in this Agreement shall be deemed to obligate the Sub-Adviser to acquire
for the Portfolio any security that the Sub-Adviser or its affiliated persons
may acquire for its own accounts or for the account of any other client, if in
the absolute discretion of the Sub-Adviser and consistent with the Sub-Adviser's
fiduciary duties to the shareholders or the Manager of the Fund, it is not
practical or desirable to acquire such a position in such security for the
Portfolio. The Sub-Adviser shall for all purposes hereof be deemed to be an
independent contractor and shall, unless otherwise provided or authorized, have
no authority to act for or represent the Series or the Manager in any way or
otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, employees or agents (the "Indemnified Parties") shall be subject to
any liability to the Manager, the Trust, the Series or any shareholder of the
Series for any error of judgment, any mistake of law or any loss arising out of
any investment or other act or omission in the course of, connected with, or
arising out of any service to be rendered under this Agreement, except by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties or by reason of reckless disregard by the Sub-Adviser of
its obligations and duties. The Manager shall hold harmless and indemnify the
Sub-Adviser for any loss, liability, cost, damage or expense (including
reasonable attorneys fees and costs) arising from any claim or demand by any
past or present shareholder of the Series or any regulatory body that is not
based upon the obligations of the Sub-Adviser under this Agreement.
10. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
(a) unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter so long as such continuance is specifically approved at
least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Series, and (ii)
by vote of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such
approval;
(b) this Agreement may at any time be terminated on sixty
days' written notice to the Sub-Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement;
(d) this Agreement may be terminated by the Sub-Adviser on
ninety days' written notice to the Manager and the Trust, or by the
Manager on ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 10 shall be
without the payment of any penalty.
11. Confidentiality. Except as required by law, the Manager agrees to
maintain in strict confidence all investment advice and information furnished to
the Manager or the Fund by the Sub-Adviser.
12. Amendment. This Agreement may be amended in writing at any time by
mutual consent of the Manager and the Sub-Adviser, provided that, if required by
law, such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of voting
on such approval.
13. Notices. Any notice given hereunder shall be in writing and may be
served by being sent to telex, facsimile, or other electronic transmission or
sent by registered mail or by courier to the address set forth for the party for
which it is intended. A notice served by mail shall be deemed to have been
served seven days after mailing and in the case of telex, facsimile or other
electronic transmission twelve hours after dispatch thereof. Addressed for
notice may be changed by written notice to the other party.
If to Manager:
Bruce R. Speca
Managing Director and President
New England Funds Management, L.P.
399 Boylston Street
Boston, MA 02116
With a copy to:
John E. Pelletier
Managing Director, Senior Vice President,
General Counsel, Secretary & Clerk
New England Funds Management, L.P.
399 Boylston Street
Boston, MA 02116
If to Sub-Adviser:
G. Randall Hecht
RS Investment Management, L.P.
388 Market Street, Suite 200
San Francisco, CA 94111
With a copy to:
David M. Elliot
RS Investment Management, L.P.
388 Market Street, Suite 200
San Francisco, CA 94111
14. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
15. Delivery of Information. The Manager acknowledges that it has
received the Sub-Adviser's brochure required to be delivered under the Advisers
Act (including the information in Part II of the Sub-Adviser's Form ADV). If the
Manager received such information less than forty-eight hours prior to signing
this Agreement, this Agreement may be terminated by the Adviser with penalty
within five business days from the effective date. On written request by the
Manager, the Sub-Adviser agrees to deliver annually without charge the
Sub-Adviser's brochure required by the Advisers Act.
16. Entire Agreement; Severability. This Agreement (and the letter
dated September 16, 1996 from Bruce R. Speca to Robertson, Stephens) is the
entire agreement of the parties and supersedes all prior or contemporaneous
written or oral negotiations, correspondence, agreements and understandings
regarding the subject matter hereof.
17. No Third-Party Beneficiaries. Neither party intends for this
Agreement to benefit any third-party not expressly named in this Agreement.
18. General.
(a) The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Manager shall
not be entitled to the advice, recommendation or judgment of any
specific person; provided, however, that the persons identified in the
prospectus of the Series shall perform the portfolio management duties
described therein until the Sub-Adviser notifies the Manager that one
or more other employees, officers or agents of the Sub-Adviser,
identified in such notice, shall assume such duties as of a specific
date.
(b) If any term or provision or this Agreement or the
application thereof to any person or circumstances is held to be
invalid or unenforceable to any extent, the remainder of this Agreement
or the application of such provision to other persons or circumstances
shall not be affected thereby and shall be enforced to the fullest
extent permitted by law.
(c) This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
NEW ENGLAND FUNDS MANAGEMENT, L.P.
By: /s/ John E. Pelletier
----------------------
Name: John E. Pelletier
Title: Managing Director, Senior Vice President,
General Counsel, Secretary & Clerk
RS INVESTMENT MANAGEMENT, L.P.
By: /s/ George R. Hecht
----------------------
Name: George R. Hecht
Title: President
<PAGE>
Exhibit (e)(1)
NEW ENGLAND GROWTH FUND
DISTRIBUTION AGREEMENT
AGREEMENT made this 30th day of August, 1996 by and between NEW ENGLAND
FUNDS TRUST I, a Massachusetts business trust (the "Trust"), and NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership (the "Distributor").
W I T N E S S E T H:
WHEREAS, this Agreement has been approved by the Trustees of the Trust in
contemplation of the transfer by the Distributor of its rights to receive the
Class B Distribution Fee (as defined in the Class B Distribution and Service
Plan attached hereto as Exhibit A) and/or contingent deferred sales charges to a
financing party in order to raise funds to cover distribution expenditures;
WHEREAS, the Trustees of the Trust recognize the importance to the Trust
of the Distributor being able to obtain financing with which to pay commissions
on Class B shares at the time of sale;
WHEREAS, the Trustees of the Trust acknowledge that by providing financing
to the Distributor the financing party enables the Distributor to provide
valuable services to the Series (as defined below); and
WHEREAS, the Trustees of the Trust, in the context of considering the best
interests of the Series and its shareholders at the time of and in preparation
for any vote, consent or other action that the Trustees of the Trust may from
time to time take relating to the continued receipt by the Distributor (and/or
the financing party) of the Distribution Fee, intend to consider the effect on
the Distributor and any financing party of any such vote, consent or action.
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Trust and the Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
distributor of shares of beneficial interest ("Series shares") of the
Trust's New England Growth Fund series (the "Series") during the term of
this Agreement. The Trust reserves the right, however, to refuse at any
time or times to sell any Series shares hereunder for any reason deemed
adequate by the Board of Trustees of the Trust.
2. Sale and Payment. Under this agreement, the following provisions shall
apply with respect to the sale of and payment for Series shares:
(a) The Distributor shall have the right, as principal, to purchase
Series shares from the Trust at their net asset value and to sell
such shares to the public against orders therefor at the applicable
public offering price, as defined in Section 4 hereof. The
Distributor shall also have the right, as principal, to sell shares
to dealers against orders therefor at the public offering price less
a concession determined by the Distributor.
(b) Prior to the time of delivery of any shares by the Trust to, or on
the order of, the Distributor, the Distributor shall pay or cause to
be paid to the Trust or to its order an amount in Boston or New York
clearing house funds equal to the applicable net asset value of such
shares. The Distributor shall retain so much of any sales charge or
underwriting discount as is not allowed by it as a concession to
dealers.
3. Fees. For its services as general distributor of the Class B Series
shares, the Trust shall cause the Series to pay to the Distributor (or
its designee or transferee) in addition to the sales charge, if any,
referred to in Section 4 below, the Class B Distribution Fee at the
rate and upon the terms and conditions set forth in the Class B
Distribution and Service Plan attached as Exhibit A hereto, and as
amended from time to time, and the Distributor shall also be entitled
to receive any contingent deferred sales charges that may be payable
upon redemption or repurchase of Class B Series shares. The Class B
Distribution Fee shall be accrued daily and paid monthly to the
Distributor (or, at its direction, to its designee or transferee) as
soon as practicable after the end of the calendar month in which it
accrues, but in any event within five business days following the last
day of the month. So long as this agreement and the Class B
Distribution and Service Plan have not been terminated in accordance
with their respective terms, the Series' obligation to pay the Class B
Distribution Fee to the Distributor shall be absolute and unconditional
and shall not be subject to any dispute, offset, counterclaim or
defense whatsoever (it being understood that nothing in this sentence
shall be deemed a waiver by the Trust or the Series of its right
separately to pursue any claims it may have against the Distributor and
to enforce such claims against any assets (other than its rights to be
paid the Class B Distribution Fee and to be paid contingent deferred
sales charges with respect to Class B Series shares) of the
Distributor).
4. Public Offering Price. The public offering price shall be the net
asset value of Series shares, plus any applicable sales charge, all as
set forth in the current prospectus and statement of additional
information ("prospectus") of the Trust relating to the Series shares.
In no event shall the public offering price exceed 1000/935 of such net
asset value, and in no event shall any applicable sales charge or
underwriting discount exceed 6.5% of the public offering price. The
net asset value of Series shares shall be determined in accordance with
the provisions of the agreement and declaration of trust and by-laws of
the Trust and the current prospectus of the Trust relating to the
Series shares.
5. Trust Issuance of Series Shares. The delivery of Series shares shall
be made promptly by a credit to a shareholder's open account for the
Series or by delivery of a share certificate. The Trust reserves the
right (a) to issue Series shares at any time directly to the
shareholders of the Series as a stock dividend or stock split, (b) to
issue to such shareholders shares of the Series, or rights to subscribe
to shares of the Series, as all or part of any dividend that may be
distributed to shareholders of the Series or as all or part of any
optional or alternative dividend that may be distributed to
shareholders of the Series, and (c) to sell Series shares in accordance
with the current applicable prospectus of the Trust relating to the
Series shares.
6. Redemption or Repurchase. The Distributor shall act as agent for the
Trust in connection with the redemption or repurchase of Series shares
by the Trust to the extent and upon the terms and conditions set forth
in the current applicable prospectus of the Trust relating to the
Series shares, and the Trust agrees to reimburse the Distributor, from
time to time upon demand, for any reasonable expenses incurred in
connection with such redemptions or repurchases. The Trust will remit
to the Distributor any contingent deferred sales charges imposed on
redemptions or repurchases of Series shares (other than Class B shares)
upon the terms and conditions set forth in the then current prospectus
of the Trust. The Trust will also remit to the Distributor (or its
designee or transferee), in addition to the Class B Distribution Fee,
any contingent deferred sales charges imposed on redemptions or
repurchases of Class B shares, in accordance with the Remittance
Agreement attached hereto as Exhibit B.
7. Undertaking Regarding Sales. The Distributor shall use reasonable
efforts to sell Series shares but does not agree hereby to sell any
specific number of Series shares and shall be free to act as
distributor of the shares of other investment companies. Series shares
will be sold by the Distributor only against orders therefor. The
Distributor shall not purchase Series shares from anyone except in
accordance with Sections 2 and 6 and shall not take "long" or "short"
positions in Series shares contrary to the agreement and declaration of
trust or by-laws of the Trust.
8. Compliance. The Distributor shall conform to the Rules of Fair
Practice of the NASD and the sale of securities laws of any
jurisdiction in which it sells, directly or indirectly, any Series
shares. The Distributor agrees to make timely filings, with the
Securities and Exchange Commission in Washington, D.C. (the "SEC"), the
NASD and such other regulatory authorities as may be required, of any
sales literature relating to the Series and intended for distribution
to prospective investors. The Distributor also agrees to furnish to
the Trust sufficient copies of any agreements or plans it intends to
use in connection with any sales of Series shares in adequate time for
the Trust to file and clear them with the proper authorities before
they are put in use (which the Trust agrees to use its best efforts to
do as expeditiously as reasonably possible), and not to use them until
so filed and cleared.
9. Registration and Qualification of Series Shares. The Trust agrees to
execute such papers and to do such acts and things as shall from time
to time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Series shares for sale
under the so-called Blue Sky Laws of any state or for maintaining the
registration of the Trust and of the Series shares under the federal
Securities Act of 1933 and the federal Investment Company Act of 1940
(the "1940 Act"), to the end that there will be available for sale from
time to time such number of Series shares as the Distributor may
reasonably be expected to sell. The Trust shall advise the Distributor
promptly of (a) any action of the SEC or any authorities of any state
or territory, of which it may be advised, affecting registration or
qualification of the Trust or the Series shares, or rights to offer
Series shares for sale, and (b) the happening of any event which makes
untrue any statement or which requires the making of any change in the
Trust's registration statement or its prospectus relating to the Series
shares in order to make the statements therein not misleading.
10. Distributor Independent Contractor. The Distributor shall be an
independent contractor and neither the Distributor nor any of its
officers or employees as such is or shall be an employee of the Trust.
The Distributor is responsible for its own conduct and the employment,
control and conduct of its agents and employees and for injury to such
agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees
under applicable statutes and agrees to pay all employer taxes
thereunder.
11. Expenses Paid by Distributor. While the Distributor continues to act as
agent of the Trust to obtain subscriptions for and to sell Series shares,
the Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Series shares for sale, and all
other copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Series shares for sale.
12. Interests in and of Distributor. It is understood that any of the
shareholders, trustees, officers, employees and agents of the Trust may
be a shareholder, director, officer, employee or agent of, or be
otherwise interested in, the Distributor, any affiliated person of the
Distributor, any organization in which the Distributor may have an
interest or any organization which may have an interest in the
Distributor; that the Distributor, any such affiliated person or any
such organization may have an interest in the Trust; and that the
existence of any such dual interest shall not affect the validity
hereof or of any transaction hereunder except as otherwise provided in
the agreement and declaration of trust or by-laws of the Trust, in the
limited partnership agreement of the Distributor or by specific
provision of applicable law.
13. Words "New England" and Letters "TNE". The Distributor and/or its
parent organization and New England Investment Companies, L.P.
("NEIC"), retain proprietary rights in the words "New England" and the
letters "TNE", which may be used by the Trust and the Series only with
the consent of the Distributor, which is authorized by NEIC to give
such consent as provided herein. The Distributor consents to the use
by the Series of the name "New England Capital Growth Fund" or any
other name embodying the words "New England" or the letters "TNE", in
such forms as the Distributor shall in writing approve, but only on
condition and so long as (i) this Agreement shall remain in full force
and (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it. No such name shall be used by the
Trust or the Series at any time or in any place or for any purposes or
under any conditions except as in this section provided. The foregoing
authorization by the Distributor as agent of NEIC to the Trust and the
Series to use said words or letters as part of a business or name is
not exclusive of the right of the Distributor itself to use, or to
authorize others to use, the same; the Trust acknowledges and agrees
that as between the Distributor and the Trust and the Series, the
Distributor has the exclusive right so to use, or authorize others to
use, said words and letters, and the Trust agrees to take such action
as may reasonably be requested by the Distributor to give full effect
to the provisions of this section (including, without limitation,
consenting to such use of said words or letters). Without limiting the
generality of the foregoing, the Trust agrees that, upon any
termination of this Agreement by either party or upon the violation of
any of its provisions by the Trust, the Trust will, at the request of
the Distributor made within six months after the Distributor has
knowledge of such termination or violation, use its best efforts to
change the name of the Trust and the Series so as to eliminate all
reference, if any, to the words "New England" or the letters "TNE" and
will not thereafter transact any business in a name containing the
words "New England" or the letters "TNE" in any form or combination
whatsoever, or designate itself as the same entity as or successor to
any entity of such name, or otherwise use the words "New England" or
the letters "TNE" or any other reference to the Distributor. Such
covenants on the part of the Trust and the Series shall be binding upon
it, its trustees, officers, shareholders, creditors and all other
persons claiming under or through it.
14. Effective Date and Termination. This Agreement shall become effective as
of the date of its execution, and
(a) Unless otherwise terminated, this Agreement shall continue in
effect with respect to the shares of the Series so long as such
continuation is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by the vote of a majority
of the votes which may be cast by shareholders of the Series and
(ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the
Trust, cast in person at a meeting called for the purpose of
voting on such approval.
(b) This Agreement may at any time be terminated on sixty days' notice
to the Distributor either by vote of a majority of the Trust's Board
of Trustees then in office or by the vote of a majority of the votes
which may be cast by shareholders of the Series.
(c) This Agreement shall automatically terminate in the event of its
assignment (excluding for this purpose any assignment of rights to
payment described in the recitals and in Section 19 of the Agreement
which are hereby ratified and approved).
(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
15. Definitions. For purposes of this Agreement, the following definitions
shall apply:
(a) The "vote of a majority of the votes which may be cast by
shareholders of the Series" means (1) 67% or more of the votes of
the Series present (in person or by proxy) and entitled to vote
at such meeting, if the holders of more than 50% of the
outstanding shares of the Series entitled to vote at such meeting
are present; or (2) the vote of the holders of more than 50% of
the outstanding shares of the Series entitled to vote at such
meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC
under the 1940 Act.
16. Amendment. This Agreement may be amended at any time by mutual consent
of the parties, provided that such consent on the part of the Series
shall be approved (i) by the Board of Trustees of the Trust or by vote
of a majority of the votes which may be cast by shareholders of the
Series and (ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the Trust
cast in person at a meeting called for the purpose of voting on such
approval.
17. Applicable Law and Liabilities. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the Series
shares shall pass, in Boston, Massachusetts.
18. Limited Recourse. The Distributor hereby acknowledges that the Trust's
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Series.
19. Payments to Distributor's Transferees. The Distributor may transfer
its rights to payments hereunder with respect to Class B shares (but
not its obligations hereunder) in order to raise funds to cover
distribution expenditures, and any such transfer shall be effective
upon written notice from the Distributor to the Trust. In connection
with the foregoing, the Series is authorized to pay all or a part of
the Distribution Fee and/or contingent deferred sales charges in
respect of Class B shares directly to such transferee as directed by
the Distributor.
20. Liquidation etc. As long as the Class B Distribution and Service Plan
is in effect, the Series shall not change the manner in which the
Distribution Fee is computed (except as may be required by a change in
applicable law after the date hereof) or adopt a plan of liquidation
without the consent of the Distributor (or any designee or transferee
of the Distributor's rights to receive payment hereunder in respect of
Class B shares) except in circumstances where a surviving entity or
transferee of the Series' assets adopts the Class B Distribution and
Service Plan and assumes the obligations of the Series to make payments
to the Distributor (or its transferee) hereunder in respect of Class B
shares.
21. "Distributor's Shares" etc. The Trust, on behalf of the Series, agrees
that it will not pay any portion of the Class B Distribution Fee which
is calculated by reference to the "Distributor's Shares" (nor shall it
pay a Distribution Fee calculated by reference to Class B shares
("Other Class B Shares") other than the Distributor's Shares at a rate
exceeding .75% per annum of the net assets attributable to Other Class
B Shares) to any person other than the Distributor (or its designee or
transferee) without the written consent of the Distributor.
"Distributor's Shares" shall mean (i) Class B shares of the Series that
were sold by the Distributor, plus (ii) Class B shares of the Series
issued in connection with the exchange, for Class B shares of the
Series, of Class B shares of another fund in the New England fund group
that were sold by the Distributor, plus (iii) Class B shares of the
Series issued in connection with the exchange, for Class B shares of
the Series, of Class B shares of another fund in the New England fund
group issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of such other
fund that were sold by the Distributor, plus (iv) Class B shares of the
Series issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of the Series
described in clauses (i), (ii) and (iii). To the extent permitted
under the 1940 Act, the terms of this Section 21 shall survive the
termination of this Agreement.
22. Limitation on Reduction of Class B Distribution Fee. The Trust, on
behalf of the Series, agrees that it will not reduce the Distribution
Fee in respect of Series' assets attributable to Class B shares below
the annual rate of 0.75% unless it has ceased (and not resumed) paying
all "service fees" (within the meaning of Section 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
or any successor provision thereto) to the Distributor, to any
affiliate of the Distributor and to any other person in circumstances
where substantially all of the services and functions relating to the
distribution of Class B Series shares have been delegated to, or are
being performed by, the Distributor or an affiliate of the
Distributor. To the extent permitted under the 1940 Act, the terms of
this Section 22 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Growth Fund series
By /s/ Frank Nesvet
---------------------------
Frank Nesvet, Treasurer
NEW ENGLAND FUNDS, L.P.
By: NEF Corporation, its general partner
By /s/ Bruce R. Speca
---------------------------
Bruce R. Speca, Executive Vice President
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust I (the "Trust") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Trust's New England Growth Fund series (the "Series") on behalf
of the Trust by officers of the Trust as officers and not individually and that
the obligations of or arising out of this Agreement are not binding upon any of
the trustees, officers or shareholders of the Trust individually but are binding
only upon the assets and property of the Series.
<PAGE>
Exhibit (e)(2)
NEW ENGLAND CAPITAL GROWTH FUND
DISTRIBUTION AGREEMENT
AGREEMENT made this 30th day of August, 1996 by and between NEW ENGLAND
FUNDS TRUST I, a Massachusetts business trust (the "Trust"), and NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership (the "Distributor").
W I T N E S S E T H:
WHEREAS, this Agreement has been approved by the Trustees of the Trust in
contemplation of the transfer by the Distributor of its rights to receive the
Class B Distribution Fee (as defined in the Class B Distribution and Service
Plan attached hereto as Exhibit A) and/or contingent deferred sales charges to a
financing party in order to raise funds to cover distribution expenditures;
WHEREAS, the Trustees of the Trust recognize the importance to the Trust
of the Distributor being able to obtain financing with which to pay commissions
on Class B shares at the time of sale;
WHEREAS, the Trustees of the Trust acknowledge that by providing financing
to the Distributor the financing party enables the Distributor to provide
valuable services to the Series (as defined below); and
WHEREAS, the Trustees of the Trust, in the context of considering the best
interests of the Series and its shareholders at the time of and in preparation
for any vote, consent or other action that the Trustees of the Trust may from
time to time take relating to the continued receipt by the Distributor (and/or
the financing party) of the Distribution Fee, intend to consider the effect on
the Distributor and any financing party of any such vote, consent or action.
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Trust and the Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
distributor of shares of beneficial interest ("Series shares") of the
Trust's New England Capital Growth Fund series (the "Series") during the
term of this Agreement. The Trust reserves the right, however, to refuse
at any time or times to sell any Series shares hereunder for any reason
deemed adequate by the Board of Trustees of the Trust.
2. Sale and Payment. Under this agreement, the following provisions shall
apply with respect to the sale of and payment for Series shares:
(a) The Distributor shall have the right, as principal, to purchase
Series shares from the Trust at their net asset value and to sell
such shares to the public against orders therefor at the applicable
public offering price, as defined in Section 4 hereof. The
Distributor shall also have the right, as principal, to sell shares
to dealers against orders therefor at the public offering price less
a concession determined by the Distributor.
(b) Prior to the time of delivery of any shares by the Trust to, or on
the order of, the Distributor, the Distributor shall pay or cause to
be paid to the Trust or to its order an amount in Boston or New York
clearing house funds equal to the applicable net asset value of such
shares. The Distributor shall retain so much of any sales charge or
underwriting discount as is not allowed by it as a concession to
dealers.
3. Fees. For its services as general distributor of the Class B Series
shares, the Trust shall cause the Series to pay to the Distributor (or
its designee or transferee) in addition to the sales charge, if any,
referred to in Section 4 below, the Class B Distribution Fee at the
rate and upon the terms and conditions set forth in the Class B
Distribution and Service Plan attached as Exhibit A hereto, and as
amended from time to time, and the Distributor shall also be entitled
to receive any contingent deferred sales charges that may be payable
upon redemption or repurchase of Class B Series shares. The Class B
Distribution Fee shall be accrued daily and paid monthly to the
Distributor (or, at its direction, to its designee or transferee) as
soon as practicable after the end of the calendar month in which it
accrues, but in any event within five business days following the last
day of the month. So long as this agreement and the Class B
Distribution and Service Plan have not been terminated in accordance
with their respective terms, the Series' obligation to pay the Class B
Distribution Fee to the Distributor shall be absolute and unconditional
and shall not be subject to any dispute, offset, counterclaim or
defense whatsoever (it being understood that nothing in this sentence
shall be deemed a waiver by the Trust or the Series of its right
separately to pursue any claims it may have against the Distributor and
to enforce such claims against any assets (other than its rights to be
paid the Class B Distribution Fee and to be paid contingent deferred
sales charges with respect to Class B Series shares) of the
Distributor).
4. Public Offering Price. The public offering price shall be the net
asset value of Series shares, plus any applicable sales charge, all as
set forth in the current prospectus and statement of additional
information ("prospectus") of the Trust relating to the Series shares.
In no event shall the public offering price exceed 1000/935 of such net
asset value, and in no event shall any applicable sales charge or
underwriting discount exceed 6.5% of the public offering price. The
net asset value of Series shares shall be determined in accordance with
the provisions of the agreement and declaration of trust and by-laws of
the Trust and the current prospectus of the Trust relating to the
Series shares.
5. Trust Issuance of Series Shares. The delivery of Series shares shall
be made promptly by a credit to a shareholder's open account for the
Series or by delivery of a share certificate. The Trust reserves the
right (a) to issue Series shares at any time directly to the
shareholders of the Series as a stock dividend or stock split, (b) to
issue to such shareholders shares of the Series, or rights to subscribe
to shares of the Series, as all or part of any dividend that may be
distributed to shareholders of the Series or as all or part of any
optional or alternative dividend that may be distributed to
shareholders of the Series, and (c) to sell Series shares in accordance
with the current applicable prospectus of the Trust relating to the
Series shares.
6. Redemption or Repurchase. The Distributor shall act as agent for the
Trust in connection with the redemption or repurchase of Series shares
by the Trust to the extent and upon the terms and conditions set forth
in the current applicable prospectus of the Trust relating to the
Series shares, and the Trust agrees to reimburse the Distributor, from
time to time upon demand, for any reasonable expenses incurred in
connection with such redemptions or repurchases. The Trust will remit
to the Distributor any contingent deferred sales charges imposed on
redemptions or repurchases of Series shares (other than Class B shares)
upon the terms and conditions set forth in the then current prospectus
of the Trust. The Trust will also remit to the Distributor (or its
designee or transferee), in addition to the Class B Distribution Fee,
any contingent deferred sales charges imposed on redemptions or
repurchases of Class B shares, in accordance with the Remittance
Agreement attached hereto as Exhibit B.
7. Undertaking Regarding Sales. The Distributor shall use reasonable
efforts to sell Series shares but does not agree hereby to sell any
specific number of Series shares and shall be free to act as
distributor of the shares of other investment companies. Series shares
will be sold by the Distributor only against orders therefor. The
Distributor shall not purchase Series shares from anyone except in
accordance with Sections 2 and 6 and shall not take "long" or "short"
positions in Series shares contrary to the agreement and declaration of
trust or by-laws of the Trust.
8. Compliance. The Distributor shall conform to the Rules of Fair
Practice of the NASD and the sale of securities laws of any
jurisdiction in which it sells, directly or indirectly, any Series
shares. The Distributor agrees to make timely filings, with the
Securities and Exchange Commission in Washington, D.C. (the "SEC"), the
NASD and such other regulatory authorities as may be required, of any
sales literature relating to the Series and intended for distribution
to prospective investors. The Distributor also agrees to furnish to
the Trust sufficient copies of any agreements or plans it intends to
use in connection with any sales of Series shares in adequate time for
the Trust to file and clear them with the proper authorities before
they are put in use (which the Trust agrees to use its best efforts to
do as expeditiously as reasonably possible), and not to use them until
so filed and cleared.
9. Registration and Qualification of Series Shares. The Trust agrees to
execute such papers and to do such acts and things as shall from time
to time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Series shares for sale
under the so-called Blue Sky Laws of any state or for maintaining the
registration of the Trust and of the Series shares under the federal
Securities Act of 1933 and the federal Investment Company Act of 1940
(the "1940 Act"), to the end that there will be available for sale from
time to time such number of Series shares as the Distributor may
reasonably be expected to sell. The Trust shall advise the Distributor
promptly of (a) any action of the SEC or any authorities of any state
or territory, of which it may be advised, affecting registration or
qualification of the Trust or the Series shares, or rights to offer
Series shares for sale, and (b) the happening of any event which makes
untrue any statement or which requires the making of any change in the
Trust's registration statement or its prospectus relating to the Series
shares in order to make the statements therein not misleading.
10. Distributor Independent Contractor. The Distributor shall be an
independent contractor and neither the Distributor nor any of its
officers or employees as such is or shall be an employee of the Trust.
The Distributor is responsible for its own conduct and the employment,
control and conduct of its agents and employees and for injury to such
agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees
under applicable statutes and agrees to pay all employer taxes
thereunder.
11. Expenses Paid by Distributor. While the Distributor continues to act as
agent of the Trust to obtain subscriptions for and to sell Series shares,
the Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Series shares for sale, and all
other copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Series shares for sale.
12. Interests in and of Distributor. It is understood that any of the
shareholders, trustees, officers, employees and agents of the Trust may
be a shareholder, director, officer, employee or agent of, or be
otherwise interested in, the Distributor, any affiliated person of the
Distributor, any organization in which the Distributor may have an
interest or any organization which may have an interest in the
Distributor; that the Distributor, any such affiliated person or any
such organization may have an interest in the Trust; and that the
existence of any such dual interest shall not affect the validity
hereof or of any transaction hereunder except as otherwise provided in
the agreement and declaration of trust or by-laws of the Trust, in the
limited partnership agreement of the Distributor or by specific
provision of applicable law.
13. Words "New England" and Letters "TNE". The Distributor and/or its
parent organization and New England Investment Companies, L.P.
("NEIC"), retain proprietary rights in the words "New England" and the
letters "TNE", which may be used by the Trust and the Series only with
the consent of the Distributor, which is authorized by NEIC to give
such consent as provided herein. The Distributor consents to the use
by the Series of the name "New England Capital Growth Fund" or any
other name embodying the words "New England" or the letters "TNE", in
such forms as the Distributor shall in writing approve, but only on
condition and so long as (i) this Agreement shall remain in full force
and (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it. No such name shall be used by the
Trust or the Series at any time or in any place or for any purposes or
under any conditions except as in this section provided. The foregoing
authorization by the Distributor as agent of NEIC to the Trust and the
Series to use said words or letters as part of a business or name is
not exclusive of the right of the Distributor itself to use, or to
authorize others to use, the same; the Trust acknowledges and agrees
that as between the Distributor and the Trust and the Series, the
Distributor has the exclusive right so to use, or authorize others to
use, said words and letters, and the Trust agrees to take such action
as may reasonably be requested by the Distributor to give full effect
to the provisions of this section (including, without limitation,
consenting to such use of said words or letters). Without limiting the
generality of the foregoing, the Trust agrees that, upon any
termination of this Agreement by either party or upon the violation of
any of its provisions by the Trust, the Trust will, at the request of
the Distributor made within six months after the Distributor has
knowledge of such termination or violation, use its best efforts to
change the name of the Trust and the Series so as to eliminate all
reference, if any, to the words "New England" or the letters "TNE" and
will not thereafter transact any business in a name containing the
words "New England" or the letters "TNE" in any form or combination
whatsoever, or designate itself as the same entity as or successor to
any entity of such name, or otherwise use the words "New England" or
the letters "TNE" or any other reference to the Distributor. Such
covenants on the part of the Trust and the Series shall be binding upon
it, its trustees, officers, shareholders, creditors and all other
persons claiming under or through it.
14. Effective Date and Termination. This Agreement shall become effective as
of the date of its execution, and
(a) Unless otherwise terminated, this Agreement shall continue in
effect with respect to the shares of the Series so long as such
continuation is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by the vote of a majority
of the votes which may be cast by shareholders of the Series and
(ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the
Trust, cast in person at a meeting called for the purpose of
voting on such approval.
(b) This Agreement may at any time be terminated on sixty days' notice
to the Distributor either by vote of a majority of the Trust's Board
of Trustees then in office or by the vote of a majority of the votes
which may be cast by shareholders of the Series.
(c) This Agreement shall automatically terminate in the event of its
assignment (excluding for this purpose any assignment of rights to
payment described in the recitals and in Section 19 of the Agreement
which are hereby ratified and approved).
(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
15. Definitions. For purposes of this Agreement, the following definitions
shall apply:
(a) The "vote of a majority of the votes which may be cast by
shareholders of the Series" means (1) 67% or more of the votes of
the Series present (in person or by proxy) and entitled to vote
at such meeting, if the holders of more than 50% of the
outstanding shares of the Series entitled to vote at such meeting
are present; or (2) the vote of the holders of more than 50% of
the outstanding shares of the Series entitled to vote at such
meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC
under the 1940 Act.
16. Amendment. This Agreement may be amended at any time by mutual consent
of the parties, provided that such consent on the part of the Series
shall be approved (i) by the Board of Trustees of the Trust or by vote
of a majority of the votes which may be cast by shareholders of the
Series and (ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the Trust
cast in person at a meeting called for the purpose of voting on such
approval.
17. Applicable Law and Liabilities. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the Series
shares shall pass, in Boston, Massachusetts.
18. Limited Recourse. The Distributor hereby acknowledges that the Trust's
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Series.
19. Payments to Distributor's Transferees. The Distributor may transfer
its rights to payments hereunder with respect to Class B shares (but
not its obligations hereunder) in order to raise funds to cover
distribution expenditures, and any such transfer shall be effective
upon written notice from the Distributor to the Trust. In connection
with the foregoing, the Series is authorized to pay all or a part of
the Distribution Fee and/or contingent deferred sales charges in
respect of Class B shares directly to such transferee as directed by
the Distributor.
20. Liquidation etc. As long as the Class B Distribution and Service Plan
is in effect, the Series shall not change the manner in which the
Distribution Fee is computed (except as may be required by a change in
applicable law after the date hereof) or adopt a plan of liquidation
without the consent of the Distributor (or any designee or transferee
of the Distributor's rights to receive payment hereunder in respect of
Class B shares) except in circumstances where a surviving entity or
transferee of the Series' assets adopts the Class B Distribution and
Service Plan and assumes the obligations of the Series to make payments
to the Distributor (or its transferee) hereunder in respect of Class B
shares.
21. "Distributor's Shares" etc. The Trust, on behalf of the Series, agrees
that it will not pay any portion of the Class B Distribution Fee which
is calculated by reference to the "Distributor's Shares" (nor shall it
pay a Distribution Fee calculated by reference to Class B shares
("Other Class B Shares") other than the Distributor's Shares at a rate
exceeding .75% per annum of the net assets attributable to Other Class
B Shares) to any person other than the Distributor (or its designee or
transferee) without the written consent of the Distributor.
"Distributor's Shares" shall mean (i) Class B shares of the Series that
were sold by the Distributor, plus (ii) Class B shares of the Series
issued in connection with the exchange, for Class B shares of the
Series, of Class B shares of another fund in the New England fund group
that were sold by the Distributor, plus (iii) Class B shares of the
Series issued in connection with the exchange, for Class B shares of
the Series, of Class B shares of another fund in the New England fund
group issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of such other
fund that were sold by the Distributor, plus (iv) Class B shares of the
Series issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of the Series
described in clauses (i), (ii) and (iii). To the extent permitted
under the 1940 Act, the terms of this Section 21 shall survive the
termination of this Agreement.
22. Limitation on Reduction of Class B Distribution Fee. The Trust, on
behalf of the Series, agrees that it will not reduce the Distribution
Fee in respect of Series' assets attributable to Class B shares below
the annual rate of 0.75% unless it has ceased (and not resumed) paying
all "service fees" (within the meaning of Section 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
or any successor provision thereto) to the Distributor, to any
affiliate of the Distributor and to any other person in circumstances
where substantially all of the services and functions relating to the
distribution of Class B Series shares have been delegated to, or are
being performed by, the Distributor or an affiliate of the
Distributor. To the extent permitted under the 1940 Act, the terms of
this Section 22 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England
Capital Growth Fund series
By /s/ Frank Nesvet
---------------------------
Frank Nesvet, Treasurer
NEW ENGLAND FUNDS, L.P.
By: NEF Corporation, its general partner
By /s/ Bruce R. Speca
---------------------------
Bruce R. Speca, Executive Vice President
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust I (the "Trust") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Trust's New England Capital Growth Fund series (the "Series") on
behalf of the Trust by officers of the Trust as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any of the trustees, officers or shareholders of the Trust individually but
are binding only upon the assets and property of the Series.
<PAGE>
Exhibit (e)(3)
NEW ENGLAND BALANCED FUND
DISTRIBUTION AGREEMENT
AGREEMENT made this 30th day of August, 1996 by and between NEW ENGLAND
FUNDS TRUST I, a Massachusetts business trust (the "Trust"), and NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership (the "Distributor").
W I T N E S S E T H:
WHEREAS, this Agreement has been approved by the Trustees of the Trust in
contemplation of the transfer by the Distributor of its rights to receive the
Class B Distribution Fee (as defined in the Class B Distribution and Service
Plan attached hereto as Exhibit A) and/or contingent deferred sales charges to a
financing party in order to raise funds to cover distribution expenditures;
WHEREAS, the Trustees of the Trust recognize the importance to the Trust
of the Distributor being able to obtain financing with which to pay commissions
on Class B shares at the time of sale;
WHEREAS, the Trustees of the Trust acknowledge that by providing financing
to the Distributor the financing party enables the Distributor to provide
valuable services to the Series (as defined below); and
WHEREAS, the Trustees of the Trust, in the context of considering the best
interests of the Series and its shareholders at the time of and in preparation
for any vote, consent or other action that the Trustees of the Trust may from
time to time take relating to the continued receipt by the Distributor (and/or
the financing party) of the Distribution Fee, intend to consider the effect on
the Distributor and any financing party of any such vote, consent or action.
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Trust and the Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
distributor of shares of beneficial interest ("Series shares") of the
Trust's New England Balanced Fund series (the "Series") during the term of
this Agreement. The Trust reserves the right, however, to refuse at any
time or times to sell any Series shares hereunder for any reason deemed
adequate by the Board of Trustees of the Trust.
2. Sale and Payment. Under this agreement, the following provisions shall
apply with respect to the sale of and payment for Series shares:
(a) The Distributor shall have the right, as principal, to purchase
Series shares from the Trust at their net asset value and to sell
such shares to the public against orders therefor at the applicable
public offering price, as defined in Section 4 hereof. The
Distributor shall also have the right, as principal, to sell shares
to dealers against orders therefor at the public offering price less
a concession determined by the Distributor.
(b) Prior to the time of delivery of any shares by the Trust to, or on
the order of, the Distributor, the Distributor shall pay or cause to
be paid to the Trust or to its order an amount in Boston or New York
clearing house funds equal to the applicable net asset value of such
shares. The Distributor shall retain so much of any sales charge or
underwriting discount as is not allowed by it as a concession to
dealers.
3. Fees. For its services as general distributor of the Class B Series
shares, the Trust shall cause the Series to pay to the Distributor (or
its designee or transferee) in addition to the sales charge, if any,
referred to in Section 4 below, the Class B Distribution Fee at the
rate and upon the terms and conditions set forth in the Class B
Distribution and Service Plan attached as Exhibit A hereto, and as
amended from time to time, and the Distributor shall also be entitled
to receive any contingent deferred sales charges that may be payable
upon redemption or repurchase of Class B Series shares. The Class B
Distribution Fee shall be accrued daily and paid monthly to the
Distributor (or, at its direction, to its designee or transferee) as
soon as practicable after the end of the calendar month in which it
accrues, but in any event within five business days following the last
day of the month. So long as this agreement and the Class B
Distribution and Service Plan have not been terminated in accordance
with their respective terms, the Series' obligation to pay the Class B
Distribution Fee to the Distributor shall be absolute and unconditional
and shall not be subject to any dispute, offset, counterclaim or
defense whatsoever (it being understood that nothing in this sentence
shall be deemed a waiver by the Trust or the Series of its right
separately to pursue any claims it may have against the Distributor and
to enforce such claims against any assets (other than its rights to be
paid the Class B Distribution Fee and to be paid contingent deferred
sales charges with respect to Class B Series shares) of the
Distributor).
4. Public Offering Price. The public offering price shall be the net
asset value of Series shares, plus any applicable sales charge, all as
set forth in the current prospectus and statement of additional
information ("prospectus") of the Trust relating to the Series shares.
In no event shall the public offering price exceed 1000/935 of such net
asset value, and in no event shall any applicable sales charge or
underwriting discount exceed 6.5% of the public offering price. The
net asset value of Series shares shall be determined in accordance with
the provisions of the agreement and declaration of trust and by-laws of
the Trust and the current prospectus of the Trust relating to the
Series shares.
5. Trust Issuance of Series Shares. The delivery of Series shares shall
be made promptly by a credit to a shareholder's open account for the
Series or by delivery of a share certificate. The Trust reserves the
right (a) to issue Series shares at any time directly to the
shareholders of the Series as a stock dividend or stock split, (b) to
issue to such shareholders shares of the Series, or rights to subscribe
to shares of the Series, as all or part of any dividend that may be
distributed to shareholders of the Series or as all or part of any
optional or alternative dividend that may be distributed to
shareholders of the Series, and (c) to sell Series shares in accordance
with the current applicable prospectus of the Trust relating to the
Series shares.
6. Redemption or Repurchase. The Distributor shall act as agent for the
Trust in connection with the redemption or repurchase of Series shares
by the Trust to the extent and upon the terms and conditions set forth
in the current applicable prospectus of the Trust relating to the
Series shares, and the Trust agrees to reimburse the Distributor, from
time to time upon demand, for any reasonable expenses incurred in
connection with such redemptions or repurchases. The Trust will remit
to the Distributor any contingent deferred sales charges imposed on
redemptions or repurchases of Series shares (other than Class B shares)
upon the terms and conditions set forth in the then current prospectus
of the Trust. The Trust will also remit to the Distributor (or its
designee or transferee), in addition to the Class B Distribution Fee,
any contingent deferred sales charges imposed on redemptions or
repurchases of Class B shares, in accordance with the Remittance
Agreement attached hereto as Exhibit B.
7. Undertaking Regarding Sales. The Distributor shall use reasonable
efforts to sell Series shares but does not agree hereby to sell any
specific number of Series shares and shall be free to act as
distributor of the shares of other investment companies. Series shares
will be sold by the Distributor only against orders therefor. The
Distributor shall not purchase Series shares from anyone except in
accordance with Sections 2 and 6 and shall not take "long" or "short"
positions in Series shares contrary to the agreement and declaration of
trust or by-laws of the Trust.
8. Compliance. The Distributor shall conform to the Rules of Fair
Practice of the NASD and the sale of securities laws of any
jurisdiction in which it sells, directly or indirectly, any Series
shares. The Distributor agrees to make timely filings, with the
Securities and Exchange Commission in Washington, D.C. (the "SEC"), the
NASD and such other regulatory authorities as may be required, of any
sales literature relating to the Series and intended for distribution
to prospective investors. The Distributor also agrees to furnish to
the Trust sufficient copies of any agreements or plans it intends to
use in connection with any sales of Series shares in adequate time for
the Trust to file and clear them with the proper authorities before
they are put in use (which the Trust agrees to use its best efforts to
do as expeditiously as reasonably possible), and not to use them until
so filed and cleared.
9. Registration and Qualification of Series Shares. The Trust agrees to
execute such papers and to do such acts and things as shall from time
to time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Series shares for sale
under the so-called Blue Sky Laws of any state or for maintaining the
registration of the Trust and of the Series shares under the federal
Securities Act of 1933 and the federal Investment Company Act of 1940
(the "1940 Act"), to the end that there will be available for sale from
time to time such number of Series shares as the Distributor may
reasonably be expected to sell. The Trust shall advise the Distributor
promptly of (a) any action of the SEC or any authorities of any state
or territory, of which it may be advised, affecting registration or
qualification of the Trust or the Series shares, or rights to offer
Series shares for sale, and (b) the happening of any event which makes
untrue any statement or which requires the making of any change in the
Trust's registration statement or its prospectus relating to the Series
shares in order to make the statements therein not misleading.
10. Distributor Independent Contractor. The Distributor shall be an
independent contractor and neither the Distributor nor any of its
officers or employees as such is or shall be an employee of the Trust.
The Distributor is responsible for its own conduct and the employment,
control and conduct of its agents and employees and for injury to such
agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees
under applicable statutes and agrees to pay all employer taxes
thereunder.
11. Expenses Paid by Distributor. While the Distributor continues to act as
agent of the Trust to obtain subscriptions for and to sell Series shares,
the Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Series shares for sale, and all
other copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Series shares for sale.
12. Interests in and of Distributor. It is understood that any of the
shareholders, trustees, officers, employees and agents of the Trust may
be a shareholder, director, officer, employee or agent of, or be
otherwise interested in, the Distributor, any affiliated person of the
Distributor, any organization in which the Distributor may have an
interest or any organization which may have an interest in the
Distributor; that the Distributor, any such affiliated person or any
such organization may have an interest in the Trust; and that the
existence of any such dual interest shall not affect the validity
hereof or of any transaction hereunder except as otherwise provided in
the agreement and declaration of trust or by-laws of the Trust, in the
limited partnership agreement of the Distributor or by specific
provision of applicable law.
13. Words "New England" and Letters "TNE". The Distributor and/or its
parent organization and New England Investment Companies, L.P.
("NEIC"), retain proprietary rights in the words "New England" and the
letters "TNE", which may be used by the Trust and the Series only with
the consent of the Distributor, which is authorized by NEIC to give
such consent as provided herein. The Distributor consents to the use
by the Series of the name "New England Capital Growth Fund" or any
other name embodying the words "New England" or the letters "TNE", in
such forms as the Distributor shall in writing approve, but only on
condition and so long as (i) this Agreement shall remain in full force
and (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it. No such name shall be used by the
Trust or the Series at any time or in any place or for any purposes or
under any conditions except as in this section provided. The foregoing
authorization by the Distributor as agent of NEIC to the Trust and the
Series to use said words or letters as part of a business or name is
not exclusive of the right of the Distributor itself to use, or to
authorize others to use, the same; the Trust acknowledges and agrees
that as between the Distributor and the Trust and the Series, the
Distributor has the exclusive right so to use, or authorize others to
use, said words and letters, and the Trust agrees to take such action
as may reasonably be requested by the Distributor to give full effect
to the provisions of this section (including, without limitation,
consenting to such use of said words or letters). Without limiting the
generality of the foregoing, the Trust agrees that, upon any
termination of this Agreement by either party or upon the violation of
any of its provisions by the Trust, the Trust will, at the request of
the Distributor made within six months after the Distributor has
knowledge of such termination or violation, use its best efforts to
change the name of the Trust and the Series so as to eliminate all
reference, if any, to the words "New England" or the letters "TNE" and
will not thereafter transact any business in a name containing the
words "New England" or the letters "TNE" in any form or combination
whatsoever, or designate itself as the same entity as or successor to
any entity of such name, or otherwise use the words "New England" or
the letters "TNE" or any other reference to the Distributor. Such
covenants on the part of the Trust and the Series shall be binding upon
it, its trustees, officers, shareholders, creditors and all other
persons claiming under or through it.
14. Effective Date and Termination. This Agreement shall become effective as
of the date of its execution, and
(a) Unless otherwise terminated, this Agreement shall continue in
effect with respect to the shares of the Series so long as such
continuation is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by the vote of a majority
of the votes which may be cast by shareholders of the Series and
(ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the
Trust, cast in person at a meeting called for the purpose of
voting on such approval.
(b) This Agreement may at any time be terminated on sixty days' notice
to the Distributor either by vote of a majority of the Trust's Board
of Trustees then in office or by the vote of a majority of the votes
which may be cast by shareholders of the Series.
(c) This Agreement shall automatically terminate in the event of its
assignment (excluding for this purpose any assignment of rights to
payment described in the recitals and in Section 19 of the Agreement
which are hereby ratified and approved).
(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
15. Definitions. For purposes of this Agreement, the following definitions
shall apply:
(a) The "vote of a majority of the votes which may be cast by
shareholders of the Series" means (1) 67% or more of the votes of
the Series present (in person or by proxy) and entitled to vote
at such meeting, if the holders of more than 50% of the
outstanding shares of the Series entitled to vote at such meeting
are present; or (2) the vote of the holders of more than 50% of
the outstanding shares of the Series entitled to vote at such
meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC
under the 1940 Act.
16. Amendment. This Agreement may be amended at any time by mutual consent
of the parties, provided that such consent on the part of the Series
shall be approved (i) by the Board of Trustees of the Trust or by vote
of a majority of the votes which may be cast by shareholders of the
Series and (ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the Trust
cast in person at a meeting called for the purpose of voting on such
approval.
17. Applicable Law and Liabilities. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the Series
shares shall pass, in Boston, Massachusetts.
18. Limited Recourse. The Distributor hereby acknowledges that the Trust's
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Series.
19. Payments to Distributor's Transferees. The Distributor may transfer
its rights to payments hereunder with respect to Class B shares (but
not its obligations hereunder) in order to raise funds to cover
distribution expenditures, and any such transfer shall be effective
upon written notice from the Distributor to the Trust. In connection
with the foregoing, the Series is authorized to pay all or a part of
the Distribution Fee and/or contingent deferred sales charges in
respect of Class B shares directly to such transferee as directed by
the Distributor.
20. Liquidation etc. As long as the Class B Distribution and Service Plan
is in effect, the Series shall not change the manner in which the
Distribution Fee is computed (except as may be required by a change in
applicable law after the date hereof) or adopt a plan of liquidation
without the consent of the Distributor (or any designee or transferee
of the Distributor's rights to receive payment hereunder in respect of
Class B shares) except in circumstances where a surviving entity or
transferee of the Series' assets adopts the Class B Distribution and
Service Plan and assumes the obligations of the Series to make payments
to the Distributor (or its transferee) hereunder in respect of Class B
shares.
21. "Distributor's Shares" etc. The Trust, on behalf of the Series, agrees
that it will not pay any portion of the Class B Distribution Fee which
is calculated by reference to the "Distributor's Shares" (nor shall it
pay a Distribution Fee calculated by reference to Class B shares
("Other Class B Shares") other than the Distributor's Shares at a rate
exceeding .75% per annum of the net assets attributable to Other Class
B Shares) to any person other than the Distributor (or its designee or
transferee) without the written consent of the Distributor.
"Distributor's Shares" shall mean (i) Class B shares of the Series that
were sold by the Distributor, plus (ii) Class B shares of the Series
issued in connection with the exchange, for Class B shares of the
Series, of Class B shares of another fund in the New England fund group
that were sold by the Distributor, plus (iii) Class B shares of the
Series issued in connection with the exchange, for Class B shares of
the Series, of Class B shares of another fund in the New England fund
group issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of such other
fund that were sold by the Distributor, plus (iv) Class B shares of the
Series issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of the Series
described in clauses (i), (ii) and (iii). To the extent permitted
under the 1940 Act, the terms of this Section 21 shall survive the
termination of this Agreement.
22. Limitation on Reduction of Class B Distribution Fee. The Trust, on
behalf of the Series, agrees that it will not reduce the Distribution
Fee in respect of Series' assets attributable to Class B shares below
the annual rate of 0.75% unless it has ceased (and not resumed) paying
all "service fees" (within the meaning of Section 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
or any successor provision thereto) to the Distributor, to any
affiliate of the Distributor and to any other person in circumstances
where substantially all of the services and functions relating to the
distribution of Class B Series shares have been delegated to, or are
being performed by, the Distributor or an affiliate of the
Distributor. To the extent permitted under the 1940 Act, the terms of
this Section 22 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Balanced Fund
series
By /s/ Frank Nesvet
---------------------------
Frank Nesvet, Treasurer
NEW ENGLAND FUNDS, L.P.
By: NEF Corporation, its general partner
By /s/ Bruce R. Speca
---------------------------
Bruce R. Speca, Executive Vice President
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust I (the "Trust") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Trust's New England Balanced Fund series (the "Series") on behalf
of the Trust by officers of the Trust as officers and not individually and that
the obligations of or arising out of this Agreement are not binding upon any of
the trustees, officers or shareholders of the Trust individually but are binding
only upon the assets and property of the Series.
<PAGE>
Exhibit (e)(4)
NEW ENGLAND INTERNATIONAL EQUITY FUND
DISTRIBUTION AGREEMENT
AGREEMENT made this 30th day of August, 1996 by and between NEW ENGLAND
FUNDS TRUST I, a Massachusetts business trust (the "Trust"), and NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership (the "Distributor").
W I T N E S S E T H:
WHEREAS, this Agreement has been approved by the Trustees of the Trust in
contemplation of the transfer by the Distributor of its rights to receive the
Class B Distribution Fee (as defined in the Class B Distribution and Service
Plan attached hereto as Exhibit A) and/or contingent deferred sales charges to a
financing party in order to raise funds to cover distribution expenditures;
WHEREAS, the Trustees of the Trust recognize the importance to the Trust
of the Distributor being able to obtain financing with which to pay commissions
on Class B shares at the time of sale;
WHEREAS, the Trustees of the Trust acknowledge that by providing financing
to the Distributor the financing party enables the Distributor to provide
valuable services to the Series (as defined below); and
WHEREAS, the Trustees of the Trust, in the context of considering the best
interests of the Series and its shareholders at the time of and in preparation
for any vote, consent or other action that the Trustees of the Trust may from
time to time take relating to the continued receipt by the Distributor (and/or
the financing party) of the Distribution Fee, intend to consider the effect on
the Distributor and any financing party of any such vote, consent or action.
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Trust and the Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
distributor of shares of beneficial interest ("Series shares") of the
Trust's New England International Equity Fund series (the "Series") during
the term of this Agreement. The Trust reserves the right, however, to
refuse at any time or times to sell any Series shares hereunder for any
reason deemed adequate by the Board of Trustees of the Trust.
2. Sale and Payment. Under this agreement, the following provisions shall
apply with respect to the sale of and payment for Series shares:
(a) The Distributor shall have the right, as principal, to purchase
Series shares from the Trust at their net asset value and to sell
such shares to the public against orders therefor at the applicable
public offering price, as defined in Section 4 hereof. The
Distributor shall also have the right, as principal, to sell shares
to dealers against orders therefor at the public offering price less
a concession determined by the Distributor.
(b) Prior to the time of delivery of any shares by the Trust to, or on
the order of, the Distributor, the Distributor shall pay or cause to
be paid to the Trust or to its order an amount in Boston or New York
clearing house funds equal to the applicable net asset value of such
shares. The Distributor shall retain so much of any sales charge or
underwriting discount as is not allowed by it as a concession to
dealers.
3. Fees. For its services as general distributor of the Class B Series
shares, the Trust shall cause the Series to pay to the Distributor (or
its designee or transferee) in addition to the sales charge, if any,
referred to in Section 4 below, the Class B Distribution Fee at the
rate and upon the terms and conditions set forth in the Class B
Distribution and Service Plan attached as Exhibit A hereto, and as
amended from time to time, and the Distributor shall also be entitled
to receive any contingent deferred sales charges that may be payable
upon redemption or repurchase of Class B Series shares. The Class B
Distribution Fee shall be accrued daily and paid monthly to the
Distributor (or, at its direction, to its designee or transferee) as
soon as practicable after the end of the calendar month in which it
accrues, but in any event within five business days following the last
day of the month. So long as this agreement and the Class B
Distribution and Service Plan have not been terminated in accordance
with their respective terms, the Series' obligation to pay the Class B
Distribution Fee to the Distributor shall be absolute and unconditional
and shall not be subject to any dispute, offset, counterclaim or
defense whatsoever (it being understood that nothing in this sentence
shall be deemed a waiver by the Trust or the Series of its right
separately to pursue any claims it may have against the Distributor and
to enforce such claims against any assets (other than its rights to be
paid the Class B Distribution Fee and to be paid contingent deferred
sales charges with respect to Class B Series shares) of the
Distributor).
4. Public Offering Price. The public offering price shall be the net
asset value of Series shares, plus any applicable sales charge, all as
set forth in the current prospectus and statement of additional
information ("prospectus") of the Trust relating to the Series shares.
In no event shall the public offering price exceed 1000/935 of such net
asset value, and in no event shall any applicable sales charge or
underwriting discount exceed 6.5% of the public offering price. The
net asset value of Series shares shall be determined in accordance with
the provisions of the agreement and declaration of trust and by-laws of
the Trust and the current prospectus of the Trust relating to the
Series shares.
5. Trust Issuance of Series Shares. The delivery of Series shares shall
be made promptly by a credit to a shareholder's open account for the
Series or by delivery of a share certificate. The Trust reserves the
right (a) to issue Series shares at any time directly to the
shareholders of the Series as a stock dividend or stock split, (b) to
issue to such shareholders shares of the Series, or rights to subscribe
to shares of the Series, as all or part of any dividend that may be
distributed to shareholders of the Series or as all or part of any
optional or alternative dividend that may be distributed to
shareholders of the Series, and (c) to sell Series shares in accordance
with the current applicable prospectus of the Trust relating to the
Series shares.
6. Redemption or Repurchase. The Distributor shall act as agent for the
Trust in connection with the redemption or repurchase of Series shares
by the Trust to the extent and upon the terms and conditions set forth
in the current applicable prospectus of the Trust relating to the
Series shares, and the Trust agrees to reimburse the Distributor, from
time to time upon demand, for any reasonable expenses incurred in
connection with such redemptions or repurchases. The Trust will remit
to the Distributor any contingent deferred sales charges imposed on
redemptions or repurchases of Series shares (other than Class B shares)
upon the terms and conditions set forth in the then current prospectus
of the Trust. The Trust will also remit to the Distributor (or its
designee or transferee), in addition to the Class B Distribution Fee,
any contingent deferred sales charges imposed on redemptions or
repurchases of Class B shares, in accordance with the Remittance
Agreement attached hereto as Exhibit B.
7. Undertaking Regarding Sales. The Distributor shall use reasonable
efforts to sell Series shares but does not agree hereby to sell any
specific number of Series shares and shall be free to act as
distributor of the shares of other investment companies. Series shares
will be sold by the Distributor only against orders therefor. The
Distributor shall not purchase Series shares from anyone except in
accordance with Sections 2 and 6 and shall not take "long" or "short"
positions in Series shares contrary to the agreement and declaration of
trust or by-laws of the Trust.
8. Compliance. The Distributor shall conform to the Rules of Fair
Practice of the NASD and the sale of securities laws of any
jurisdiction in which it sells, directly or indirectly, any Series
shares. The Distributor agrees to make timely filings, with the
Securities and Exchange Commission in Washington, D.C. (the "SEC"), the
NASD and such other regulatory authorities as may be required, of any
sales literature relating to the Series and intended for distribution
to prospective investors. The Distributor also agrees to furnish to
the Trust sufficient copies of any agreements or plans it intends to
use in connection with any sales of Series shares in adequate time for
the Trust to file and clear them with the proper authorities before
they are put in use (which the Trust agrees to use its best efforts to
do as expeditiously as reasonably possible), and not to use them until
so filed and cleared.
9. Registration and Qualification of Series Shares. The Trust agrees to
execute such papers and to do such acts and things as shall from time
to time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Series shares for sale
under the so-called Blue Sky Laws of any state or for maintaining the
registration of the Trust and of the Series shares under the federal
Securities Act of 1933 and the federal Investment Company Act of 1940
(the "1940 Act"), to the end that there will be available for sale from
time to time such number of Series shares as the Distributor may
reasonably be expected to sell. The Trust shall advise the Distributor
promptly of (a) any action of the SEC or any authorities of any state
or territory, of which it may be advised, affecting registration or
qualification of the Trust or the Series shares, or rights to offer
Series shares for sale, and (b) the happening of any event which makes
untrue any statement or which requires the making of any change in the
Trust's registration statement or its prospectus relating to the Series
shares in order to make the statements therein not misleading.
10. Distributor Independent Contractor. The Distributor shall be an
independent contractor and neither the Distributor nor any of its
officers or employees as such is or shall be an employee of the Trust.
The Distributor is responsible for its own conduct and the employment,
control and conduct of its agents and employees and for injury to such
agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees
under applicable statutes and agrees to pay all employer taxes
thereunder.
11. Expenses Paid by Distributor. While the Distributor continues to act as
agent of the Trust to obtain subscriptions for and to sell Series shares,
the Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Series shares for sale, and all
other copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Series shares for sale.
12. Interests in and of Distributor. It is understood that any of the
shareholders, trustees, officers, employees and agents of the Trust may
be a shareholder, director, officer, employee or agent of, or be
otherwise interested in, the Distributor, any affiliated person of the
Distributor, any organization in which the Distributor may have an
interest or any organization which may have an interest in the
Distributor; that the Distributor, any such affiliated person or any
such organization may have an interest in the Trust; and that the
existence of any such dual interest shall not affect the validity
hereof or of any transaction hereunder except as otherwise provided in
the agreement and declaration of trust or by-laws of the Trust, in the
limited partnership agreement of the Distributor or by specific
provision of applicable law.
13. Words "New England" and Letters "TNE". The Distributor and/or its
parent organization and New England Investment Companies, L.P.
("NEIC"), retain proprietary rights in the words "New England" and the
letters "TNE", which may be used by the Trust and the Series only with
the consent of the Distributor, which is authorized by NEIC to give
such consent as provided herein. The Distributor consents to the use
by the Series of the name "New England Capital Growth Fund" or any
other name embodying the words "New England" or the letters "TNE", in
such forms as the Distributor shall in writing approve, but only on
condition and so long as (i) this Agreement shall remain in full force
and (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it. No such name shall be used by the
Trust or the Series at any time or in any place or for any purposes or
under any conditions except as in this section provided. The foregoing
authorization by the Distributor as agent of NEIC to the Trust and the
Series to use said words or letters as part of a business or name is
not exclusive of the right of the Distributor itself to use, or to
authorize others to use, the same; the Trust acknowledges and agrees
that as between the Distributor and the Trust and the Series, the
Distributor has the exclusive right so to use, or authorize others to
use, said words and letters, and the Trust agrees to take such action
as may reasonably be requested by the Distributor to give full effect
to the provisions of this section (including, without limitation,
consenting to such use of said words or letters). Without limiting the
generality of the foregoing, the Trust agrees that, upon any
termination of this Agreement by either party or upon the violation of
any of its provisions by the Trust, the Trust will, at the request of
the Distributor made within six months after the Distributor has
knowledge of such termination or violation, use its best efforts to
change the name of the Trust and the Series so as to eliminate all
reference, if any, to the words "New England" or the letters "TNE" and
will not thereafter transact any business in a name containing the
words "New England" or the letters "TNE" in any form or combination
whatsoever, or designate itself as the same entity as or successor to
any entity of such name, or otherwise use the words "New England" or
the letters "TNE" or any other reference to the Distributor. Such
covenants on the part of the Trust and the Series shall be binding upon
it, its trustees, officers, shareholders, creditors and all other
persons claiming under or through it.
14. Effective Date and Termination. This Agreement shall become effective as
of the date of its execution, and
(a) Unless otherwise terminated, this Agreement shall continue in
effect with respect to the shares of the Series so long as such
continuation is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by the vote of a majority
of the votes which may be cast by shareholders of the Series and
(ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the
Trust, cast in person at a meeting called for the purpose of
voting on such approval.
(b) This Agreement may at any time be terminated on sixty days' notice
to the Distributor either by vote of a majority of the Trust's Board
of Trustees then in office or by the vote of a majority of the votes
which may be cast by shareholders of the Series.
(c) This Agreement shall automatically terminate in the event of its
assignment (excluding for this purpose any assignment of rights to
payment described in the recitals and in Section 19 of the Agreement
which are hereby ratified and approved).
(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
15. Definitions. For purposes of this Agreement, the following definitions
shall apply:
(a) The "vote of a majority of the votes which may be cast by
shareholders of the Series" means (1) 67% or more of the votes of
the Series present (in person or by proxy) and entitled to vote
at such meeting, if the holders of more than 50% of the
outstanding shares of the Series entitled to vote at such meeting
are present; or (2) the vote of the holders of more than 50% of
the outstanding shares of the Series entitled to vote at such
meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC
under the 1940 Act.
16. Amendment. This Agreement may be amended at any time by mutual consent
of the parties, provided that such consent on the part of the Series
shall be approved (i) by the Board of Trustees of the Trust or by vote
of a majority of the votes which may be cast by shareholders of the
Series and (ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the Trust
cast in person at a meeting called for the purpose of voting on such
approval.
17. Applicable Law and Liabilities. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the Series
shares shall pass, in Boston, Massachusetts.
18. Limited Recourse. The Distributor hereby acknowledges that the Trust's
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Series.
19. Payments to Distributor's Transferees. The Distributor may transfer
its rights to payments hereunder with respect to Class B shares (but
not its obligations hereunder) in order to raise funds to cover
distribution expenditures, and any such transfer shall be effective
upon written notice from the Distributor to the Trust. In connection
with the foregoing, the Series is authorized to pay all or a part of
the Distribution Fee and/or contingent deferred sales charges in
respect of Class B shares directly to such transferee as directed by
the Distributor.
20. Liquidation etc. As long as the Class B Distribution and Service Plan
is in effect, the Series shall not change the manner in which the
Distribution Fee is computed (except as may be required by a change in
applicable law after the date hereof) or adopt a plan of liquidation
without the consent of the Distributor (or any designee or transferee
of the Distributor's rights to receive payment hereunder in respect of
Class B shares) except in circumstances where a surviving entity or
transferee of the Series' assets adopts the Class B Distribution and
Service Plan and assumes the obligations of the Series to make payments
to the Distributor (or its transferee) hereunder in respect of Class B
shares.
21. "Distributor's Shares" etc. The Trust, on behalf of the Series, agrees
that it will not pay any portion of the Class B Distribution Fee which
is calculated by reference to the "Distributor's Shares" (nor shall it
pay a Distribution Fee calculated by reference to Class B shares
("Other Class B Shares") other than the Distributor's Shares at a rate
exceeding .75% per annum of the net assets attributable to Other Class
B Shares) to any person other than the Distributor (or its designee or
transferee) without the written consent of the Distributor.
"Distributor's Shares" shall mean (i) Class B shares of the Series that
were sold by the Distributor, plus (ii) Class B shares of the Series
issued in connection with the exchange, for Class B shares of the
Series, of Class B shares of another fund in the New England fund group
that were sold by the Distributor, plus (iii) Class B shares of the
Series issued in connection with the exchange, for Class B shares of
the Series, of Class B shares of another fund in the New England fund
group issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of such other
fund that were sold by the Distributor, plus (iv) Class B shares of the
Series issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of the Series
described in clauses (i), (ii) and (iii). To the extent permitted
under the 1940 Act, the terms of this Section 21 shall survive the
termination of this Agreement.
22. Limitation on Reduction of Class B Distribution Fee. The Trust, on
behalf of the Series, agrees that it will not reduce the Distribution
Fee in respect of Series' assets attributable to Class B shares below
the annual rate of 0.75% unless it has ceased (and not resumed) paying
all "service fees" (within the meaning of Section 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
or any successor provision thereto) to the Distributor, to any
affiliate of the Distributor and to any other person in circumstances
where substantially all of the services and functions relating to the
distribution of Class B Series shares have been delegated to, or are
being performed by, the Distributor or an affiliate of the
Distributor. To the extent permitted under the 1940 Act, the terms of
this Section 22 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England
International Equity Fund series
By /s/ Frank Nesvet
---------------------------
Frank Nesvet, Treasurer
NEW ENGLAND FUNDS, L.P.
By: NEF Corporation, its general partner
By /s/ Bruce R. Speca
---------------------------
Bruce R. Speca, Executive Vice President
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust I (the "Trust") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Trust's New England International Equity Fund series (the
"Series") on behalf of the Trust by officers of the Trust as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders of the Trust
individually but are binding only upon the assets and property of the Series.
<PAGE>
Exhibit (e)(5)
NEW ENGLAND STAR ADVISERS FUND
DISTRIBUTION AGREEMENT
AGREEMENT made this 30th day of August, 1996 by and between NEW ENGLAND
FUNDS TRUST I, a Massachusetts business trust (the "Trust"), and NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership (the "Distributor").
W I T N E S S E T H:
WHEREAS, this Agreement has been approved by the Trustees of the Trust in
contemplation of the transfer by the Distributor of its rights to receive the
Class B Distribution Fee (as defined in the Class B Distribution and Service
Plan attached hereto as Exhibit A) and/or contingent deferred sales charges to a
financing party in order to raise funds to cover distribution expenditures;
WHEREAS, the Trustees of the Trust recognize the importance to the Trust
of the Distributor being able to obtain financing with which to pay commissions
on Class B shares at the time of sale;
WHEREAS, the Trustees of the Trust acknowledge that by providing financing
to the Distributor the financing party enables the Distributor to provide
valuable services to the Series (as defined below); and
WHEREAS, the Trustees of the Trust, in the context of considering the best
interests of the Series and its shareholders at the time of and in preparation
for any vote, consent or other action that the Trustees of the Trust may from
time to time take relating to the continued receipt by the Distributor (and/or
the financing party) of the Distribution Fee, intend to consider the effect on
the Distributor and any financing party of any such vote, consent or action.
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Trust and the Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
distributor of shares of beneficial interest ("Series shares") of the
Trust's New England Star Advisers Fund series (the "Series") during the
term of this Agreement. The Trust reserves the right, however, to refuse
at any time or times to sell any Series shares hereunder for any reason
deemed adequate by the Board of Trustees of the Trust.
2. Sale and Payment. Under this agreement, the following provisions shall
apply with respect to the sale of and payment for Series shares:
(a) The Distributor shall have the right, as principal, to purchase
Series shares from the Trust at their net asset value and to sell
such shares to the public against orders therefor at the applicable
public offering price, as defined in Section 4 hereof. The
Distributor shall also have the right, as principal, to sell shares
to dealers against orders therefor at the public offering price less
a concession determined by the Distributor.
(b) Prior to the time of delivery of any shares by the Trust to, or on
the order of, the Distributor, the Distributor shall pay or cause to
be paid to the Trust or to its order an amount in Boston or New York
clearing house funds equal to the applicable net asset value of such
shares. The Distributor shall retain so much of any sales charge or
underwriting discount as is not allowed by it as a concession to
dealers.
3. Fees. For its services as general distributor of the Class B Series
shares, the Trust shall cause the Series to pay to the Distributor (or
its designee or transferee) in addition to the sales charge, if any,
referred to in Section 4 below, the Class B Distribution Fee at the
rate and upon the terms and conditions set forth in the Class B
Distribution and Service Plan attached as Exhibit A hereto, and as
amended from time to time, and the Distributor shall also be entitled
to receive any contingent deferred sales charges that may be payable
upon redemption or repurchase of Class B Series shares. The Class B
Distribution Fee shall be accrued daily and paid monthly to the
Distributor (or, at its direction, to its designee or transferee) as
soon as practicable after the end of the calendar month in which it
accrues, but in any event within five business days following the last
day of the month. So long as this agreement and the Class B
Distribution and Service Plan have not been terminated in accordance
with their respective terms, the Series' obligation to pay the Class B
Distribution Fee to the Distributor shall be absolute and unconditional
and shall not be subject to any dispute, offset, counterclaim or
defense whatsoever (it being understood that nothing in this sentence
shall be deemed a waiver by the Trust or the Series of its right
separately to pursue any claims it may have against the Distributor and
to enforce such claims against any assets (other than its rights to be
paid the Class B Distribution Fee and to be paid contingent deferred
sales charges with respect to Class B Series shares) of the
Distributor).
4. Public Offering Price. The public offering price shall be the net
asset value of Series shares, plus any applicable sales charge, all as
set forth in the current prospectus and statement of additional
information ("prospectus") of the Trust relating to the Series shares.
In no event shall the public offering price exceed 1000/935 of such net
asset value, and in no event shall any applicable sales charge or
underwriting discount exceed 6.5% of the public offering price. The
net asset value of Series shares shall be determined in accordance with
the provisions of the agreement and declaration of trust and by-laws of
the Trust and the current prospectus of the Trust relating to the
Series shares.
5. Trust Issuance of Series Shares. The delivery of Series shares shall
be made promptly by a credit to a shareholder's open account for the
Series or by delivery of a share certificate. The Trust reserves the
right (a) to issue Series shares at any time directly to the
shareholders of the Series as a stock dividend or stock split, (b) to
issue to such shareholders shares of the Series, or rights to subscribe
to shares of the Series, as all or part of any dividend that may be
distributed to shareholders of the Series or as all or part of any
optional or alternative dividend that may be distributed to
shareholders of the Series, and (c) to sell Series shares in accordance
with the current applicable prospectus of the Trust relating to the
Series shares.
6. Redemption or Repurchase. The Distributor shall act as agent for the
Trust in connection with the redemption or repurchase of Series shares
by the Trust to the extent and upon the terms and conditions set forth
in the current applicable prospectus of the Trust relating to the
Series shares, and the Trust agrees to reimburse the Distributor, from
time to time upon demand, for any reasonable expenses incurred in
connection with such redemptions or repurchases. The Trust will remit
to the Distributor any contingent deferred sales charges imposed on
redemptions or repurchases of Series shares (other than Class B shares)
upon the terms and conditions set forth in the then current prospectus
of the Trust. The Trust will also remit to the Distributor (or its
designee or transferee), in addition to the Class B Distribution Fee,
any contingent deferred sales charges imposed on redemptions or
repurchases of Class B shares, in accordance with the Remittance
Agreement attached hereto as Exhibit B.
7. Undertaking Regarding Sales. The Distributor shall use reasonable
efforts to sell Series shares but does not agree hereby to sell any
specific number of Series shares and shall be free to act as
distributor of the shares of other investment companies. Series shares
will be sold by the Distributor only against orders therefor. The
Distributor shall not purchase Series shares from anyone except in
accordance with Sections 2 and 6 and shall not take "long" or "short"
positions in Series shares contrary to the agreement and declaration of
trust or by-laws of the Trust.
8. Compliance. The Distributor shall conform to the Rules of Fair
Practice of the NASD and the sale of securities laws of any
jurisdiction in which it sells, directly or indirectly, any Series
shares. The Distributor agrees to make timely filings, with the
Securities and Exchange Commission in Washington, D.C. (the "SEC"), the
NASD and such other regulatory authorities as may be required, of any
sales literature relating to the Series and intended for distribution
to prospective investors. The Distributor also agrees to furnish to
the Trust sufficient copies of any agreements or plans it intends to
use in connection with any sales of Series shares in adequate time for
the Trust to file and clear them with the proper authorities before
they are put in use (which the Trust agrees to use its best efforts to
do as expeditiously as reasonably possible), and not to use them until
so filed and cleared.
9. Registration and Qualification of Series Shares. The Trust agrees to
execute such papers and to do such acts and things as shall from time
to time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Series shares for sale
under the so-called Blue Sky Laws of any state or for maintaining the
registration of the Trust and of the Series shares under the federal
Securities Act of 1933 and the federal Investment Company Act of 1940
(the "1940 Act"), to the end that there will be available for sale from
time to time such number of Series shares as the Distributor may
reasonably be expected to sell. The Trust shall advise the Distributor
promptly of (a) any action of the SEC or any authorities of any state
or territory, of which it may be advised, affecting registration or
qualification of the Trust or the Series shares, or rights to offer
Series shares for sale, and (b) the happening of any event which makes
untrue any statement or which requires the making of any change in the
Trust's registration statement or its prospectus relating to the Series
shares in order to make the statements therein not misleading.
10. Distributor Independent Contractor. The Distributor shall be an
independent contractor and neither the Distributor nor any of its
officers or employees as such is or shall be an employee of the Trust.
The Distributor is responsible for its own conduct and the employment,
control and conduct of its agents and employees and for injury to such
agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees
under applicable statutes and agrees to pay all employer taxes
thereunder.
11. Expenses Paid by Distributor. While the Distributor continues to act as
agent of the Trust to obtain subscriptions for and to sell Series shares,
the Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Series shares for sale, and all
other copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Series shares for sale.
12. Interests in and of Distributor. It is understood that any of the
shareholders, trustees, officers, employees and agents of the Trust may
be a shareholder, director, officer, employee or agent of, or be
otherwise interested in, the Distributor, any affiliated person of the
Distributor, any organization in which the Distributor may have an
interest or any organization which may have an interest in the
Distributor; that the Distributor, any such affiliated person or any
such organization may have an interest in the Trust; and that the
existence of any such dual interest shall not affect the validity
hereof or of any transaction hereunder except as otherwise provided in
the agreement and declaration of trust or by-laws of the Trust, in the
limited partnership agreement of the Distributor or by specific
provision of applicable law.
13. Words "New England" and Letters "TNE". The Distributor and/or its
parent organization and New England Investment Companies, L.P.
("NEIC"), retain proprietary rights in the words "New England" and the
letters "TNE", which may be used by the Trust and the Series only with
the consent of the Distributor, which is authorized by NEIC to give
such consent as provided herein. The Distributor consents to the use
by the Series of the name "New England Capital Growth Fund" or any
other name embodying the words "New England" or the letters "TNE", in
such forms as the Distributor shall in writing approve, but only on
condition and so long as (i) this Agreement shall remain in full force
and (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it. No such name shall be used by the
Trust or the Series at any time or in any place or for any purposes or
under any conditions except as in this section provided. The foregoing
authorization by the Distributor as agent of NEIC to the Trust and the
Series to use said words or letters as part of a business or name is
not exclusive of the right of the Distributor itself to use, or to
authorize others to use, the same; the Trust acknowledges and agrees
that as between the Distributor and the Trust and the Series, the
Distributor has the exclusive right so to use, or authorize others to
use, said words and letters, and the Trust agrees to take such action
as may reasonably be requested by the Distributor to give full effect
to the provisions of this section (including, without limitation,
consenting to such use of said words or letters). Without limiting the
generality of the foregoing, the Trust agrees that, upon any
termination of this Agreement by either party or upon the violation of
any of its provisions by the Trust, the Trust will, at the request of
the Distributor made within six months after the Distributor has
knowledge of such termination or violation, use its best efforts to
change the name of the Trust and the Series so as to eliminate all
reference, if any, to the words "New England" or the letters "TNE" and
will not thereafter transact any business in a name containing the
words "New England" or the letters "TNE" in any form or combination
whatsoever, or designate itself as the same entity as or successor to
any entity of such name, or otherwise use the words "New England" or
the letters "TNE" or any other reference to the Distributor. Such
covenants on the part of the Trust and the Series shall be binding upon
it, its trustees, officers, shareholders, creditors and all other
persons claiming under or through it.
14. Effective Date and Termination. This Agreement shall become effective as
of the date of its execution, and
(a) Unless otherwise terminated, this Agreement shall continue in
effect with respect to the shares of the Series so long as such
continuation is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by the vote of a majority
of the votes which may be cast by shareholders of the Series and
(ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the
Trust, cast in person at a meeting called for the purpose of
voting on such approval.
(b) This Agreement may at any time be terminated on sixty days' notice
to the Distributor either by vote of a majority of the Trust's Board
of Trustees then in office or by the vote of a majority of the votes
which may be cast by shareholders of the Series.
(c) This Agreement shall automatically terminate in the event of its
assignment (excluding for this purpose any assignment of rights to
payment described in the recitals and in Section 19 of the Agreement
which are hereby ratified and approved).
(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
15. Definitions. For purposes of this Agreement, the following definitions
shall apply:
(a) The "vote of a majority of the votes which may be cast by
shareholders of the Series" means (1) 67% or more of the votes of
the Series present (in person or by proxy) and entitled to vote
at such meeting, if the holders of more than 50% of the
outstanding shares of the Series entitled to vote at such meeting
are present; or (2) the vote of the holders of more than 50% of
the outstanding shares of the Series entitled to vote at such
meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC
under the 1940 Act.
16. Amendment. This Agreement may be amended at any time by mutual consent
of the parties, provided that such consent on the part of the Series
shall be approved (i) by the Board of Trustees of the Trust or by vote
of a majority of the votes which may be cast by shareholders of the
Series and (ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the Trust
cast in person at a meeting called for the purpose of voting on such
approval.
17. Applicable Law and Liabilities. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the Series
shares shall pass, in Boston, Massachusetts.
18. Limited Recourse. The Distributor hereby acknowledges that the Trust's
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Series.
19. Payments to Distributor's Transferees. The Distributor may transfer
its rights to payments hereunder with respect to Class B shares (but
not its obligations hereunder) in order to raise funds to cover
distribution expenditures, and any such transfer shall be effective
upon written notice from the Distributor to the Trust. In connection
with the foregoing, the Series is authorized to pay all or a part of
the Distribution Fee and/or contingent deferred sales charges in
respect of Class B shares directly to such transferee as directed by
the Distributor.
20. Liquidation etc. As long as the Class B Distribution and Service Plan
is in effect, the Series shall not change the manner in which the
Distribution Fee is computed (except as may be required by a change in
applicable law after the date hereof) or adopt a plan of liquidation
without the consent of the Distributor (or any designee or transferee
of the Distributor's rights to receive payment hereunder in respect of
Class B shares) except in circumstances where a surviving entity or
transferee of the Series' assets adopts the Class B Distribution and
Service Plan and assumes the obligations of the Series to make payments
to the Distributor (or its transferee) hereunder in respect of Class B
shares.
21. "Distributor's Shares" etc. The Trust, on behalf of the Series, agrees
that it will not pay any portion of the Class B Distribution Fee which
is calculated by reference to the "Distributor's Shares" (nor shall it
pay a Distribution Fee calculated by reference to Class B shares
("Other Class B Shares") other than the Distributor's Shares at a rate
exceeding .75% per annum of the net assets attributable to Other Class
B Shares) to any person other than the Distributor (or its designee or
transferee) without the written consent of the Distributor.
"Distributor's Shares" shall mean (i) Class B shares of the Series that
were sold by the Distributor, plus (ii) Class B shares of the Series
issued in connection with the exchange, for Class B shares of the
Series, of Class B shares of another fund in the New England fund group
that were sold by the Distributor, plus (iii) Class B shares of the
Series issued in connection with the exchange, for Class B shares of
the Series, of Class B shares of another fund in the New England fund
group issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of such other
fund that were sold by the Distributor, plus (iv) Class B shares of the
Series issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of the Series
described in clauses (i), (ii) and (iii). To the extent permitted
under the 1940 Act, the terms of this Section 21 shall survive the
termination of this Agreement.
22. Limitation on Reduction of Class B Distribution Fee. The Trust, on
behalf of the Series, agrees that it will not reduce the Distribution
Fee in respect of Series' assets attributable to Class B shares below
the annual rate of 0.75% unless it has ceased (and not resumed) paying
all "service fees" (within the meaning of Section 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
or any successor provision thereto) to the Distributor, to any
affiliate of the Distributor and to any other person in circumstances
where substantially all of the services and functions relating to the
distribution of Class B Series shares have been delegated to, or are
being performed by, the Distributor or an affiliate of the
Distributor. To the extent permitted under the 1940 Act, the terms of
this Section 22 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Star Advisers Fund
series
By /s/ Frank Nesvet
---------------------------
Frank Nesvet, Treasurer
NEW ENGLAND FUNDS, L.P.
By: NEF Corporation, its general partner
By /s/ Bruce R. Speca
---------------------------
Bruce R. Speca, Executive Vice President
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust I (the "Trust") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Trust's New England Star Advisers Fund series (the "Series") on
behalf of the Trust by officers of the Trust as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any of the trustees, officers or shareholders of the Trust individually but
are binding only upon the assets and property of the Series.
<PAGE>
Exhibit (e)(6)
NEW ENGLAND VALUE FUND
DISTRIBUTION AGREEMENT
AGREEMENT made this 30th day of August, 1996 by and between NEW ENGLAND
FUNDS TRUST I, a Massachusetts business trust (the "Trust"), and NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership (the "Distributor").
W I T N E S S E T H:
WHEREAS, this Agreement has been approved by the Trustees of the Trust in
contemplation of the transfer by the Distributor of its rights to receive the
Class B Distribution Fee (as defined in the Class B Distribution and Service
Plan attached hereto as Exhibit A) and/or contingent deferred sales charges to a
financing party in order to raise funds to cover distribution expenditures;
WHEREAS, the Trustees of the Trust recognize the importance to the Trust
of the Distributor being able to obtain financing with which to pay commissions
on Class B shares at the time of sale;
WHEREAS, the Trustees of the Trust acknowledge that by providing financing
to the Distributor the financing party enables the Distributor to provide
valuable services to the Series (as defined below); and
WHEREAS, the Trustees of the Trust, in the context of considering the best
interests of the Series and its shareholders at the time of and in preparation
for any vote, consent or other action that the Trustees of the Trust may from
time to time take relating to the continued receipt by the Distributor (and/or
the financing party) of the Distribution Fee, intend to consider the effect on
the Distributor and any financing party of any such vote, consent or action.
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Trust and the Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
distributor of shares of beneficial interest ("Series shares") of the
Trust's New England Value Fund series (the "Series") during the term of
this Agreement. The Trust reserves the right, however, to refuse at any
time or times to sell any Series shares hereunder for any reason deemed
adequate by the Board of Trustees of the Trust.
2. Sale and Payment. Under this agreement, the following provisions shall
apply with respect to the sale of and payment for Series shares:
(a) The Distributor shall have the right, as principal, to purchase
Series shares from the Trust at their net asset value and to sell
such shares to the public against orders therefor at the applicable
public offering price, as defined in Section 4 hereof. The
Distributor shall also have the right, as principal, to sell shares
to dealers against orders therefor at the public offering price less
a concession determined by the Distributor.
(b) Prior to the time of delivery of any shares by the Trust to, or on
the order of, the Distributor, the Distributor shall pay or cause to
be paid to the Trust or to its order an amount in Boston or New York
clearing house funds equal to the applicable net asset value of such
shares. The Distributor shall retain so much of any sales charge or
underwriting discount as is not allowed by it as a concession to
dealers.
3. Fees. For its services as general distributor of the Class B Series
shares, the Trust shall cause the Series to pay to the Distributor (or
its designee or transferee) in addition to the sales charge, if any,
referred to in Section 4 below, the Class B Distribution Fee at the
rate and upon the terms and conditions set forth in the Class B
Distribution and Service Plan attached as Exhibit A hereto, and as
amended from time to time, and the Distributor shall also be entitled
to receive any contingent deferred sales charges that may be payable
upon redemption or repurchase of Class B Series shares. The Class B
Distribution Fee shall be accrued daily and paid monthly to the
Distributor (or, at its direction, to its designee or transferee) as
soon as practicable after the end of the calendar month in which it
accrues, but in any event within five business days following the last
day of the month. So long as this agreement and the Class B
Distribution and Service Plan have not been terminated in accordance
with their respective terms, the Series' obligation to pay the Class B
Distribution Fee to the Distributor shall be absolute and unconditional
and shall not be subject to any dispute, offset, counterclaim or
defense whatsoever (it being understood that nothing in this sentence
shall be deemed a waiver by the Trust or the Series of its right
separately to pursue any claims it may have against the Distributor and
to enforce such claims against any assets (other than its rights to be
paid the Class B Distribution Fee and to be paid contingent deferred
sales charges with respect to Class B Series shares) of the
Distributor).
4. Public Offering Price. The public offering price shall be the net
asset value of Series shares, plus any applicable sales charge, all as
set forth in the current prospectus and statement of additional
information ("prospectus") of the Trust relating to the Series shares.
In no event shall the public offering price exceed 1000/935 of such net
asset value, and in no event shall any applicable sales charge or
underwriting discount exceed 6.5% of the public offering price. The
net asset value of Series shares shall be determined in accordance with
the provisions of the agreement and declaration of trust and by-laws of
the Trust and the current prospectus of the Trust relating to the
Series shares.
5. Trust Issuance of Series Shares. The delivery of Series shares shall
be made promptly by a credit to a shareholder's open account for the
Series or by delivery of a share certificate. The Trust reserves the
right (a) to issue Series shares at any time directly to the
shareholders of the Series as a stock dividend or stock split, (b) to
issue to such shareholders shares of the Series, or rights to subscribe
to shares of the Series, as all or part of any dividend that may be
distributed to shareholders of the Series or as all or part of any
optional or alternative dividend that may be distributed to
shareholders of the Series, and (c) to sell Series shares in accordance
with the current applicable prospectus of the Trust relating to the
Series shares.
6. Redemption or Repurchase. The Distributor shall act as agent for the
Trust in connection with the redemption or repurchase of Series shares
by the Trust to the extent and upon the terms and conditions set forth
in the current applicable prospectus of the Trust relating to the
Series shares, and the Trust agrees to reimburse the Distributor, from
time to time upon demand, for any reasonable expenses incurred in
connection with such redemptions or repurchases. The Trust will remit
to the Distributor any contingent deferred sales charges imposed on
redemptions or repurchases of Series shares (other than Class B shares)
upon the terms and conditions set forth in the then current prospectus
of the Trust. The Trust will also remit to the Distributor (or its
designee or transferee), in addition to the Class B Distribution Fee,
any contingent deferred sales charges imposed on redemptions or
repurchases of Class B shares, in accordance with the Remittance
Agreement attached hereto as Exhibit B.
7. Undertaking Regarding Sales. The Distributor shall use reasonable
efforts to sell Series shares but does not agree hereby to sell any
specific number of Series shares and shall be free to act as
distributor of the shares of other investment companies. Series shares
will be sold by the Distributor only against orders therefor. The
Distributor shall not purchase Series shares from anyone except in
accordance with Sections 2 and 6 and shall not take "long" or "short"
positions in Series shares contrary to the agreement and declaration of
trust or by-laws of the Trust.
8. Compliance. The Distributor shall conform to the Rules of Fair
Practice of the NASD and the sale of securities laws of any
jurisdiction in which it sells, directly or indirectly, any Series
shares. The Distributor agrees to make timely filings, with the
Securities and Exchange Commission in Washington, D.C. (the "SEC"), the
NASD and such other regulatory authorities as may be required, of any
sales literature relating to the Series and intended for distribution
to prospective investors. The Distributor also agrees to furnish to
the Trust sufficient copies of any agreements or plans it intends to
use in connection with any sales of Series shares in adequate time for
the Trust to file and clear them with the proper authorities before
they are put in use (which the Trust agrees to use its best efforts to
do as expeditiously as reasonably possible), and not to use them until
so filed and cleared.
9. Registration and Qualification of Series Shares. The Trust agrees to
execute such papers and to do such acts and things as shall from time
to time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Series shares for sale
under the so-called Blue Sky Laws of any state or for maintaining the
registration of the Trust and of the Series shares under the federal
Securities Act of 1933 and the federal Investment Company Act of 1940
(the "1940 Act"), to the end that there will be available for sale from
time to time such number of Series shares as the Distributor may
reasonably be expected to sell. The Trust shall advise the Distributor
promptly of (a) any action of the SEC or any authorities of any state
or territory, of which it may be advised, affecting registration or
qualification of the Trust or the Series shares, or rights to offer
Series shares for sale, and (b) the happening of any event which makes
untrue any statement or which requires the making of any change in the
Trust's registration statement or its prospectus relating to the Series
shares in order to make the statements therein not misleading.
10. Distributor Independent Contractor. The Distributor shall be an
independent contractor and neither the Distributor nor any of its
officers or employees as such is or shall be an employee of the Trust.
The Distributor is responsible for its own conduct and the employment,
control and conduct of its agents and employees and for injury to such
agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees
under applicable statutes and agrees to pay all employer taxes
thereunder.
11. Expenses Paid by Distributor. While the Distributor continues to act as
agent of the Trust to obtain subscriptions for and to sell Series shares,
the Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Series shares for sale, and all
other copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Series shares for sale.
12. Interests in and of Distributor. It is understood that any of the
shareholders, trustees, officers, employees and agents of the Trust may
be a shareholder, director, officer, employee or agent of, or be
otherwise interested in, the Distributor, any affiliated person of the
Distributor, any organization in which the Distributor may have an
interest or any organization which may have an interest in the
Distributor; that the Distributor, any such affiliated person or any
such organization may have an interest in the Trust; and that the
existence of any such dual interest shall not affect the validity
hereof or of any transaction hereunder except as otherwise provided in
the agreement and declaration of trust or by-laws of the Trust, in the
limited partnership agreement of the Distributor or by specific
provision of applicable law.
13. Words "New England" and Letters "TNE". The Distributor and/or its
parent organization and New England Investment Companies, L.P.
("NEIC"), retain proprietary rights in the words "New England" and the
letters "TNE", which may be used by the Trust and the Series only with
the consent of the Distributor, which is authorized by NEIC to give
such consent as provided herein. The Distributor consents to the use
by the Series of the name "New England Capital Growth Fund" or any
other name embodying the words "New England" or the letters "TNE", in
such forms as the Distributor shall in writing approve, but only on
condition and so long as (i) this Agreement shall remain in full force
and (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it. No such name shall be used by the
Trust or the Series at any time or in any place or for any purposes or
under any conditions except as in this section provided. The foregoing
authorization by the Distributor as agent of NEIC to the Trust and the
Series to use said words or letters as part of a business or name is
not exclusive of the right of the Distributor itself to use, or to
authorize others to use, the same; the Trust acknowledges and agrees
that as between the Distributor and the Trust and the Series, the
Distributor has the exclusive right so to use, or authorize others to
use, said words and letters, and the Trust agrees to take such action
as may reasonably be requested by the Distributor to give full effect
to the provisions of this section (including, without limitation,
consenting to such use of said words or letters). Without limiting the
generality of the foregoing, the Trust agrees that, upon any
termination of this Agreement by either party or upon the violation of
any of its provisions by the Trust, the Trust will, at the request of
the Distributor made within six months after the Distributor has
knowledge of such termination or violation, use its best efforts to
change the name of the Trust and the Series so as to eliminate all
reference, if any, to the words "New England" or the letters "TNE" and
will not thereafter transact any business in a name containing the
words "New England" or the letters "TNE" in any form or combination
whatsoever, or designate itself as the same entity as or successor to
any entity of such name, or otherwise use the words "New England" or
the letters "TNE" or any other reference to the Distributor. Such
covenants on the part of the Trust and the Series shall be binding upon
it, its trustees, officers, shareholders, creditors and all other
persons claiming under or through it.
14. Effective Date and Termination. This Agreement shall become effective as
of the date of its execution, and
(a) Unless otherwise terminated, this Agreement shall continue in
effect with respect to the shares of the Series so long as such
continuation is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by the vote of a majority
of the votes which may be cast by shareholders of the Series and
(ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the
Trust, cast in person at a meeting called for the purpose of
voting on such approval.
(b) This Agreement may at any time be terminated on sixty days' notice
to the Distributor either by vote of a majority of the Trust's Board
of Trustees then in office or by the vote of a majority of the votes
which may be cast by shareholders of the Series.
(c) This Agreement shall automatically terminate in the event of its
assignment (excluding for this purpose any assignment of rights to
payment described in the recitals and in Section 19 of the Agreement
which are hereby ratified and approved).
(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
15. Definitions. For purposes of this Agreement, the following definitions
shall apply:
(a) The "vote of a majority of the votes which may be cast by
shareholders of the Series" means (1) 67% or more of the votes of
the Series present (in person or by proxy) and entitled to vote
at such meeting, if the holders of more than 50% of the
outstanding shares of the Series entitled to vote at such meeting
are present; or (2) the vote of the holders of more than 50% of
the outstanding shares of the Series entitled to vote at such
meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC
under the 1940 Act.
16. Amendment. This Agreement may be amended at any time by mutual consent
of the parties, provided that such consent on the part of the Series
shall be approved (i) by the Board of Trustees of the Trust or by vote
of a majority of the votes which may be cast by shareholders of the
Series and (ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the Trust
cast in person at a meeting called for the purpose of voting on such
approval.
17. Applicable Law and Liabilities. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the Series
shares shall pass, in Boston, Massachusetts.
18. Limited Recourse. The Distributor hereby acknowledges that the Trust's
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Series.
19. Payments to Distributor's Transferees. The Distributor may transfer
its rights to payments hereunder with respect to Class B shares (but
not its obligations hereunder) in order to raise funds to cover
distribution expenditures, and any such transfer shall be effective
upon written notice from the Distributor to the Trust. In connection
with the foregoing, the Series is authorized to pay all or a part of
the Distribution Fee and/or contingent deferred sales charges in
respect of Class B shares directly to such transferee as directed by
the Distributor.
20. Liquidation etc. As long as the Class B Distribution and Service Plan
is in effect, the Series shall not change the manner in which the
Distribution Fee is computed (except as may be required by a change in
applicable law after the date hereof) or adopt a plan of liquidation
without the consent of the Distributor (or any designee or transferee
of the Distributor's rights to receive payment hereunder in respect of
Class B shares) except in circumstances where a surviving entity or
transferee of the Series' assets adopts the Class B Distribution and
Service Plan and assumes the obligations of the Series to make payments
to the Distributor (or its transferee) hereunder in respect of Class B
shares.
21. "Distributor's Shares" etc. The Trust, on behalf of the Series, agrees
that it will not pay any portion of the Class B Distribution Fee which
is calculated by reference to the "Distributor's Shares" (nor shall it
pay a Distribution Fee calculated by reference to Class B shares
("Other Class B Shares") other than the Distributor's Shares at a rate
exceeding .75% per annum of the net assets attributable to Other Class
B Shares) to any person other than the Distributor (or its designee or
transferee) without the written consent of the Distributor.
"Distributor's Shares" shall mean (i) Class B shares of the Series that
were sold by the Distributor, plus (ii) Class B shares of the Series
issued in connection with the exchange, for Class B shares of the
Series, of Class B shares of another fund in the New England fund group
that were sold by the Distributor, plus (iii) Class B shares of the
Series issued in connection with the exchange, for Class B shares of
the Series, of Class B shares of another fund in the New England fund
group issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of such other
fund that were sold by the Distributor, plus (iv) Class B shares of the
Series issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of the Series
described in clauses (i), (ii) and (iii). To the extent permitted
under the 1940 Act, the terms of this Section 21 shall survive the
termination of this Agreement.
22. Limitation on Reduction of Class B Distribution Fee. The Trust, on
behalf of the Series, agrees that it will not reduce the Distribution
Fee in respect of Series' assets attributable to Class B shares below
the annual rate of 0.75% unless it has ceased (and not resumed) paying
all "service fees" (within the meaning of Section 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
or any successor provision thereto) to the Distributor, to any
affiliate of the Distributor and to any other person in circumstances
where substantially all of the services and functions relating to the
distribution of Class B Series shares have been delegated to, or are
being performed by, the Distributor or an affiliate of the
Distributor. To the extent permitted under the 1940 Act, the terms of
this Section 22 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Value Fund series
By /s/ Frank Nesvet
---------------------------
Frank Nesvet, Treasurer
NEW ENGLAND FUNDS, L.P.
By: NEF Corporation, its general partner
By /s/ Bruce R. Speca
---------------------------
Bruce R. Speca, Executive Vice President
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust I (the "Trust") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Trust's New England Value Fund series (the "Series") on behalf of
the Trust by officers of the Trust as officers and not individually and that the
obligations of or arising out of this Agreement are not binding upon any of the
trustees, officers or shareholders of the Trust individually but are binding
only upon the assets and property of the Series.
<PAGE>
Exhibit (e)(7)
NEW ENGLAND STAR WORLDWIDE FUND
DISTRIBUTION AGREEMENT
AGREEMENT made this 29th day of December, 1996 by and between NEW ENGLAND
FUNDS TRUST I, a Massachusetts business trust (the "Trust"), and NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership (the "Distributor").
W I T N E S S E T H:
WHEREAS, this Agreement has been approved by the Trustees of the Trust in
contemplation of the transfer by the Distributor of its rights to receive the
Class B Distribution Fee (as defined in the Class B Distribution and Service
Plan attached hereto as Exhibit A) and/or contingent deferred sales charges to a
financing party in order to raise funds to cover distribution expenditures;
WHEREAS, the Trustees of the Trust recognize the importance to the Trust
of the Distributor being able to obtain financing with which to pay commissions
on Class B shares at the time of sale;
WHEREAS, the Trustees of the Trust acknowledge that by providing financing
to the Distributor the financing party enables the Distributor to provide
valuable services to the Series (as defined below); and
WHEREAS, the Trustees of the Trust, in the context of considering the best
interests of the Series and its shareholders at the time of and in preparation
for any vote, consent or other action that the Trustees of the Trust may from
time to time take relating to the continued receipt by the Distributor (and/or
the financing party) of the Distribution Fee, intend to consider the effect on
the Distributor and any financing party of any such vote, consent or action.
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Trust and the Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
distributor of shares of beneficial interest ("Series shares") of the
Trust's New England Star Worldwide Fund series (the "Series") during the
term of this Agreement. The Trust reserves the right, however, to refuse
at any time or times to sell any Series shares hereunder for any reason
deemed adequate by the Board of Trustees of the Trust.
2. Sale and Payment. Under this agreement, the following provisions shall
apply with respect to the sale of and payment for Series shares:
(a) The Distributor shall have the right, as principal, to purchase
Series shares from the Trust at their net asset value and to sell
such shares to the public against orders therefor at the applicable
public offering price, as defined in Section 4 hereof. The
Distributor shall also have the right, as principal, to sell shares
to dealers against orders therefor at the public offering price less
a concession determined by the Distributor.
(b) Prior to the time of delivery of any shares by the Trust to, or on
the order of, the Distributor, the Distributor shall pay or cause to
be paid to the Trust or to its order an amount in Boston or New York
clearing house funds equal to the applicable net asset value of such
shares. The Distributor shall retain so much of any sales charge or
underwriting discount as is not allowed by it as a concession to
dealers.
3. Fees. For its services as general distributor of the Class B Series
shares, the Trust shall cause the Series to pay to the Distributor (or
its designee or transferee) in addition to the sales charge, if any,
referred to in Section 4 below, the Class B Distribution Fee at the
rate and upon the terms and conditions set forth in the Class B
Distribution and Service Plan attached as Exhibit A hereto, and as
amended from time to time, and the Distributor shall also be entitled
to receive any contingent deferred sales charges that may be payable
upon redemption or repurchase of Class B Series shares. The Class B
Distribution Fee shall be accrued daily and paid monthly to the
Distributor (or, at its direction, to its designee or transferee) as
soon as practicable after the end of the calendar month in which it
accrues, but in any event within five business days following the last
day of the month. So long as this agreement and the Class B
Distribution and Service Plan have not been terminated in accordance
with their respective terms, the Series' obligation to pay the Class B
Distribution Fee to the Distributor shall be absolute and unconditional
and shall not be subject to any dispute, offset, counterclaim or
defense whatsoever (it being understood that nothing in this sentence
shall be deemed a waiver by the Trust or the Series of its right
separately to pursue any claims it may have against the Distributor and
to enforce such claims against any assets (other than its rights to be
paid the Class B Distribution Fee and to be paid contingent deferred
sales charges with respect to Class B Series shares) of the
Distributor).
4. Public Offering Price. The public offering price shall be the net
asset value of Series shares, plus any applicable sales charge, all as
set forth in the current prospectus and statement of additional
information ("prospectus") of the Trust relating to the Series shares.
In no event shall the public offering price exceed 1000/935 of such net
asset value, and in no event shall any applicable sales charge or
underwriting discount exceed 6.5% of the public offering price. The
net asset value of Series shares shall be determined in accordance with
the provisions of the agreement and declaration of trust and by-laws of
the Trust and the current prospectus of the Trust relating to the
Series shares.
5. Trust Issuance of Series Shares. The delivery of Series shares shall
be made promptly by a credit to a shareholder's open account for the
Series or by delivery of a share certificate. The Trust reserves the
right (a) to issue Series shares at any time directly to the
shareholders of the Series as a stock dividend or stock split, (b) to
issue to such shareholders shares of the Series, or rights to subscribe
to shares of the Series, as all or part of any dividend that may be
distributed to shareholders of the Series or as all or part of any
optional or alternative dividend that may be distributed to
shareholders of the Series, and (c) to sell Series shares in accordance
with the current applicable prospectus of the Trust relating to the
Series shares.
6. Redemption or Repurchase. The Distributor shall act as agent for the
Trust in connection with the redemption or repurchase of Series shares
by the Trust to the extent and upon the terms and conditions set forth
in the current applicable prospectus of the Trust relating to the
Series shares, and the Trust agrees to reimburse the Distributor, from
time to time upon demand, for any reasonable expenses incurred in
connection with such redemptions or repurchases. The Trust will remit
to the Distributor any contingent deferred sales charges imposed on
redemptions or repurchases of Series shares (other than Class B shares)
upon the terms and conditions set forth in the then current prospectus
of the Trust. The Trust will also remit to the Distributor (or its
designee or transferee), in addition to the Class B Distribution Fee,
any contingent deferred sales charges imposed on redemptions or
repurchases of Class B shares, in accordance with the Remittance
Agreement attached hereto as Exhibit B.
7. Undertaking Regarding Sales. The Distributor shall use reasonable
efforts to sell Series shares but does not agree hereby to sell any
specific number of Series shares and shall be free to act as
distributor of the shares of other investment companies. Series shares
will be sold by the Distributor only against orders therefor. The
Distributor shall not purchase Series shares from anyone except in
accordance with Sections 2 and 6 and shall not take "long" or "short"
positions in Series shares contrary to the agreement and declaration of
trust or by-laws of the Trust.
8. Compliance. The Distributor shall conform to the Rules of Fair
Practice of the NASD and the sale of securities laws of any
jurisdiction in which it sells, directly or indirectly, any Series
shares. The Distributor agrees to make timely filings, with the
Securities and Exchange Commission in Washington, D.C. (the "SEC"), the
NASD and such other regulatory authorities as may be required, of any
sales literature relating to the Series and intended for distribution
to prospective investors. The Distributor also agrees to furnish to
the Trust sufficient copies of any agreements or plans it intends to
use in connection with any sales of Series shares in adequate time for
the Trust to file and clear them with the proper authorities before
they are put in use (which the Trust agrees to use its best efforts to
do as expeditiously as reasonably possible), and not to use them until
so filed and cleared.
9. Registration and Qualification of Series Shares. The Trust agrees to
execute such papers and to do such acts and things as shall from time
to time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Series shares for sale
under the so-called Blue Sky Laws of any state or for maintaining the
registration of the Trust and of the Series shares under the federal
Securities Act of 1933 and the federal Investment Company Act of 1940
(the "1940 Act"), to the end that there will be available for sale from
time to time such number of Series shares as the Distributor may
reasonably be expected to sell. The Trust shall advise the Distributor
promptly of (a) any action of the SEC or any authorities of any state
or territory, of which it may be advised, affecting registration or
qualification of the Trust or the Series shares, or rights to offer
Series shares for sale, and (b) the happening of any event which makes
untrue any statement or which requires the making of any change in the
Trust's registration statement or its prospectus relating to the Series
shares in order to make the statements therein not misleading.
10. Distributor Independent Contractor. The Distributor shall be an
independent contractor and neither the Distributor nor any of its
officers or employees as such is or shall be an employee of the Trust.
The Distributor is responsible for its own conduct and the employment,
control and conduct of its agents and employees and for injury to such
agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees
under applicable statutes and agrees to pay all employer taxes
thereunder.
11. Expenses Paid by Distributor. While the Distributor continues to act as
agent of the Trust to obtain subscriptions for and to sell Series shares,
the Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Series shares for sale, and all
other copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Series shares for sale.
12. Interests in and of Distributor. It is understood that any of the
shareholders, trustees, officers, employees and agents of the Trust may
be a shareholder, director, officer, employee or agent of, or be
otherwise interested in, the Distributor, any affiliated person of the
Distributor, any organization in which the Distributor may have an
interest or any organization which may have an interest in the
Distributor; that the Distributor, any such affiliated person or any
such organization may have an interest in the Trust; and that the
existence of any such dual interest shall not affect the validity
hereof or of any transaction hereunder except as otherwise provided in
the agreement and declaration of trust or by-laws of the Trust, in the
limited partnership agreement of the Distributor or by specific
provision of applicable law.
13. Words "New England" and Letters "TNE". The Distributor and/or its
parent organization and New England Investment Companies, L.P.
("NEIC"), retain proprietary rights in the words "New England" and the
letters "TNE", which may be used by the Trust and the Series only with
the consent of the Distributor, which is authorized by NEIC to give
such consent as provided herein. The Distributor consents to the use
by the Series of the name "New England Capital Growth Fund" or any
other name embodying the words "New England" or the letters "TNE", in
such forms as the Distributor shall in writing approve, but only on
condition and so long as (i) this Agreement shall remain in full force
and (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it. No such name shall be used by the
Trust or the Series at any time or in any place or for any purposes or
under any conditions except as in this section provided. The foregoing
authorization by the Distributor as agent of NEIC to the Trust and the
Series to use said words or letters as part of a business or name is
not exclusive of the right of the Distributor itself to use, or to
authorize others to use, the same; the Trust acknowledges and agrees
that as between the Distributor and the Trust and the Series, the
Distributor has the exclusive right so to use, or authorize others to
use, said words and letters, and the Trust agrees to take such action
as may reasonably be requested by the Distributor to give full effect
to the provisions of this section (including, without limitation,
consenting to such use of said words or letters). Without limiting the
generality of the foregoing, the Trust agrees that, upon any
termination of this Agreement by either party or upon the violation of
any of its provisions by the Trust, the Trust will, at the request of
the Distributor made within six months after the Distributor has
knowledge of such termination or violation, use its best efforts to
change the name of the Trust and the Series so as to eliminate all
reference, if any, to the words "New England" or the letters "TNE" and
will not thereafter transact any business in a name containing the
words "New England" or the letters "TNE" in any form or combination
whatsoever, or designate itself as the same entity as or successor to
any entity of such name, or otherwise use the words "New England" or
the letters "TNE" or any other reference to the Distributor. Such
covenants on the part of the Trust and the Series shall be binding upon
it, its trustees, officers, shareholders, creditors and all other
persons claiming under or through it. thereafter transact any business
in a name containing the words "New England" or the letters "TNE" in
any form or combination whatsoever, or designate itself as the same
entity as or successor to any entity of such name, or otherwise use the
words "New England" or the letters "TNE" or any other reference to the
Distributor. Such covenants on the part of the Trust and the Series
shall be binding upon it, its trustees, officers, shareholders,
creditors and all other persons claiming under or through it.
14. Effective Date and Termination. This Agreement shall become effective as
of the date of its execution, and
(a) Unless otherwise terminated, this Agreement shall continue in
effect with respect to the shares of the Series so long as such
continuation is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by the vote of a majority
of the votes which may be cast by shareholders of the Series and
(ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the
Trust, cast in person at a meeting called for the purpose of
voting on such approval.
(b) This Agreement may at any time be terminated on sixty days' notice
to the Distributor either by vote of a majority of the Trust's Board
of Trustees then in office or by the vote of a majority of the votes
which may be cast by shareholders of the Series.
(c) This Agreement shall automatically terminate in the event of its
assignment (excluding for this purpose any assignment of rights to
payment described in the recitals and in Section 19 of the Agreement
which are hereby ratified and approved).
(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
15. Definitions. For purposes of this Agreement, the following definitions
shall apply:
(a) The "vote of a majority of the votes which may be cast by
shareholders of the Series" means (1) 67% or more of the votes of
the Series present (in person or by proxy) and entitled to vote
at such meeting, if the holders of more than 50% of the
outstanding shares of the Series entitled to vote at such meeting
are present; or (2) the vote of the holders of more than 50% of
the outstanding shares of the Series entitled to vote at such
meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC
under the 1940 Act.
16. Amendment. This Agreement may be amended at any time by mutual consent
of the parties, provided that such consent on the part of the Series
shall be approved (i) by the Board of Trustees of the Trust or by vote
of a majority of the votes which may be cast by shareholders of the
Series and (ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the Trust
cast in person at a meeting called for the purpose of voting on such
approval.
17. Applicable Law and Liabilities. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the Series
shares shall pass, in Boston, Massachusetts.
18. Limited Recourse. The Distributor hereby acknowledges that the Trust's
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Series.
19. Payments to Distributor's Transferees. The Distributor may transfer
its rights to payments hereunder with respect to Class B shares (but
not its obligations hereunder) in order to raise funds to cover
distribution expenditures, and any such transfer shall be effective
upon written notice from the Distributor to the Trust. In connection
with the foregoing, the Series is authorized to pay all or a part of
the Distribution Fee and/or contingent deferred sales charges in
respect of Class B shares directly to such transferee as directed by
the Distributor.
20. Liquidation etc. As long as the Class B Distribution and Service Plan
is in effect, the Series shall not change the manner in which the
Distribution Fee is computed (except as may be required by a change in
applicable law after the date hereof) or adopt a plan of liquidation
without the consent of the Distributor (or any designee or transferee
of the Distributor's rights to receive payment hereunder in respect of
Class B shares) except in circumstances where a surviving entity or
transferee of the Series' assets adopts the Class B Distribution and
Service Plan and assumes the obligations of the Series to make payments
to the Distributor (or its transferee) hereunder in respect of Class B
shares.
21. "Distributor's Shares" etc. The Trust, on behalf of the Series, agrees
that it will not pay any portion of the Class B Distribution Fee which
is calculated by reference to the "Distributor's Shares" (nor shall it
pay a Distribution Fee calculated by reference to Class B shares
("Other Class B Shares") other than the Distributor's Shares at a rate
exceeding .75% per annum of the net assets attributable to Other Class
B Shares) to any person other than the Distributor (or its designee or
transferee) without the written consent of the Distributor.
"Distributor's Shares" shall mean (i) Class B shares of the Series that
were sold by the Distributor, plus (ii) Class B shares of the Series
issued in connection with the exchange, for Class B shares of the
Series, of Class B shares of another fund in the New England fund group
that were sold by the Distributor, plus (iii) Class B shares of the
Series issued in connection with the exchange, for Class B shares of
the Series, of Class B shares of another fund in the New England fund
group issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of such other
fund that were sold by the Distributor, plus (iv) Class B shares of the
Series issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of the Series
described in clauses (i), (ii) and (iii). To the extent permitted
under the 1940 Act, the terms of this Section 21 shall survive the
termination of this Agreement.
22. Limitation on Reduction of Class B Distribution Fee. The Trust, on
behalf of the Series, agrees that it will not reduce the Distribution
Fee in respect of Series' assets attributable to Class B shares below
the annual rate of 0.75% unless it has ceased (and not resumed) paying
all "service fees" (within the meaning of Section 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
or any successor provision thereto) to the Distributor, to any
affiliate of the Distributor and to any other person in circumstances
where substantially all of the services and functions relating to the
distribution of Class B Series shares have been delegated to, or are
being performed by, the Distributor or an affiliate of the
Distributor. To the extent permitted under the 1940 Act, the terms of
this Section 22 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England
Star Worldwide Fund series
By /s/ Frank Nesvet
---------------------------
Frank Nesvet, Treasurer
NEW ENGLAND FUNDS, L.P.
By: NEF Corporation, its general partner
By /s/ Bruce R. Speca
---------------------------
Bruce R. Speca, Executive Vice President
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust I (the "Trust") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Trust's New England Star Worldwide Fund series (the "Series") on
behalf of the Trust by officers of the Trust as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any of the trustees, officers or shareholders of the Trust individually but
are binding only upon the assets and property of the Series.
<PAGE>
Exhibit (e)(8)
NEW ENGLAND GOVERNMENT SECURITIES FUND
DISTRIBUTION AGREEMENT
AGREEMENT made this 30th day of August, 1996 by and between NEW ENGLAND
FUNDS TRUST I, a Massachusetts business trust (the "Trust"), and NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership (the "Distributor").
W I T N E S S E T H:
WHEREAS, this Agreement has been approved by the Trustees of the Trust in
contemplation of the transfer by the Distributor of its rights to receive the
Class B Distribution Fee (as defined in the Class B Distribution and Service
Plan attached hereto as Exhibit A) and/or contingent deferred sales charges to a
financing party in order to raise funds to cover distribution expenditures;
WHEREAS, the Trustees of the Trust recognize the importance to the Trust
of the Distributor being able to obtain financing with which to pay commissions
on Class B shares at the time of sale;
WHEREAS, the Trustees of the Trust acknowledge that by providing financing
to the Distributor the financing party enables the Distributor to provide
valuable services to the Series (as defined below); and
WHEREAS, the Trustees of the Trust, in the context of considering the best
interests of the Series and its shareholders at the time of and in preparation
for any vote, consent or other action that the Trustees of the Trust may from
time to time take relating to the continued receipt by the Distributor (and/or
the financing party) of the Distribution Fee, intend to consider the effect on
the Distributor and any financing party of any such vote, consent or action.
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Trust and the Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
distributor of shares of beneficial interest ("Series shares") of the
Trust's New England Government Securities Fund series (the "Series")
during the term of this Agreement. The Trust reserves the right, however,
to refuse at any time or times to sell any Series shares hereunder for any
reason deemed adequate by the Board of Trustees of the Trust.
2. Sale and Payment. Under this agreement, the following provisions shall
apply with respect to the sale of and payment for Series shares:
(a) The Distributor shall have the right, as principal, to purchase
Series shares from the Trust at their net asset value and to sell
such shares to the public against orders therefor at the applicable
public offering price, as defined in Section 4 hereof. The
Distributor shall also have the right, as principal, to sell shares
to dealers against orders therefor at the public offering price less
a concession determined by the Distributor.
(b) Prior to the time of delivery of any shares by the Trust to, or on
the order of, the Distributor, the Distributor shall pay or cause to
be paid to the Trust or to its order an amount in Boston or New York
clearing house funds equal to the applicable net asset value of such
shares. The Distributor shall retain so much of any sales charge or
underwriting discount as is not allowed by it as a concession to
dealers.
3. Fees. For its services as general distributor of the Class B Series
shares, the Trust shall cause the Series to pay to the Distributor (or
its designee or transferee) in addition to the sales charge, if any,
referred to in Section 4 below, the Class B Distribution Fee at the
rate and upon the terms and conditions set forth in the Class B
Distribution and Service Plan attached as Exhibit A hereto, and as
amended from time to time, and the Distributor shall also be entitled
to receive any contingent deferred sales charges that may be payable
upon redemption or repurchase of Class B Series shares. The Class B
Distribution Fee shall be accrued daily and paid monthly to the
Distributor (or, at its direction, to its designee or transferee) as
soon as practicable after the end of the calendar month in which it
accrues, but in any event within five business days following the last
day of the month. So long as this agreement and the Class B
Distribution and Service Plan have not been terminated in accordance
with their respective terms, the Series' obligation to pay the Class B
Distribution Fee to the Distributor shall be absolute and unconditional
and shall not be subject to any dispute, offset, counterclaim or
defense whatsoever (it being understood that nothing in this sentence
shall be deemed a waiver by the Trust or the Series of its right
separately to pursue any claims it may have against the Distributor and
to enforce such claims against any assets (other than its rights to be
paid the Class B Distribution Fee and to be paid contingent deferred
sales charges with respect to Class B Series shares) of the
Distributor).
4. Public Offering Price. The public offering price shall be the net
asset value of Series shares, plus any applicable sales charge, all as
set forth in the current prospectus and statement of additional
information ("prospectus") of the Trust relating to the Series shares.
In no event shall the public offering price exceed 1000/935 of such net
asset value, and in no event shall any applicable sales charge or
underwriting discount exceed 6.5% of the public offering price. The
net asset value of Series shares shall be determined in accordance with
the provisions of the agreement and declaration of trust and by-laws of
the Trust and the current prospectus of the Trust relating to the
Series shares.
5. Trust Issuance of Series Shares. The delivery of Series shares shall
be made promptly by a credit to a shareholder's open account for the
Series or by delivery of a share certificate. The Trust reserves the
right (a) to issue Series shares at any time directly to the
shareholders of the Series as a stock dividend or stock split, (b) to
issue to such shareholders shares of the Series, or rights to subscribe
to shares of the Series, as all or part of any dividend that may be
distributed to shareholders of the Series or as all or part of any
optional or alternative dividend that may be distributed to
shareholders of the Series, and (c) to sell Series shares in accordance
with the current applicable prospectus of the Trust relating to the
Series shares.
6. Redemption or Repurchase. The Distributor shall act as agent for the
Trust in connection with the redemption or repurchase of Series shares
by the Trust to the extent and upon the terms and conditions set forth
in the current applicable prospectus of the Trust relating to the
Series shares, and the Trust agrees to reimburse the Distributor, from
time to time upon demand, for any reasonable expenses incurred in
connection with such redemptions or repurchases. The Trust will remit
to the Distributor any contingent deferred sales charges imposed on
redemptions or repurchases of Series shares (other than Class B shares)
upon the terms and conditions set forth in the then current prospectus
of the Trust. The Trust will also remit to the Distributor (or its
designee or transferee), in addition to the Class B Distribution Fee,
any contingent deferred sales charges imposed on redemptions or
repurchases of Class B shares, in accordance with the Remittance
Agreement attached hereto as Exhibit B.
7. Undertaking Regarding Sales. The Distributor shall use reasonable
efforts to sell Series shares but does not agree hereby to sell any
specific number of Series shares and shall be free to act as
distributor of the shares of other investment companies. Series shares
will be sold by the Distributor only against orders therefor. The
Distributor shall not purchase Series shares from anyone except in
accordance with Sections 2 and 6 and shall not take "long" or "short"
positions in Series shares contrary to the agreement and declaration of
trust or by-laws of the Trust.
8. Compliance. The Distributor shall conform to the Rules of Fair
Practice of the NASD and the sale of securities laws of any
jurisdiction in which it sells, directly or indirectly, any Series
shares. The Distributor agrees to make timely filings, with the
Securities and Exchange Commission in Washington, D.C. (the "SEC"), the
NASD and such other regulatory authorities as may be required, of any
sales literature relating to the Series and intended for distribution
to prospective investors. The Distributor also agrees to furnish to
the Trust sufficient copies of any agreements or plans it intends to
use in connection with any sales of Series shares in adequate time for
the Trust to file and clear them with the proper authorities before
they are put in use (which the Trust agrees to use its best efforts to
do as expeditiously as reasonably possible), and not to use them until
so filed and cleared.
9. Registration and Qualification of Series Shares. The Trust agrees to
execute such papers and to do such acts and things as shall from time
to time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Series shares for sale
under the so-called Blue Sky Laws of any state or for maintaining the
registration of the Trust and of the Series shares under the federal
Securities Act of 1933 and the federal Investment Company Act of 1940
(the "1940 Act"), to the end that there will be available for sale from
time to time such number of Series shares as the Distributor may
reasonably be expected to sell. The Trust shall advise the Distributor
promptly of (a) any action of the SEC or any authorities of any state
or territory, of which it may be advised, affecting registration or
qualification of the Trust or the Series shares, or rights to offer
Series shares for sale, and (b) the happening of any event which makes
untrue any statement or which requires the making of any change in the
Trust's registration statement or its prospectus relating to the Series
shares in order to make the statements therein not misleading.
10. Distributor Independent Contractor. The Distributor shall be an
independent contractor and neither the Distributor nor any of its
officers or employees as such is or shall be an employee of the Trust.
The Distributor is responsible for its own conduct and the employment,
control and conduct of its agents and employees and for injury to such
agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees
under applicable statutes and agrees to pay all employer taxes
thereunder.
11. Expenses Paid by Distributor. While the Distributor continues to act as
agent of the Trust to obtain subscriptions for and to sell Series shares,
the Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Series shares for sale, and all
other copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Series shares for sale.
12. Interests in and of Distributor. It is understood that any of the
shareholders, trustees, officers, employees and agents of the Trust may
be a shareholder, director, officer, employee or agent of, or be
otherwise interested in, the Distributor, any affiliated person of the
Distributor, any organization in which the Distributor may have an
interest or any organization which may have an interest in the
Distributor; that the Distributor, any such affiliated person or any
such organization may have an interest in the Trust; and that the
existence of any such dual interest shall not affect the validity
hereof or of any transaction hereunder except as otherwise provided in
the agreement and declaration of trust or by-laws of the Trust, in the
limited partnership agreement of the Distributor or by specific
provision of applicable law.
13. Words "New England" and Letters "TNE". The Distributor and/or its
parent organization and New England Investment Companies, L.P.
("NEIC"), retain proprietary rights in the words "New England" and the
letters "TNE", which may be used by the Trust and the Series only with
the consent of the Distributor, which is authorized by NEIC to give
such consent as provided herein. The Distributor consents to the use
by the Series of the name "New England Capital Growth Fund" or any
other name embodying the words "New England" or the letters "TNE", in
such forms as the Distributor shall in writing approve, but only on
condition and so long as (i) this Agreement shall remain in full force
and (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it. No such name shall be used by the
Trust or the Series at any time or in any place or for any purposes or
under any conditions except as in this section provided. The foregoing
authorization by the Distributor as agent of NEIC to the Trust and the
Series to use said words or letters as part of a business or name is
not exclusive of the right of the Distributor itself to use, or to
authorize others to use, the same; the Trust acknowledges and agrees
that as between the Distributor and the Trust and the Series, the
Distributor has the exclusive right so to use, or authorize others to
use, said words and letters, and the Trust agrees to take such action
as may reasonably be requested by the Distributor to give full effect
to the provisions of this section (including, without limitation,
consenting to such use of said words or letters). Without limiting the
generality of the foregoing, the Trust agrees that, upon any
termination of this Agreement by either party or upon the violation of
any of its provisions by the Trust, the Trust will, at the request of
the Distributor made within six months after the Distributor has
knowledge of such termination or violation, use its best efforts to
change the name of the Trust and the Series so as to eliminate all
reference, if any, to the words "New England" or the letters "TNE" and
will not thereafter transact any business in a name containing the
words "New England" or the letters "TNE" in any form or combination
whatsoever, or designate itself as the same entity as or successor to
any entity of such name, or otherwise use the words "New England" or
the letters "TNE" or any other reference to the Distributor. Such
covenants on the part of the Trust and the Series shall be binding upon
it, its trustees, officers, shareholders, creditors and all other
persons claiming under or through it.
14. Effective Date and Termination. This Agreement shall become effective as
of the date of its execution, and
(a) Unless otherwise terminated, this Agreement shall continue in
effect with respect to the shares of the Series so long as such
continuation is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by the vote of a majority
of the votes which may be cast by shareholders of the Series and
(ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the
Trust, cast in person at a meeting called for the purpose of
voting on such approval.
(b) This Agreement may at any time be terminated on sixty days' notice
to the Distributor either by vote of a majority of the Trust's Board
of Trustees then in office or by the vote of a majority of the votes
which may be cast by shareholders of the Series.
(c) This Agreement shall automatically terminate in the event of its
assignment (excluding for this purpose any assignment of rights to
payment described in the recitals and in Section 19 of the Agreement
which are hereby ratified and approved).
(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
15. Definitions. For purposes of this Agreement, the following definitions
shall apply:
(a) The "vote of a majority of the votes which may be cast by
shareholders of the Series" means (1) 67% or more of the votes of
the Series present (in person or by proxy) and entitled to vote
at such meeting, if the holders of more than 50% of the
outstanding shares of the Series entitled to vote at such meeting
are present; or (2) the vote of the holders of more than 50% of
the outstanding shares of the Series entitled to vote at such
meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC
under the 1940 Act.
16. Amendment. This Agreement may be amended at any time by mutual consent
of the parties, provided that such consent on the part of the Series
shall be approved (i) by the Board of Trustees of the Trust or by vote
of a majority of the votes which may be cast by shareholders of the
Series and (ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the Trust
cast in person at a meeting called for the purpose of voting on such
approval.
17. Applicable Law and Liabilities. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the Series
shares shall pass, in Boston, Massachusetts.
18. Limited Recourse. The Distributor hereby acknowledges that the Trust's
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Series.
19. Payments to Distributor's Transferees. The Distributor may transfer
its rights to payments hereunder with respect to Class B shares (but
not its obligations hereunder) in order to raise funds to cover
distribution expenditures, and any such transfer shall be effective
upon written notice from the Distributor to the Trust. In connection
with the foregoing, the Series is authorized to pay all or a part of
the Distribution Fee and/or contingent deferred sales charges in
respect of Class B shares directly to such transferee as directed by
the Distributor.
20. Liquidation etc. As long as the Class B Distribution and Service Plan
is in effect, the Series shall not change the manner in which the
Distribution Fee is computed (except as may be required by a change in
applicable law after the date hereof) or adopt a plan of liquidation
without the consent of the Distributor (or any designee or transferee
of the Distributor's rights to receive payment hereunder in respect of
Class B shares) except in circumstances where a surviving entity or
transferee of the Series' assets adopts the Class B Distribution and
Service Plan and assumes the obligations of the Series to make payments
to the Distributor (or its transferee) hereunder in respect of Class B
shares.
21. "Distributor's Shares" etc. The Trust, on behalf of the Series, agrees
that it will not pay any portion of the Class B Distribution Fee which
is calculated by reference to the "Distributor's Shares" (nor shall it
pay a Distribution Fee calculated by reference to Class B shares
("Other Class B Shares") other than the Distributor's Shares at a rate
exceeding .75% per annum of the net assets attributable to Other Class
B Shares) to any person other than the Distributor (or its designee or
transferee) without the written consent of the Distributor.
"Distributor's Shares" shall mean (i) Class B shares of the Series that
were sold by the Distributor, plus (ii) Class B shares of the Series
issued in connection with the exchange, for Class B shares of the
Series, of Class B shares of another fund in the New England fund group
that were sold by the Distributor, plus (iii) Class B shares of the
Series issued in connection with the exchange, for Class B shares of
the Series, of Class B shares of another fund in the New England fund
group issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of such other
fund that were sold by the Distributor, plus (iv) Class B shares of the
Series issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of the Series
described in clauses (i), (ii) and (iii). To the extent permitted
under the 1940 Act, the terms of this Section 21 shall survive the
termination of this Agreement.
22. Limitation on Reduction of Class B Distribution Fee. The Trust, on
behalf of the Series, agrees that it will not reduce the Distribution
Fee in respect of Series' assets attributable to Class B shares below
the annual rate of 0.75% unless it has ceased (and not resumed) paying
all "service fees" (within the meaning of Section 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
or any successor provision thereto) to the Distributor, to any
affiliate of the Distributor and to any other person in circumstances
where substantially all of the services and functions relating to the
distribution of Class B Series shares have been delegated to, or are
being performed by, the Distributor or an affiliate of the
Distributor. To the extent permitted under the 1940 Act, the terms of
this Section 22 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England
Government Securities Fund series
By /s/ Frank Nesvet
---------------------------
Frank Nesvet, Treasurer
NEW ENGLAND FUNDS, L.P.
By: NEF Corporation, its general partner
By /s/ Bruce R. Speca
---------------------------
Bruce R. Speca, Executive Vice President
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust I (the "Trust") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Trust's New England Government Securities Fund series (the
"Series") on behalf of the Trust by officers of the Trust as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders of the Trust
individually but are binding only upon the assets and property of the Series.
<PAGE>
Exhibit (e)(9)
NEW ENGLAND STRATEGIC INCOME FUND
DISTRIBUTION AGREEMENT
AGREEMENT made this 30th day of August, 1996 by and between NEW ENGLAND
FUNDS TRUST I, a Massachusetts business trust (the "Trust"), and NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership (the "Distributor").
W I T N E S S E T H:
WHEREAS, this Agreement has been approved by the Trustees of the Trust in
contemplation of the transfer by the Distributor of its rights to receive the
Class B Distribution Fee (as defined in the Class B Distribution and Service
Plan attached hereto as Exhibit A) and/or contingent deferred sales charges to a
financing party in order to raise funds to cover distribution expenditures;
WHEREAS, the Trustees of the Trust recognize the importance to the Trust
of the Distributor being able to obtain financing with which to pay commissions
on Class B shares at the time of sale;
WHEREAS, the Trustees of the Trust acknowledge that by providing financing
to the Distributor the financing party enables the Distributor to provide
valuable services to the Series (as defined below); and
WHEREAS, the Trustees of the Trust, in the context of considering the best
interests of the Series and its shareholders at the time of and in preparation
for any vote, consent or other action that the Trustees of the Trust may from
time to time take relating to the continued receipt by the Distributor (and/or
the financing party) of the Distribution Fee, intend to consider the effect on
the Distributor and any financing party of any such vote, consent or action.
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Trust and the Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
distributor of shares of beneficial interest ("Series shares") of the
Trust's New England Strategic Income Fund series (the "Series") during the
term of this Agreement. The Trust reserves the right, however, to refuse
at any time or times to sell any Series shares hereunder for any reason
deemed adequate by the Board of Trustees of the Trust.
2. Sale and Payment. Under this agreement, the following provisions shall
apply with respect to the sale of and payment for Series shares:
(a) The Distributor shall have the right, as principal, to purchase
Series shares from the Trust at their net asset value and to sell
such shares to the public against orders therefor at the applicable
public offering price, as defined in Section 4 hereof. The
Distributor shall also have the right, as principal, to sell shares
to dealers against orders therefor at the public offering price less
a concession determined by the Distributor.
(b) Prior to the time of delivery of any shares by the Trust to, or on
the order of, the Distributor, the Distributor shall pay or cause to
be paid to the Trust or to its order an amount in Boston or New York
clearing house funds equal to the applicable net asset value of such
shares. The Distributor shall retain so much of any sales charge or
underwriting discount as is not allowed by it as a concession to
dealers.
3. Fees. For its services as general distributor of the Class B Series
shares, the Trust shall cause the Series to pay to the Distributor (or
its designee or transferee) in addition to the sales charge, if any,
referred to in Section 4 below, the Class B Distribution Fee at the
rate and upon the terms and conditions set forth in the Class B
Distribution and Service Plan attached as Exhibit A hereto, and as
amended from time to time, and the Distributor shall also be entitled
to receive any contingent deferred sales charges that may be payable
upon redemption or repurchase of Class B Series shares. The Class B
Distribution Fee shall be accrued daily and paid monthly to the
Distributor (or, at its direction, to its designee or transferee) as
soon as practicable after the end of the calendar month in which it
accrues, but in any event within five business days following the last
day of the month. So long as this agreement and the Class B
Distribution and Service Plan have not been terminated in accordance
with their respective terms, the Series' obligation to pay the Class B
Distribution Fee to the Distributor shall be absolute and unconditional
and shall not be subject to any dispute, offset, counterclaim or
defense whatsoever (it being understood that nothing in this sentence
shall be deemed a waiver by the Trust or the Series of its right
separately to pursue any claims it may have against the Distributor and
to enforce such claims against any assets (other than its rights to be
paid the Class B Distribution Fee and to be paid contingent deferred
sales charges with respect to Class B Series shares) of the
Distributor).
4. Public Offering Price. The public offering price shall be the net
asset value of Series shares, plus any applicable sales charge, all as
set forth in the current prospectus and statement of additional
information ("prospectus") of the Trust relating to the Series shares.
In no event shall the public offering price exceed 1000/935 of such net
asset value, and in no event shall any applicable sales charge or
underwriting discount exceed 6.5% of the public offering price. The
net asset value of Series shares shall be determined in accordance with
the provisions of the agreement and declaration of trust and by-laws of
the Trust and the current prospectus of the Trust relating to the
Series shares.
5. Trust Issuance of Series Shares. The delivery of Series shares shall
be made promptly by a credit to a shareholder's open account for the
Series or by delivery of a share certificate. The Trust reserves the
right (a) to issue Series shares at any time directly to the
shareholders of the Series as a stock dividend or stock split, (b) to
issue to such shareholders shares of the Series, or rights to subscribe
to shares of the Series, as all or part of any dividend that may be
distributed to shareholders of the Series or as all or part of any
optional or alternative dividend that may be distributed to
shareholders of the Series, and (c) to sell Series shares in accordance
with the current applicable prospectus of the Trust relating to the
Series shares.
6. Redemption or Repurchase. The Distributor shall act as agent for the
Trust in connection with the redemption or repurchase of Series shares
by the Trust to the extent and upon the terms and conditions set forth
in the current applicable prospectus of the Trust relating to the
Series shares, and the Trust agrees to reimburse the Distributor, from
time to time upon demand, for any reasonable expenses incurred in
connection with such redemptions or repurchases. The Trust will remit
to the Distributor any contingent deferred sales charges imposed on
redemptions or repurchases of Series shares (other than Class B shares)
upon the terms and conditions set forth in the then current prospectus
of the Trust. The Trust will also remit to the Distributor (or its
designee or transferee), in addition to the Class B Distribution Fee,
any contingent deferred sales charges imposed on redemptions or
repurchases of Class B shares, in accordance with the Remittance
Agreement attached hereto as Exhibit B.
7. Undertaking Regarding Sales. The Distributor shall use reasonable
efforts to sell Series shares but does not agree hereby to sell any
specific number of Series shares and shall be free to act as
distributor of the shares of other investment companies. Series shares
will be sold by the Distributor only against orders therefor. The
Distributor shall not purchase Series shares from anyone except in
accordance with Sections 2 and 6 and shall not take "long" or "short"
positions in Series shares contrary to the agreement and declaration of
trust or by-laws of the Trust.
8. Compliance. The Distributor shall conform to the Rules of Fair
Practice of the NASD and the sale of securities laws of any
jurisdiction in which it sells, directly or indirectly, any Series
shares. The Distributor agrees to make timely filings, with the
Securities and Exchange Commission in Washington, D.C. (the "SEC"), the
NASD and such other regulatory authorities as may be required, of any
sales literature relating to the Series and intended for distribution
to prospective investors. The Distributor also agrees to furnish to
the Trust sufficient copies of any agreements or plans it intends to
use in connection with any sales of Series shares in adequate time for
the Trust to file and clear them with the proper authorities before
they are put in use (which the Trust agrees to use its best efforts to
do as expeditiously as reasonably possible), and not to use them until
so filed and cleared.
9. Registration and Qualification of Series Shares. The Trust agrees to
execute such papers and to do such acts and things as shall from time
to time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Series shares for sale
under the so-called Blue Sky Laws of any state or for maintaining the
registration of the Trust and of the Series shares under the federal
Securities Act of 1933 and the federal Investment Company Act of 1940
(the "1940 Act"), to the end that there will be available for sale from
time to time such number of Series shares as the Distributor may
reasonably be expected to sell. The Trust shall advise the Distributor
promptly of (a) any action of the SEC or any authorities of any state
or territory, of which it may be advised, affecting registration or
qualification of the Trust or the Series shares, or rights to offer
Series shares for sale, and (b) the happening of any event which makes
untrue any statement or which requires the making of any change in the
Trust's registration statement or its prospectus relating to the Series
shares in order to make the statements therein not misleading.
10. Distributor Independent Contractor. The Distributor shall be an
independent contractor and neither the Distributor nor any of its
officers or employees as such is or shall be an employee of the Trust.
The Distributor is responsible for its own conduct and the employment,
control and conduct of its agents and employees and for injury to such
agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees
under applicable statutes and agrees to pay all employer taxes
thereunder.
11. Expenses Paid by Distributor. While the Distributor continues to act as
agent of the Trust to obtain subscriptions for and to sell Series shares,
the Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Series shares for sale, and all
other copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Series shares for sale.
12. Interests in and of Distributor. It is understood that any of the
shareholders, trustees, officers, employees and agents of the Trust may
be a shareholder, director, officer, employee or agent of, or be
otherwise interested in, the Distributor, any affiliated person of the
Distributor, any organization in which the Distributor may have an
interest or any organization which may have an interest in the
Distributor; that the Distributor, any such affiliated person or any
such organization may have an interest in the Trust; and that the
existence of any such dual interest shall not affect the validity
hereof or of any transaction hereunder except as otherwise provided in
the agreement and declaration of trust or by-laws of the Trust, in the
limited partnership agreement of the Distributor or by specific
provision of applicable law.
13. Words "New England" and Letters "TNE". The Distributor and/or its
parent organization and New England Investment Companies, L.P.
("NEIC"), retain proprietary rights in the words "New England" and the
letters "TNE", which may be used by the Trust and the Series only with
the consent of the Distributor, which is authorized by NEIC to give
such consent as provided herein. The Distributor consents to the use
by the Series of the name "New England Capital Growth Fund" or any
other name embodying the words "New England" or the letters "TNE", in
such forms as the Distributor shall in writing approve, but only on
condition and so long as (i) this Agreement shall remain in full force
and (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it. No such name shall be used by the
Trust or the Series at any time or in any place or for any purposes or
under any conditions except as in this section provided. The foregoing
authorization by the Distributor as agent of NEIC to the Trust and the
Series to use said words or letters as part of a business or name is
not exclusive of the right of the Distributor itself to use, or to
authorize others to use, the same; the Trust acknowledges and agrees
that as between the Distributor and the Trust and the Series, the
Distributor has the exclusive right so to use, or authorize others to
use, said words and letters, and the Trust agrees to take such action
as may reasonably be requested by the Distributor to give full effect
to the provisions of this section (including, without limitation,
consenting to such use of said words or letters). Without limiting the
generality of the foregoing, the Trust agrees that, upon any
termination of this Agreement by either party or upon the violation of
any of its provisions by the Trust, the Trust will, at the request of
the Distributor made within six months after the Distributor has
knowledge of such termination or violation, use its best efforts to
change the name of the Trust and the Series so as to eliminate all
reference, if any, to the words "New England" or the letters "TNE" and
will not thereafter transact any business in a name containing the
words "New England" or the letters "TNE" in any form or combination
whatsoever, or designate itself as the same entity as or successor to
any entity of such name, or otherwise use the words "New England" or
the letters "TNE" or any other reference to the Distributor. Such
covenants on the part of the Trust and the Series shall be binding upon
it, its trustees, officers, shareholders, creditors and all other
persons claiming under or through it.
14. Effective Date and Termination. This Agreement shall become effective as
of the date of its execution, and
(a) Unless otherwise terminated, this Agreement shall continue in
effect with respect to the shares of the Series so long as such
continuation is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by the vote of a majority
of the votes which may be cast by shareholders of the Series and
(ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the
Trust, cast in person at a meeting called for the purpose of
voting on such approval.
(b) This Agreement may at any time be terminated on sixty days' notice
to the Distributor either by vote of a majority of the Trust's Board
of Trustees then in office or by the vote of a majority of the votes
which may be cast by shareholders of the Series.
(c) This Agreement shall automatically terminate in the event of its
assignment (excluding for this purpose any assignment of rights to
payment described in the recitals and in Section 19 of the Agreement
which are hereby ratified and approved).
(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
15. Definitions. For purposes of this Agreement, the following definitions
shall apply:
(a) The "vote of a majority of the votes which may be cast by
shareholders of the Series" means (1) 67% or more of the votes of
the Series present (in person or by proxy) and entitled to vote
at such meeting, if the holders of more than 50% of the
outstanding shares of the Series entitled to vote at such meeting
are present; or (2) the vote of the holders of more than 50% of
the outstanding shares of the Series entitled to vote at such
meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC
under the 1940 Act.
16. Amendment. This Agreement may be amended at any time by mutual consent
of the parties, provided that such consent on the part of the Series
shall be approved (i) by the Board of Trustees of the Trust or by vote
of a majority of the votes which may be cast by shareholders of the
Series and (ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the Trust
cast in person at a meeting called for the purpose of voting on such
approval.
17. Applicable Law and Liabilities. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the Series
shares shall pass, in Boston, Massachusetts.
18. Limited Recourse. The Distributor hereby acknowledges that the Trust's
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Series.
19. Payments to Distributor's Transferees. The Distributor may transfer
its rights to payments hereunder with respect to Class B shares (but
not its obligations hereunder) in order to raise funds to cover
distribution expenditures, and any such transfer shall be effective
upon written notice from the Distributor to the Trust. In connection
with the foregoing, the Series is authorized to pay all or a part of
the Distribution Fee and/or contingent deferred sales charges in
respect of Class B shares directly to such transferee as directed by
the Distributor.
20. Liquidation etc. As long as the Class B Distribution and Service Plan
is in effect, the Series shall not change the manner in which the
Distribution Fee is computed (except as may be required by a change in
applicable law after the date hereof) or adopt a plan of liquidation
without the consent of the Distributor (or any designee or transferee
of the Distributor's rights to receive payment hereunder in respect of
Class B shares) except in circumstances where a surviving entity or
transferee of the Series' assets adopts the Class B Distribution and
Service Plan and assumes the obligations of the Series to make payments
to the Distributor (or its transferee) hereunder in respect of Class B
shares.
21. "Distributor's Shares" etc. The Trust, on behalf of the Series, agrees
that it will not pay any portion of the Class B Distribution Fee which
is calculated by reference to the "Distributor's Shares" (nor shall it
pay a Distribution Fee calculated by reference to Class B shares
("Other Class B Shares") other than the Distributor's Shares at a rate
exceeding .75% per annum of the net assets attributable to Other Class
B Shares) to any person other than the Distributor (or its designee or
transferee) without the written consent of the Distributor.
"Distributor's Shares" shall mean (i) Class B shares of the Series that
were sold by the Distributor, plus (ii) Class B shares of the Series
issued in connection with the exchange, for Class B shares of the
Series, of Class B shares of another fund in the New England fund group
that were sold by the Distributor, plus (iii) Class B shares of the
Series issued in connection with the exchange, for Class B shares of
the Series, of Class B shares of another fund in the New England fund
group issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of such other
fund that were sold by the Distributor, plus (iv) Class B shares of the
Series issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of the Series
described in clauses (i), (ii) and (iii). To the extent permitted
under the 1940 Act, the terms of this Section 21 shall survive the
termination of this Agreement.
22. Limitation on Reduction of Class B Distribution Fee. The Trust, on
behalf of the Series, agrees that it will not reduce the Distribution
Fee in respect of Series' assets attributable to Class B shares below
the annual rate of 0.75% unless it has ceased (and not resumed) paying
all "service fees" (within the meaning of Section 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
or any successor provision thereto) to the Distributor, to any
affiliate of the Distributor and to any other person in circumstances
where substantially all of the services and functions relating to the
distribution of Class B Series shares have been delegated to, or are
being performed by, the Distributor or an affiliate of the
Distributor. To the extent permitted under the 1940 Act, the terms of
this Section 22 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England
Strategic Income Fund series
By /s/ Frank Nesvet
---------------------------
Frank Nesvet, Treasurer
NEW ENGLAND FUNDS, L.P.
By: NEF Corporation, its general partner
By /s/ Bruce R. Speca
---------------------------
Bruce R. Speca, Executive Vice President
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust I (the "Trust") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Trust's New England Strategic Income Fund series (the "Series")
on behalf of the Trust by officers of the Trust as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any of the trustees, officers or shareholders of the Trust individually but
are binding only upon the assets and property of the Series.
<PAGE>
Exhibit (e)(10)
NEW ENGLAND BOND INCOME FUND
DISTRIBUTION AGREEMENT
AGREEMENT made this 30th day of August, 1996 by and between NEW ENGLAND
FUNDS TRUST I, a Massachusetts business trust (the "Trust"), and NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership (the "Distributor").
W I T N E S S E T H:
WHEREAS, this Agreement has been approved by the Trustees of the Trust in
contemplation of the transfer by the Distributor of its rights to receive the
Class B Distribution Fee (as defined in the Class B Distribution and Service
Plan attached hereto as Exhibit A) and/or contingent deferred sales charges to a
financing party in order to raise funds to cover distribution expenditures;
WHEREAS, the Trustees of the Trust recognize the importance to the Trust
of the Distributor being able to obtain financing with which to pay commissions
on Class B shares at the time of sale;
WHEREAS, the Trustees of the Trust acknowledge that by providing financing
to the Distributor the financing party enables the Distributor to provide
valuable services to the Series (as defined below); and
WHEREAS, the Trustees of the Trust, in the context of considering the best
interests of the Series and its shareholders at the time of and in preparation
for any vote, consent or other action that the Trustees of the Trust may from
time to time take relating to the continued receipt by the Distributor (and/or
the financing party) of the Distribution Fee, intend to consider the effect on
the Distributor and any financing party of any such vote, consent or action.
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Trust and the Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
distributor of shares of beneficial interest ("Series shares") of the
Trust's New England Bond Income Fund series (the "Series") during the term
of this Agreement. The Trust reserves the right, however, to refuse at any
time or times to sell any Series shares hereunder for any reason deemed
adequate by the Board of Trustees of the Trust.
2. Sale and Payment. Under this agreement, the following provisions shall
apply with respect to the sale of and payment for Series shares:
(a) The Distributor shall have the right, as principal, to purchase
Series shares from the Trust at their net asset value and to sell
such shares to the public against orders therefor at the applicable
public offering price, as defined in Section 4 hereof. The
Distributor shall also have the right, as principal, to sell shares
to dealers against orders therefor at the public offering price less
a concession determined by the Distributor.
(b) Prior to the time of delivery of any shares by the Trust to, or on
the order of, the Distributor, the Distributor shall pay or cause to
be paid to the Trust or to its order an amount in Boston or New York
clearing house funds equal to the applicable net asset value of such
shares. The Distributor shall retain so much of any sales charge or
underwriting discount as is not allowed by it as a concession to
dealers.
3. Fees. For its services as general distributor of the Class B Series
shares, the Trust shall cause the Series to pay to the Distributor (or
its designee or transferee) in addition to the sales charge, if any,
referred to in Section 4 below, the Class B Distribution Fee at the
rate and upon the terms and conditions set forth in the Class B
Distribution and Service Plan attached as Exhibit A hereto, and as
amended from time to time, and the Distributor shall also be entitled
to receive any contingent deferred sales charges that may be payable
upon redemption or repurchase of Class B Series shares. The Class B
Distribution Fee shall be accrued daily and paid monthly to the
Distributor (or, at its direction, to its designee or transferee) as
soon as practicable after the end of the calendar month in which it
accrues, but in any event within five business days following the last
day of the month. So long as this agreement and the Class B
Distribution and Service Plan have not been terminated in accordance
with their respective terms, the Series' obligation to pay the Class B
Distribution Fee to the Distributor shall be absolute and unconditional
and shall not be subject to any dispute, offset, counterclaim or
defense whatsoever (it being understood that nothing in this sentence
shall be deemed a waiver by the Trust or the Series of its right
separately to pursue any claims it may have against the Distributor and
to enforce such claims against any assets (other than its rights to be
paid the Class B Distribution Fee and to be paid contingent deferred
sales charges with respect to Class B Series shares) of the
Distributor).
4. Public Offering Price. The public offering price shall be the net
asset value of Series shares, plus any applicable sales charge, all as
set forth in the current prospectus and statement of additional
information ("prospectus") of the Trust relating to the Series shares.
In no event shall the public offering price exceed 1000/935 of such net
asset value, and in no event shall any applicable sales charge or
underwriting discount exceed 6.5% of the public offering price. The
net asset value of Series shares shall be determined in accordance with
the provisions of the agreement and declaration of trust and by-laws of
the Trust and the current prospectus of the Trust relating to the
Series shares.
5. Trust Issuance of Series Shares. The delivery of Series shares shall
be made promptly by a credit to a shareholder's open account for the
Series or by delivery of a share certificate. The Trust reserves the
right (a) to issue Series shares at any time directly to the
shareholders of the Series as a stock dividend or stock split, (b) to
issue to such shareholders shares of the Series, or rights to subscribe
to shares of the Series, as all or part of any dividend that may be
distributed to shareholders of the Series or as all or part of any
optional or alternative dividend that may be distributed to
shareholders of the Series, and (c) to sell Series shares in accordance
with the current applicable prospectus of the Trust relating to the
Series shares.
6. Redemption or Repurchase. The Distributor shall act as agent for the
Trust in connection with the redemption or repurchase of Series shares
by the Trust to the extent and upon the terms and conditions set forth
in the current applicable prospectus of the Trust relating to the
Series shares, and the Trust agrees to reimburse the Distributor, from
time to time upon demand, for any reasonable expenses incurred in
connection with such redemptions or repurchases. The Trust will remit
to the Distributor any contingent deferred sales charges imposed on
redemptions or repurchases of Series shares (other than Class B shares)
upon the terms and conditions set forth in the then current prospectus
of the Trust. The Trust will also remit to the Distributor (or its
designee or transferee), in addition to the Class B Distribution Fee,
any contingent deferred sales charges imposed on redemptions or
repurchases of Class B shares, in accordance with the Remittance
Agreement attached hereto as Exhibit B.
7. Undertaking Regarding Sales. The Distributor shall use reasonable
efforts to sell Series shares but does not agree hereby to sell any
specific number of Series shares and shall be free to act as
distributor of the shares of other investment companies. Series shares
will be sold by the Distributor only against orders therefor. The
Distributor shall not purchase Series shares from anyone except in
accordance with Sections 2 and 6 and shall not take "long" or "short"
positions in Series shares contrary to the agreement and declaration of
trust or by-laws of the Trust.
8. Compliance. The Distributor shall conform to the Rules of Fair
Practice of the NASD and the sale of securities laws of any
jurisdiction in which it sells, directly or indirectly, any Series
shares. The Distributor agrees to make timely filings, with the
Securities and Exchange Commission in Washington, D.C. (the "SEC"), the
NASD and such other regulatory authorities as may be required, of any
sales literature relating to the Series and intended for distribution
to prospective investors. The Distributor also agrees to furnish to
the Trust sufficient copies of any agreements or plans it intends to
use in connection with any sales of Series shares in adequate time for
the Trust to file and clear them with the proper authorities before
they are put in use (which the Trust agrees to use its best efforts to
do as expeditiously as reasonably possible), and not to use them until
so filed and cleared.
9. Registration and Qualification of Series Shares. The Trust agrees to
execute such papers and to do such acts and things as shall from time
to time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Series shares for sale
under the so-called Blue Sky Laws of any state or for maintaining the
registration of the Trust and of the Series shares under the federal
Securities Act of 1933 and the federal Investment Company Act of 1940
(the "1940 Act"), to the end that there will be available for sale from
time to time such number of Series shares as the Distributor may
reasonably be expected to sell. The Trust shall advise the Distributor
promptly of (a) any action of the SEC or any authorities of any state
or territory, of which it may be advised, affecting registration or
qualification of the Trust or the Series shares, or rights to offer
Series shares for sale, and (b) the happening of any event which makes
untrue any statement or which requires the making of any change in the
Trust's registration statement or its prospectus relating to the Series
shares in order to make the statements therein not misleading.
10. Distributor Independent Contractor. The Distributor shall be an
independent contractor and neither the Distributor nor any of its
officers or employees as such is or shall be an employee of the Trust.
The Distributor is responsible for its own conduct and the employment,
control and conduct of its agents and employees and for injury to such
agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees
under applicable statutes and agrees to pay all employer taxes
thereunder.
11. Expenses Paid by Distributor. While the Distributor continues to act as
agent of the Trust to obtain subscriptions for and to sell Series shares,
the Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Series shares for sale, and all
other copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Series shares for sale.
12. Interests in and of Distributor. It is understood that any of the
shareholders, trustees, officers, employees and agents of the Trust may
be a shareholder, director, officer, employee or agent of, or be
otherwise interested in, the Distributor, any affiliated person of the
Distributor, any organization in which the Distributor may have an
interest or any organization which may have an interest in the
Distributor; that the Distributor, any such affiliated person or any
such organization may have an interest in the Trust; and that the
existence of any such dual interest shall not affect the validity
hereof or of any transaction hereunder except as otherwise provided in
the agreement and declaration of trust or by-laws of the Trust, in the
limited partnership agreement of the Distributor or by specific
provision of applicable law.
13. Words "New England" and Letters "TNE". The Distributor and/or its
parent organization and New England Investment Companies, L.P.
("NEIC"), retain proprietary rights in the words "New England" and the
letters "TNE", which may be used by the Trust and the Series only with
the consent of the Distributor, which is authorized by NEIC to give
such consent as provided herein. The Distributor consents to the use
by the Series of the name "New England Capital Growth Fund" or any
other name embodying the words "New England" or the letters "TNE", in
such forms as the Distributor shall in writing approve, but only on
condition and so long as (i) this Agreement shall remain in full force
and (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it. No such name shall be used by the
Trust or the Series at any time or in any place or for any purposes or
under any conditions except as in this section provided. The foregoing
authorization by the Distributor as agent of NEIC to the Trust and the
Series to use said words or letters as part of a business or name is
not exclusive of the right of the Distributor itself to use, or to
authorize others to use, the same; the Trust acknowledges and agrees
that as between the Distributor and the Trust and the Series, the
Distributor has the exclusive right so to use, or authorize others to
use, said words and letters, and the Trust agrees to take such action
as may reasonably be requested by the Distributor to give full effect
to the provisions of this section (including, without limitation,
consenting to such use of said words or letters). Without limiting the
generality of the foregoing, the Trust agrees that, upon any
termination of this Agreement by either party or upon the violation of
any of its provisions by the Trust, the Trust will, at the request of
the Distributor made within six months after the Distributor has
knowledge of such termination or violation, use its best efforts to
change the name of the Trust and the Series so as to eliminate all
reference, if any, to the words "New England" or the letters "TNE" and
will not thereafter transact any business in a name containing the
words "New England" or the letters "TNE" in any form or combination
whatsoever, or designate itself as the same entity as or successor to
any entity of such name, or otherwise use the words "New England" or
the letters "TNE" or any other reference to the Distributor. Such
covenants on the part of the Trust and the Series shall be binding upon
it, its trustees, officers, shareholders, creditors and all other
persons claiming under or through it.
14. Effective Date and Termination. This Agreement shall become effective as
of the date of its execution, and
(a) Unless otherwise terminated, this Agreement shall continue in
effect with respect to the shares of the Series so long as such
continuation is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by the vote of a majority
of the votes which may be cast by shareholders of the Series and
(ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the
Trust, cast in person at a meeting called for the purpose of
voting on such approval.
(b) This Agreement may at any time be terminated on sixty days' notice
to the Distributor either by vote of a majority of the Trust's Board
of Trustees then in office or by the vote of a majority of the votes
which may be cast by shareholders of the Series.
(c) This Agreement shall automatically terminate in the event of its
assignment (excluding for this purpose any assignment of rights to
payment described in the recitals and in Section 19 of the Agreement
which are hereby ratified and approved).
(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
15. Definitions. For purposes of this Agreement, the following definitions
shall apply:
(a) The "vote of a majority of the votes which may be cast by
shareholders of the Series" means (1) 67% or more of the votes of
the Series present (in person or by proxy) and entitled to vote
at such meeting, if the holders of more than 50% of the
outstanding shares of the Series entitled to vote at such meeting
are present; or (2) the vote of the holders of more than 50% of
the outstanding shares of the Series entitled to vote at such
meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC
under the 1940 Act.
16. Amendment. This Agreement may be amended at any time by mutual consent
of the parties, provided that such consent on the part of the Series
shall be approved (i) by the Board of Trustees of the Trust or by vote
of a majority of the votes which may be cast by shareholders of the
Series and (ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the Trust
cast in person at a meeting called for the purpose of voting on such
approval.
17. Applicable Law and Liabilities. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the Series
shares shall pass, in Boston, Massachusetts.
18. Limited Recourse. The Distributor hereby acknowledges that the Trust's
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Series.
19. Payments to Distributor's Transferees. The Distributor may transfer
its rights to payments hereunder with respect to Class B shares (but
not its obligations hereunder) in order to raise funds to cover
distribution expenditures, and any such transfer shall be effective
upon written notice from the Distributor to the Trust. In connection
with the foregoing, the Series is authorized to pay all or a part of
the Distribution Fee and/or contingent deferred sales charges in
respect of Class B shares directly to such transferee as directed by
the Distributor.
20. Liquidation etc. As long as the Class B Distribution and Service Plan
is in effect, the Series shall not change the manner in which the
Distribution Fee is computed (except as may be required by a change in
applicable law after the date hereof) or adopt a plan of liquidation
without the consent of the Distributor (or any designee or transferee
of the Distributor's rights to receive payment hereunder in respect of
Class B shares) except in circumstances where a surviving entity or
transferee of the Series' assets adopts the Class B Distribution and
Service Plan and assumes the obligations of the Series to make payments
to the Distributor (or its transferee) hereunder in respect of Class B
shares.
21. "Distributor's Shares" etc. The Trust, on behalf of the Series, agrees
that it will not pay any portion of the Class B Distribution Fee which
is calculated by reference to the "Distributor's Shares" (nor shall it
pay a Distribution Fee calculated by reference to Class B shares
("Other Class B Shares") other than the Distributor's Shares at a rate
exceeding .75% per annum of the net assets attributable to Other Class
B Shares) to any person other than the Distributor (or its designee or
transferee) without the written consent of the Distributor.
"Distributor's Shares" shall mean (i) Class B shares of the Series that
were sold by the Distributor, plus (ii) Class B shares of the Series
issued in connection with the exchange, for Class B shares of the
Series, of Class B shares of another fund in the New England fund group
that were sold by the Distributor, plus (iii) Class B shares of the
Series issued in connection with the exchange, for Class B shares of
the Series, of Class B shares of another fund in the New England fund
group issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of such other
fund that were sold by the Distributor, plus (iv) Class B shares of the
Series issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of the Series
described in clauses (i), (ii) and (iii). To the extent permitted
under the 1940 Act, the terms of this Section 21 shall survive the
termination of this Agreement.
22. Limitation on Reduction of Class B Distribution Fee. The Trust, on
behalf of the Series, agrees that it will not reduce the Distribution
Fee in respect of Series' assets attributable to Class B shares below
the annual rate of 0.75% unless it has ceased (and not resumed) paying
all "service fees" (within the meaning of Section 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
or any successor provision thereto) to the Distributor, to any
affiliate of the Distributor and to any other person in circumstances
where substantially all of the services and functions relating to the
distribution of Class B Series shares have been delegated to, or are
being performed by, the Distributor or an affiliate of the
Distributor. To the extent permitted under the 1940 Act, the terms of
this Section 22 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Bond Income
Fund series
By /s/ Frank Nesvet
---------------------------
Frank Nesvet, Treasurer
NEW ENGLAND FUNDS, L.P.
By: NEF Corporation, its general partner
By /s/ Bruce R. Speca
---------------------------
Bruce R. Speca
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust I (the "Trust") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Trust's New England Bond Income Fund series (the "Series") on
behalf of the Trust by officers of the Trust as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any of the trustees, officers or shareholders of the Trust individually but
are binding only upon the assets and property of the Series.
<PAGE>
Exhibit (e)(11)
NEW ENGLAND MUNICIPAL INCOME FUND
DISTRIBUTION AGREEMENT
AGREEMENT made this 30th day of August, 1996 by and between NEW ENGLAND
FUNDS TRUST I, a Massachusetts business trust (the "Trust"), and NEW ENGLAND
FUNDS, L.P., a Delaware limited partnership (the "Distributor").
W I T N E S S E T H:
WHEREAS, this Agreement has been approved by the Trustees of the Trust in
contemplation of the transfer by the Distributor of its rights to receive the
Class B Distribution Fee (as defined in the Class B Distribution and Service
Plan attached hereto as Exhibit A) and/or contingent deferred sales charges to a
financing party in order to raise funds to cover distribution expenditures;
WHEREAS, the Trustees of the Trust recognize the importance to the Trust
of the Distributor being able to obtain financing with which to pay commissions
on Class B shares at the time of sale;
WHEREAS, the Trustees of the Trust acknowledge that by providing financing
to the Distributor the financing party enables the Distributor to provide
valuable services to the Series (as defined below); and
WHEREAS, the Trustees of the Trust, in the context of considering the best
interests of the Series and its shareholders at the time of and in preparation
for any vote, consent or other action that the Trustees of the Trust may from
time to time take relating to the continued receipt by the Distributor (and/or
the financing party) of the Distribution Fee, intend to consider the effect on
the Distributor and any financing party of any such vote, consent or action.
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Trust and the Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
distributor of shares of beneficial interest ("Series shares") of the
Trust's New England Municipal Income Fund series (the "Series") during the
term of this Agreement. The Trust reserves the right, however, to refuse
at any time or times to sell any Series shares hereunder for any reason
deemed adequate by the Board of Trustees of the Trust.
2. Sale and Payment. Under this agreement, the following provisions shall
apply with respect to the sale of and payment for Series shares:
(a) The Distributor shall have the right, as principal, to purchase
Series shares from the Trust at their net asset value and to sell
such shares to the public against orders therefor at the applicable
public offering price, as defined in Section 4 hereof. The
Distributor shall also have the right, as principal, to sell shares
to dealers against orders therefor at the public offering price less
a concession determined by the Distributor.
(b) Prior to the time of delivery of any shares by the Trust to, or on
the order of, the Distributor, the Distributor shall pay or cause to
be paid to the Trust or to its order an amount in Boston or New York
clearing house funds equal to the applicable net asset value of such
shares. The Distributor shall retain so much of any sales charge or
underwriting discount as is not allowed by it as a concession to
dealers.
3. Fees. For its services as general distributor of the Class B Series
shares, the Trust shall cause the Series to pay to the Distributor (or
its designee or transferee) in addition to the sales charge, if any,
referred to in Section 4 below, the Class B Distribution Fee at the
rate and upon the terms and conditions set forth in the Class B
Distribution and Service Plan attached as Exhibit A hereto, and as
amended from time to time, and the Distributor shall also be entitled
to receive any contingent deferred sales charges that may be payable
upon redemption or repurchase of Class B Series shares. The Class B
Distribution Fee shall be accrued daily and paid monthly to the
Distributor (or, at its direction, to its designee or transferee) as
soon as practicable after the end of the calendar month in which it
accrues, but in any event within five business days following the last
day of the month. So long as this agreement and the Class B
Distribution and Service Plan have not been terminated in accordance
with their respective terms, the Series' obligation to pay the Class B
Distribution Fee to the Distributor shall be absolute and unconditional
and shall not be subject to any dispute, offset, counterclaim or
defense whatsoever (it being understood that nothing in this sentence
shall be deemed a waiver by the Trust or the Series of its right
separately to pursue any claims it may have against the Distributor and
to enforce such claims against any assets (other than its rights to be
paid the Class B Distribution Fee and to be paid contingent deferred
sales charges with respect to Class B Series shares) of the
Distributor).
4. Public Offering Price. The public offering price shall be the net
asset value of Series shares, plus any applicable sales charge, all as
set forth in the current prospectus and statement of additional
information ("prospectus") of the Trust relating to the Series shares.
In no event shall the public offering price exceed 1000/935 of such net
asset value, and in no event shall any applicable sales charge or
underwriting discount exceed 6.5% of the public offering price. The
net asset value of Series shares shall be determined in accordance with
the provisions of the agreement and declaration of trust and by-laws of
the Trust and the current prospectus of the Trust relating to the
Series shares.
5. Trust Issuance of Series Shares. The delivery of Series shares shall
be made promptly by a credit to a shareholder's open account for the
Series or by delivery of a share certificate. The Trust reserves the
right (a) to issue Series shares at any time directly to the
shareholders of the Series as a stock dividend or stock split, (b) to
issue to such shareholders shares of the Series, or rights to subscribe
to shares of the Series, as all or part of any dividend that may be
distributed to shareholders of the Series or as all or part of any
optional or alternative dividend that may be distributed to
shareholders of the Series, and (c) to sell Series shares in accordance
with the current applicable prospectus of the Trust relating to the
Series shares.
6. Redemption or Repurchase. The Distributor shall act as agent for the
Trust in connection with the redemption or repurchase of Series shares
by the Trust to the extent and upon the terms and conditions set forth
in the current applicable prospectus of the Trust relating to the
Series shares, and the Trust agrees to reimburse the Distributor, from
time to time upon demand, for any reasonable expenses incurred in
connection with such redemptions or repurchases. The Trust will remit
to the Distributor any contingent deferred sales charges imposed on
redemptions or repurchases of Series shares (other than Class B shares)
upon the terms and conditions set forth in the then current prospectus
of the Trust. The Trust will also remit to the Distributor (or its
designee or transferee), in addition to the Class B Distribution Fee,
any contingent deferred sales charges imposed on redemptions or
repurchases of Class B shares, in accordance with the Remittance
Agreement attached hereto as Exhibit B.
7. Undertaking Regarding Sales. The Distributor shall use reasonable
efforts to sell Series shares but does not agree hereby to sell any
specific number of Series shares and shall be free to act as
distributor of the shares of other investment companies. Series shares
will be sold by the Distributor only against orders therefor. The
Distributor shall not purchase Series shares from anyone except in
accordance with Sections 2 and 6 and shall not take "long" or "short"
positions in Series shares contrary to the agreement and declaration of
trust or by-laws of the Trust.
8. Compliance. The Distributor shall conform to the Rules of Fair
Practice of the NASD and the sale of securities laws of any
jurisdiction in which it sells, directly or indirectly, any Series
shares. The Distributor agrees to make timely filings, with the
Securities and Exchange Commission in Washington, D.C. (the "SEC"), the
NASD and such other regulatory authorities as may be required, of any
sales literature relating to the Series and intended for distribution
to prospective investors. The Distributor also agrees to furnish to
the Trust sufficient copies of any agreements or plans it intends to
use in connection with any sales of Series shares in adequate time for
the Trust to file and clear them with the proper authorities before
they are put in use (which the Trust agrees to use its best efforts to
do as expeditiously as reasonably possible), and not to use them until
so filed and cleared.
9. Registration and Qualification of Series Shares. The Trust agrees to
execute such papers and to do such acts and things as shall from time
to time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Series shares for sale
under the so-called Blue Sky Laws of any state or for maintaining the
registration of the Trust and of the Series shares under the federal
Securities Act of 1933 and the federal Investment Company Act of 1940
(the "1940 Act"), to the end that there will be available for sale from
time to time such number of Series shares as the Distributor may
reasonably be expected to sell. The Trust shall advise the Distributor
promptly of (a) any action of the SEC or any authorities of any state
or territory, of which it may be advised, affecting registration or
qualification of the Trust or the Series shares, or rights to offer
Series shares for sale, and (b) the happening of any event which makes
untrue any statement or which requires the making of any change in the
Trust's registration statement or its prospectus relating to the Series
shares in order to make the statements therein not misleading.
10. Distributor Independent Contractor. The Distributor shall be an
independent contractor and neither the Distributor nor any of its
officers or employees as such is or shall be an employee of the Trust.
The Distributor is responsible for its own conduct and the employment,
control and conduct of its agents and employees and for injury to such
agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees
under applicable statutes and agrees to pay all employer taxes
thereunder.
11. Expenses Paid by Distributor. While the Distributor continues to act as
agent of the Trust to obtain subscriptions for and to sell Series shares,
the Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Series shares for sale, and all
other copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Series shares for sale.
12. Interests in and of Distributor. It is understood that any of the
shareholders, trustees, officers, employees and agents of the Trust may
be a shareholder, director, officer, employee or agent of, or be
otherwise interested in, the Distributor, any affiliated person of the
Distributor, any organization in which the Distributor may have an
interest or any organization which may have an interest in the
Distributor; that the Distributor, any such affiliated person or any
such organization may have an interest in the Trust; and that the
existence of any such dual interest shall not affect the validity
hereof or of any transaction hereunder except as otherwise provided in
the agreement and declaration of trust or by-laws of the Trust, in the
limited partnership agreement of the Distributor or by specific
provision of applicable law.
13. Words "New England" and Letters "TNE". The Distributor and/or its
parent organization and New England Investment Companies, L.P.
("NEIC"), retain proprietary rights in the words "New England" and the
letters "TNE", which may be used by the Trust and the Series only with
the consent of the Distributor, which is authorized by NEIC to give
such consent as provided herein. The Distributor consents to the use
by the Series of the name "New England Capital Growth Fund" or any
other name embodying the words "New England" or the letters "TNE", in
such forms as the Distributor shall in writing approve, but only on
condition and so long as (i) this Agreement shall remain in full force
and (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it. No such name shall be used by the
Trust or the Series at any time or in any place or for any purposes or
under any conditions except as in this section provided. The foregoing
authorization by the Distributor as agent of NEIC to the Trust and the
Series to use said words or letters as part of a business or name is
not exclusive of the right of the Distributor itself to use, or to
authorize others to use, the same; the Trust acknowledges and agrees
that as between the Distributor and the Trust and the Series, the
Distributor has the exclusive right so to use, or authorize others to
use, said words and letters, and the Trust agrees to take such action
as may reasonably be requested by the Distributor to give full effect
to the provisions of this section (including, without limitation,
consenting to such use of said words or letters). Without limiting the
generality of the foregoing, the Trust agrees that, upon any
termination of this Agreement by either party or upon the violation of
any of its provisions by the Trust, the Trust will, at the request of
the Distributor made within six months after the Distributor has
knowledge of such termination or violation, use its best efforts to
change the name of the Trust and the Series so as to eliminate all
reference, if any, to the words "New England" or the letters "TNE" and
will not thereafter transact any business in a name containing the
words "New England" or the letters "TNE" in any form or combination
whatsoever, or designate itself as the same entity as or successor to
any entity of such name, or otherwise use the words "New England" or
the letters "TNE" or any other reference to the Distributor. Such
covenants on the part of the Trust and the Series shall be binding upon
it, its trustees, officers, shareholders, creditors and all other
persons claiming under or through it.
14. Effective Date and Termination. This Agreement shall become effective as
of the date of its execution, and
(a) Unless otherwise terminated, this Agreement shall continue in
effect with respect to the shares of the Series so long as such
continuation is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by the vote of a majority
of the votes which may be cast by shareholders of the Series and
(ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the
Trust, cast in person at a meeting called for the purpose of
voting on such approval.
(b) This Agreement may at any time be terminated on sixty days' notice
to the Distributor either by vote of a majority of the Trust's Board
of Trustees then in office or by the vote of a majority of the votes
which may be cast by shareholders of the Series.
(c) This Agreement shall automatically terminate in the event of its
assignment (excluding for this purpose any assignment of rights to
payment described in the recitals and in Section 19 of the Agreement
which are hereby ratified and approved).
(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
15. Definitions. For purposes of this Agreement, the following definitions
shall apply:
(a) The "vote of a majority of the votes which may be cast by
shareholders of the Series" means (1) 67% or more of the votes of
the Series present (in person or by proxy) and entitled to vote
at such meeting, if the holders of more than 50% of the
outstanding shares of the Series entitled to vote at such meeting
are present; or (2) the vote of the holders of more than 50% of
the outstanding shares of the Series entitled to vote at such
meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC
under the 1940 Act.
16. Amendment. This Agreement may be amended at any time by mutual consent
of the parties, provided that such consent on the part of the Series
shall be approved (i) by the Board of Trustees of the Trust or by vote
of a majority of the votes which may be cast by shareholders of the
Series and (ii) by a vote of a majority of the Board of Trustees of the
Trust who are not interested persons of the Distributor or the Trust
cast in person at a meeting called for the purpose of voting on such
approval.
17. Applicable Law and Liabilities. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the Series
shares shall pass, in Boston, Massachusetts.
18. Limited Recourse. The Distributor hereby acknowledges that the Trust's
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Series.
19. Payments to Distributor's Transferees. The Distributor may transfer
its rights to payments hereunder with respect to Class B shares (but
not its obligations hereunder) in order to raise funds to cover
distribution expenditures, and any such transfer shall be effective
upon written notice from the Distributor to the Trust. In connection
with the foregoing, the Series is authorized to pay all or a part of
the Distribution Fee and/or contingent deferred sales charges in
respect of Class B shares directly to such transferee as directed by
the Distributor.
20. Liquidation etc. As long as the Class B Distribution and Service Plan
is in effect, the Series shall not change the manner in which the
Distribution Fee is computed (except as may be required by a change in
applicable law after the date hereof) or adopt a plan of liquidation
without the consent of the Distributor (or any designee or transferee
of the Distributor's rights to receive payment hereunder in respect of
Class B shares) except in circumstances where a surviving entity or
transferee of the Series' assets adopts the Class B Distribution and
Service Plan and assumes the obligations of the Series to make payments
to the Distributor (or its transferee) hereunder in respect of Class B
shares.
21. "Distributor's Shares" etc. The Trust, on behalf of the Series, agrees
that it will not pay any portion of the Class B Distribution Fee which
is calculated by reference to the "Distributor's Shares" (nor shall it
pay a Distribution Fee calculated by reference to Class B shares
("Other Class B Shares") other than the Distributor's Shares at a rate
exceeding .75% per annum of the net assets attributable to Other Class
B Shares) to any person other than the Distributor (or its designee or
transferee) without the written consent of the Distributor.
"Distributor's Shares" shall mean (i) Class B shares of the Series that
were sold by the Distributor, plus (ii) Class B shares of the Series
issued in connection with the exchange, for Class B shares of the
Series, of Class B shares of another fund in the New England fund group
that were sold by the Distributor, plus (iii) Class B shares of the
Series issued in connection with the exchange, for Class B shares of
the Series, of Class B shares of another fund in the New England fund
group issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of such other
fund that were sold by the Distributor, plus (iv) Class B shares of the
Series issued in respect of the automatic reinvestment of dividends or
capital gain distributions in respect of Class B shares of the Series
described in clauses (i), (ii) and (iii). To the extent permitted
under the 1940 Act, the terms of this Section 21 shall survive the
termination of this Agreement.
22. Limitation on Reduction of Class B Distribution Fee. The Trust, on
behalf of the Series, agrees that it will not reduce the Distribution
Fee in respect of Series' assets attributable to Class B shares below
the annual rate of 0.75% unless it has ceased (and not resumed) paying
all "service fees" (within the meaning of Section 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
or any successor provision thereto) to the Distributor, to any
affiliate of the Distributor and to any other person in circumstances
where substantially all of the services and functions relating to the
distribution of Class B Series shares have been delegated to, or are
being performed by, the Distributor or an affiliate of the
Distributor. To the extent permitted under the 1940 Act, the terms of
this Section 22 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUNDS TRUST I,
on behalf of its New England Municipal Income
Fund series
By /s/ Frank Nesvet
---------------------------
Frank Nesvet, Treasurer
NEW ENGLAND FUNDS, L.P.
By: NEF Corporation, its general partner
By /s/ Bruce R. Speca
---------------------------
Bruce R. Speca, Executive Vice President
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust I (the "Trust") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Trust's New England Municipal Income Fund series (the "Series")
on behalf of the Trust by officers of the Trust as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any of the trustees, officers or shareholders of the Trust individually but
are binding only upon the assets and property of the Series.
<PAGE>
Exhibit (e)(13)
NVEST FUNDS DISTRIBUTOR, L.P.
399 Boylston Street
Boston, Massachusetts 02116
FORM OF DEALER AGREEMENT
As dealer for our own account, we offer to sell to you shares of each of the
Funds distributed by us (the "Funds" and each a "Fund"), each of which Funds we
are a principal underwriter as defined in the Investment Company Act of 1940
(the "Act") and from which we have the right to purchase shares.
With respect to each of the Funds (except for paragraph 4, which applies only
with respect to each Fund having in effect from time to time a service plan or
service and distribution plan adopted pursuant to Rule 12b-1 under the Act):
1. In all sales of shares of the Fund to the public you shall act as dealer for
your own account, and in no transaction shall you have any authority to act as
agent for any of the Funds or for us.
2. Orders received from you will be accepted by us only at the public offering
price applicable to each order, except for transactions to which a reduced
offering price applies as provided in the then current Prospectus (which term as
used herein shall include the Statement of Additional Information) of the Fund.
The minimum dollar purchase of shares of each Fund by any investor shall be the
applicable minimum amount described in the then current Prospectus of the fund
and no order for less than such amount will be accepted hereunder. The public
offering price shall be the net asset value per share plus the sales charge, if
any, applicable to the transaction, expressed as a percentage of the public
offering price, as determined and effective as of the time specified in the then
current Prospectus of the Fund. The procedures relating to the handling of
orders shall be subject to any instructions that we shall forward from time to
time to you. All orders are subject to acceptance or rejection by us in our sole
discretion. You hereby agree to comply with the attached Policies and Procedures
with Respect to the Sales of Shares of Funds Offering Multiple Classes of
Shares.
3. The sales charge applicable to any sale of Fund shares by you and the dealer
concession or commission applicable to any order from you for the purchase of
Fund shares accepted by us shall be set forth in the then current Prospectus of
the Fund. You may be deemed to be an underwriter in connection with sales by you
of shares of the fund where you receive all or substantially all of the sales
charge as set forth in the Fund's Prospectus, and therefore you may be subject
to applicable provisions of the Securities Act of 1933.
We are entitled to a contingent deferred sales charge ("CDSC") on redemptions of
applicable Classes of shares of the Funds, as described in the then current
Prospectus. You agree that you will sell shares subject to a CDSC and that are
to be held in omnibus accounts only if you are a NETWORKING participant with the
National Securities Clearing Corporation and if such accounts are established
pursuant to a NETWORKING Agreement.
Reduced sales charges or no sales charge may apply to certain transactions under
letter of intent, combined purchases or investments, reinvestment of dividends
and distributions, repurchase privilege, unit investment trust distribution
reinvestment or other programs, as described in the then current Prospectus of
the Fund.
4. Rule 12b-1 Plans. The substantive provisions of this Paragraph 4 have been
adopted pursuant to Rule 12b-1 under the Act by certain funds, under plans
pursuant to such Rule (each a "Plan")
(a) You agree to provide (i) for the Funds with a Service Plan, personal
services to investors in shares of the Funds and/or the maintenance of
shareholder accounts and (ii) for those Funds with a Service and Distribution
Plan, both personal services to investors in shares of the funds and/or the
maintenance of shareholder accounts and also distribution and marketing services
in the promotion of Fund shares. As compensation for these services, we shall
pay you, with respect to Fund shares which are owned of record by your firm as
nominee for your customers or which are owned by those shareholders whose
records, as maintained by the Fund or its agent, designate your firm as the
shareholder's dealer of record, a quarterly services fee or services fee and
distribution fee based on the average daily net asset value of such Fund shares
at the rate set forth with respect to the Fund in the then current Prospectus.
No such fee will be paid to you with respect to shares purchased by you and
redeemed or repurchased by the Fund or by us as an agent within seven (7)
business days after the date of our confirmation of such purchase. No such fee
will be paid to you with respect to any of your customers if the amount of such
fee based upon the value of such customer's Fund shares will be less than $5.00
Normally, payment of such fee to you shall be made within forty-five (45) days
after the close of each quarter for which such fee is payable.
(b) You shall furnish us and the Fund with such information as shall reasonably
be requested by the Trustees or Directors of the Fund with respect to the fees
paid to you pursuant to this paragraph 4.
(c) The provisions of this Paragraph 4 may be terminated by the vote of a
majority of the Trustees or Directors of the Fund who are not interested persons
of the fund and who have no direct or indirect financial interest in the
operation of the Plan or in any agreements related to the Plan, or by a vote of
a majority of the Fund's outstanding shares, on sixty (60) days' written notice,
without payment of any penalty. Such provisions will be terminated also by any
act that terminates either the Fund's Distributor's Contract or Underwriting
Agreement with us or this Dealer Agreement and shall terminate automatically in
the event of the assignment (as that term is defined in the Act) of this Dealer
Agreement.
(d) The provisions of the Distributor's Contract or Underwriting Agreement
between the Fund and us, insofar as they relate to the Plan, are incorporated
herein by reference. The provisions of this paragraph 4 shall continue in full
force and effect only so long as the continuance of the Plan, the Distributor's
Contract or Underwriting Agreement and these provisions are approved at least
annually by a vote of the Trustees or Directors, including a majority of the
Trustees or Directors who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan, cast in person at a meeting called for the
purpose of voting thereon.
5. You agree to purchase shares only from us or from your customers. If you
purchase shares from us, you agree that all such purchases shall be made only:
(a) to cover orders already received by you from your customers; (b) for shares
being acquired by your customers pursuant to either Exchange privilege or the
Reinvestment Privilege, as described in the then current prospectus of the Fund;
(c) for your own bona fide investment; or (d) for investments by any IRS
qualified pension, profit sharing or other trust established for the benefit of
your employees or for investments in Individual Retirement Accounts established
by your employees, and if you so advise us in writing prior to any sale of Fund
shares pursuant to this subparagraph (d), you agree to waive all your dealer
concessions to all sales of Fund shares pursuant to this subparagraph (d). If
you purchase shares from your customers, you agree to pay such customers not
less than the applicable redemption price as established by the then current
Prospectus of the Fund. We agree that we will not purchase any securities from
the Fund except for our own bona fide investment purposes for the purpose of
covering purchase orders that we have already received or for shares to be
acquired by our customers pursuant to either exchange privilege or the
repurchase privilege, as described in the then current prospectus of the Fund.
6. You shall sell shares only: (a) to customers at the applicable public
offering price, except for shares being acquired by your customers at net asset
value pursuant to either the exchange privilege or the repurchase privilege as
described in the then current Prospectus of the Fund, and (b) to us agent for
the Fund at the redemption price. In such a sale to us, you may act as either as
principal for your own account or as agent for your customer. If you act as
principal for your own account in purchasing shares for resale to us, you agree
to pay your customer not less than the price that you receive from us. If you
act as an agent for your customer in selling shares to us, you agree not to
charge your customer more than a fair commission for handling the transaction,
except that you agree to receive no compensation of any kind based on the
reinvestment of redemption or repurchase proceeds pursuant to the repurchase
privilege, as described in the current Prospectus of the Fund.
7. You hereby certify that all of your customers' taxpayer identification
numbers ("TIN") or social security numbers ("SSN") furnished to us by you are
correct and that you will not open an account without providing the customer's
TIN or SSN.
8. You shall not withhold placing with us orders received from your customers so
as to profit yourself as a result of such withholding; e.g., by a change in the
net asset value from that used in determining the public offering price to your
customers.
9. We will not accept from you any conditional orders for shares.
10. If any Fund shares sold to you under the terms of this Agreement are
redeemed by the Fund or repurchased by us as agent for the Fund within seven (7)
business days after the date of our confirmation of the original purchase by
you, it is agreed that you shall forfeit your right to the dealer concession or
commission received by you on such Fund shares.
We will notify you of any such repurchase or redemption within ten (10) business
days after the date thereof and you shall forthwith refund to us the entire
concession or commission allowed or paid to you on such sale. We agree, in the
event of any such repurchase or redemption, to refund to the Fund the portion of
the sales charge if any, retained by us and upon receipt from you of the
concession allowed to you on Class A Shares, to pay such refund forthwith to the
Fund.
11. Payment for Fund shares sold to you shall be made on or before the
settlement date specified in our confirmation, at the office of our clearing
agent, and by check payable to the order of the Fund, which reserves the right
to delay issuance, redemption or transfer of shares until such check has
cleared. If such payment is not received by us, we reserve the right, without
notice, forthwith either to cancel the sale, or at our option, to sell the
shares ordered back to the Fund, resulting from your failure to make payment as
aforesaid.
12. You will also act as principal in all purchases by a shareholder for whom
you are the dealer of record of fund shares with payments sent directly by such
shareholder to the Shareholder Services and Transfer agent (the "Agent")
specified in the then current Prospectus of the Fund, and you authorize and
appoint the Agent to execute and confirm such purchases to such shareholder on
your behalf. The Agent will remit not less frequently than monthly to you the
amount of any concessions due with respect to such purchases, except that no
concessions will be paid to you on any transaction for which your net sales
concession is less than the total of $5.00 in any one month. You also represent
that with respect to all such direct purchases by such shareholder, you may
lawfully sell shares of such Fund in the state designated as such shareholder's
record address.
13. Stock certificates for shares sold to you shall be issued only if
specifically requested and upon terms specified from time-to-time by the
Trustees of the Fund. If no open account registration or transfer instructions
are received by the Agent within 20 days after payment by you for shares sold to
you, an open account for such shares will be established in your name. You agree
to hold harmless and indemnify us, the Agent and the Fund, for any loss or
expenses resulting from such open account registration of such shares.
14. No person is authorized to make any representations concerning shares of the
Fund except those contained in the then current Prospectuses of the Fund and in
sales literature issued by us supplemental to such Prospectuses. In purchasing
shares from us, you shall rely solely on the representations contained in such
Prospectus and such sales literature. We will furnish you with additional copies
of such Prospectuses and such sales literature and other releases and
information issued by us in reasonable quantities upon request.
If, with prior approval from us, you use any advertisement or sales literature
which has not been supplied by us, you are responsible for ensuring that the
material complies with all applicable regulations and has been filed with the
appropriate authorities. Also, you will send us copies of all such materials
within (10) days of first use.
You shall indemnify and hold us (Distributor and its directors, officers,
employees, and agents) harmless from and against any and all losses, claims,
liabilities and expenses (including reasonable attorneys' fees)("Losses")
incurred by any of them arising out of (i) your dissemination of information
regarding any Fund that is alleged to contain an untrue statement of material
fact or any omission of a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading and that was not published or provided to you by or on behalf of us
or our affiliated persons ("Affiliates"), as defined under the Investment
Company Act of 1940, as amended (the "1940 Act"), or accurately derived from
information published or provided by or on behalf of us or any of our
affiliates, (ii) any breach by you of any representation, warranty or agreement
contained in this agreement, or (iii) any willful misconduct or negligence on
your part in the performance of, or failure to perform, your obligations under
this agreement, except to the extent such losses are caused by our breach of
this Agreement or our willful misconduct or negligence in the performance, or
failure to perform, its obligations under this Agreement. This Section (14)
shall survive termination of this Agreement.
15. The Fund reserves the right in its discretion and we reserve the right in
our discretion, without notice, to suspend sales or withdraw the offering of
Fund shares entirely. We reserve the right, by written notice to you, to amend,
modify, cancel or assign this Dealer Agreement. Notice for all purposes shall be
deemed to be given when mailed or electronically transmitted to you.
16. This Dealer Agreement shall replace any prior agreement between you and us
or any of our predecessor entities (New England Funds, L.P., TNE Investment
Services Corporation, Investment Trust of Boston Distributors, Inc.) and is
conditioned upon your representation and warranty that you are a member of the
National Association of Securities Dealers, Inc. Or, in the alternative, that
you are a foreign dealer not eligible for membership in that Association, in
which case you agree that, in making any sales to purchasers within the United
States of securities acquired from us, you will conform to the provisions of
paragraphs (a) and (b) of Rule 2420 of that Association's Conduct Rules. You and
we agree to abide by the Rules and Regulations of the National Association of
Securities Dealers, Inc. Including without limitation Conduct Rules 2310, 3110,
and 2830 , and all applicable state and federal laws, rules and regulations.
You will not offer Fund shares for sale in any state (a) where they are not
qualified for sale under the blue sky laws and regulations of such state or (b)
where you are not qualified to act as a dealer.
In the event that you offer fund shares outside the United States, you agree to
comply with the applicable laws, rules and regulations of the foreign government
having jurisdiction over such sales, including any regulations of United States
military authorities applicable to solicitations to military personnel.
<PAGE>
17. All communications to us should be sent to the above address. Any notice to
you shall be duly given if mailed or telegraphed to you at the address specified
by you below. This Agreement shall be effective when accepted by you below and
shall be construed under the laws of the Commonwealth of Massachusetts.
Accepted: Nvest Funds Distributor, L.P.
- --------------------------------------- By:
Dealer's Name --------------------------
Address
- --------------------------------------
By:
------------------------------------
Authorized Signature of Dealer
- --------------------------------------
(Please print name)
Date:
---------------------------------
<PAGE>
POLICIES AND PROCEDURES WITH RESPECT TO SALES OF NVEST FUNDS OFFERING
MULTIPLE CLASSES OF SHARES
In connection with the offering by certain Funds (the "Funds") with multiple
classes of shares, one subject to a front-end sales load and a service fee or
service and distribution fee ("Class A shares"), one subject to a service fee, a
distribution fee, no front-end sales load and a contingent deferred sales charge
("CDSC") on redemptions within a time period specified in the then current
prospectus of the Fund ("Class B shares"), one subject to a service fee,
distribution fee, no front-end sales load and a CDSC if redeemed in the first
year ("Class C shares") and one intended only for certain institutional
investors and subject to no front-end sales load ("Class Y shares"), an investor
must choose the method of purchasing shares which best suits his/her particular
circumstances. To assist investors in these decisions, the Distributor has
instituted the following policies with respect to orders for Fund shares. These
policies apply to each broker/dealer which distributes Fund shares.
1. No purchase order may be placed for Class B shares if the amount of the
orders equals or exceeds $1,000,000 or the order is eligible for a net
asset value purchase price (i.e. no front-end sales charge) of Class A
shares, as provided in the prospectus.
2. No purchase order may be placed for Class C shares if the amount of the
order equals or exceeds $1,000,000 or the order is eligible for a net
asset value purchase price (i.e. no front-end sales charge) of Class A
shares unless the investor indicates on the relevant section of the
application that the investor has been advised of the relative
advantages and disadvantages of Class A and C shares.
3. Any purchase order for less than $1,000,000 may be for either Class, A,
B or C shares in light of the relevant facts and circumstances,
including:
a) the specific purchase order dollar amount;
b) the length of time the investor expects to hold his/her
shares; and
c) any other relevant circumstances such as the availability of
purchase under a Letter of Intent, Breakpoints (a volume
discount), or Rights of Accumulation, as described in the
prospectus.
4. The following types of investors are eligible only to purchase Class Y
shares so long as they meet the minimum initial investment standard;
they are not eligible to invest in Class A, B or C shares:
a) tax-qualified retirement plans ($2,000,000 minimum initial
investment);
b) endowments, foundations and other tax-qualified organizations
($1,000,000 minimum initial investment);
c) separate accounts of New England Financial or any insurance
company affiliated with New England Financial (no minimum);
d) omnibus accounts of retirement plans with at least 500
eligible plan participants and $1,000,000 of plan assets.
Institutional investors described above who will not make the initial minimum
investment amount are eligible to invest in Class A, B or C shares. They should
be advised, however, of the lower fees and expenses applicable to Class Y shares
and should consider whether a larger investment, to meet the Class Y
requirements, would be appropriate and desirable for their circumstances.
There are instances when one method of purchasing shares may be more appropriate
than the other. For example, investors who would qualify for a significant
discount from the maximum sales load on Class A shares may determine that
payment of such a reduced front-end sales load and service fee is preferable to
payment of a higher ongoing distribution fee. Investors whose orders would not
qualify for such a discount and who anticipate holding their investment for more
than eight years might consider Class B shares because 100% of the purchase
price is invested immediately. Investors making smaller investments who
anticipate redeeming their shares within eight years might consider Class C
shares for the same reason.
Appropriate supervisory personnel within your organization must ensure that all
employees and representatives receiving investor inquires about the purchase of
shares of a Fund advise the investor of then available pricing structures
offered by the Fund, and the impact of choosing one method over another. In some
instances it may be appropriate for a supervisory person to discuss a purchase
with the investor.
This policy is effective with respect to any order for the purchase of shares of
a Fund offering multiple classes of shares.
Questions relating to this policy should be directed to John T. Hailer,
President and Chief Executive Officer, Nvest Funds Distributor, L.P. at
(617) 578-1166.
<PAGE>
Exhibit (g)(9)
AMENDMENT TO CUSTODIAN CONTRACT
Amendment dated February 28, 2000, to the custody contract, dated April
12, 1988, as amended, by and between State Street Bank and Trust Company (the
"Custodian") and Nvest Funds Trust I (formerly New England Funds Trust II and
The New England Funds), on behalf of its portfolios (each a "Fund") (the
"Custodian Contract").
In consideration of the promises and covenants contained herein, the
Custodian and the Fund hereby agree to amend and replace Section 5 of the
Custodian Contract as follows:
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing signed or
initialed by one or more person or persons as the Board of Trustees shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be confirmed
in writing. Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices; provided that the Fund has
followed any security procedures agreed to from time to time by the Fund and the
Custodian, including, but not limited to the security procedures selected by the
Fund in the Funds Transfer Agreement. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any multi-party agreement, which requires a segregated asset account in
accordance with Section 2.11.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and on its behalf by its duly authorized representative
as of the date first written above.
NVEST FUNDS TRUST I
By: /s/ Neal Litvack
---------------------
Its: President
STATE STREET BANK AND TRUST
By: /s/ Ronald E. Logue
---------------------
Its: Vice Chairman
<PAGE>
Exhibit (h)(1)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
NEW ENGLAND FUNDS TRUST I
NEW ENGLAND FUNDS TRUST II
NEW ENGLAND FUNDS TRUST III
NEW ENGLAND CASH MANAGEMENT TRUST
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
and
NVEST SERVICES COMPANY, INC.
<PAGE>
TABLE OF CONTENTS
Page
1. Appointment and Duties.............................................. 1
2. Third Party Administrators for Defined Contribution Plans .......... 3
3. Fees and Expenses................................................... 4
4. Representations and Warranties of the Transfer Agent................ 5
5. Representations and Warranties of the Funds......................... 5
6. Wire Transfer Operating Guidelines.................................. 6
7. Data Access and Proprietary Information............................. 7
8. Confidentiality..................................................... 9
9. Indemnification..................................................... 10
10. Standard of Care.................................................... 11
11. Information to be Furnished by the Funds ........................... 12
12. Recordkeeping....................................................... 12
13. Termination of Agreement............................................ 13
14. Assignment and Third Party Beneficiaries............................ 13
15. Subcontractors...................................................... 14
16. Miscellaneous....................................................... 14
17. Additional Funds.................................................... 16
18. Limitations of Liability of the Trustees and Shareholders........... 17
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
Agreement made as of this 1st day of November, 1999, by and between NEW ENGLAND
FUNDS TRUST I, NEW ENGLAND FUNDS TRUST II, NEW ENGLAND FUNDS TRUST III, NEW
ENGLAND CASH MANAGEMENT TRUST AND NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST,
each a Massachusetts business trust, having its principal office and place of
business at 399 Boylston Street, Boston, Massachusetts 02116 (each a "Fund" and
collectively, "the Funds"), and NVEST SERVICES COMPANY, INC., a Massachusetts
corporation having its principal office and place of business at 399 Boylston
Street, Boston, Massachusetts 02116 (the "Transfer Agent").
WHEREAS, each Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets;
WHEREAS, the Funds currently offer shares in twenty two series, such series
being named in the attached Schedule A, which may be amended by the parties from
time to time (each such series, together with all other series subsequently
established by a Fund and made subject to this Agreement in accordance with
Section 17 hereof, being herein referred to as a "Portfolio," and collectively
as the "Portfolios"); and
WHEREAS, each Funds, on behalf of the Portfolios, desires to appoint the
Transfer Agent as its transfer agent, dividend disbursing agent, and agent in
connection with certain other activities, and the Transfer Agent desires to
accept such appointment.
WHEREAS, the Transfer Agent intends to engage Boston Financial Data Services,
Inc. (the "Sub-Transfer Agent") to perform certain of the services to be
provided by the Transfer Agent hereunder and enter into a Sub-Transfer Agency
and Service Agreement with the Sub-Transfer Agent to that effect, and each Fund
hereby acknowledges the Transfer Agent's intent to so engage the Sub-Transfer
Agent.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
l. Appointment and Duties
1.1 General. Subject to the terms and conditions set forth in this Agreement,
each Fund, on behalf of the Portfolios, hereby employs and appoints the
Transfer Agent to act as, and the Transfer Agent agrees to act as, its
transfer agent for the authorized and issued shares of beneficial interest
of the Fund ("Shares"), dividend disbursing agent, and agent in connection
with any accumulation, open-account, or similar plan provided to the
shareholders of each of the respective Portfolios of the Fund
("Shareholders") and set out in the currently effective prospectuses and
statements of additional information ("prospectus") of the Fund, on behalf
of the applicable Portfolio, including, without limitation, any periodic
investment plan or periodic withdrawal program.
In accordance with written procedures established from time to time by
agreement between the Funds and the Transfer Agent, the Transfer Agent
agrees that it will perform the services set forth in Schedule B hereto.
As the Funds and the Transfer Agent may, from time to time, mutually agree
in writing, the Transfer Agent may at times perform only a portion of the
services listed in Schedule B, and a Fund or its agent may perform such
services.
1.2 Retirement Accounts. With respect to certain retirement plans or accounts
(such as individual retirement accounts ("IRAs"), SIMPLE IRAs, SEP IRAs,
Roth IRAs, Education IRAs, and 403(b) Plans (such accounts, "Retirement
Accounts")), the Transfer Agent, at the request of a Fund, may provide or
arrange for the provision of appropriate prototype plans as well as
provide or arrange for the provision of various services to such plans
and/or accounts, which services may include plan custodian services,
account set-up, maintenance, and disbursements as well as such other
services as the parties hereto shall mutually agree upon.
If at any time and for any reason the Transfer Agent, any of its agent or
sub-contractors, or any of their affiliates chooses to resign as custodian
of any or all Retirement Accounts, the Transfer Agent will give the Fund
at least eighty-five (85) days' prior written notice and shall not be
required to designate a successor custodian. If either party chooses to
terminate this Agreement pursuant to Section 13 hereof, the Transfer
Agent, any of its agents or sub-contractors, or any of their affiliates
may thereupon resign as custodian in respect to any or all of the
Retirement Accounts upon eighty-five (85) days' prior written notice to
the Fund. In either such event, the Fund will promptly distribute notice
of the custodian's resignation to such persons and in such manner as are
called for under the applicable provisions of the Retirement Account and
in form and content satisfactory to and signed by the Transfer Agent. The
Fund shall be responsible for obtaining a successor custodian for all
Retirement Accounts.
1.3 Review and Maintenance of Fund Prototype Retirement Plans or Account
Materials.
(a) If a Fund develops and makes available its own retirement plan
prototypes or account materials (the "Fund Prototype(s)") for use in
connection with a Retirement Account or Accounts, the Fund, subject to
the terms set forth below, may appoint the Transfer Agent, one of its
agent or sub-contractors, or an affiliate thereof as the custodian
with respect to such Retirement Accounts.
(b) The Fund agrees that the Fund Prototypes will comply with applicable
sections of the Internal Revenue Code of 1986, as amended (the
"Code"), and regulations promulgated thereunder as in effect at the
time. The Fund will be responsible for establishing, maintaining, and
updating the Fund Prototypes in compliance with the Code and all other
applicable federal or state law or regulations, when changes in the
law require such updating.
(c) The Fund agrees that the Fund Prototypes are the responsibility of the
Fund and further agrees that it will indemnify, defend, and hold
harmless the Transfer Agent, its affiliates, successors,
representatives, and assigns from and against any and all losses,
damages, costs, charges, expenses, including reasonable fees for
counsel, taxes, penalties, and liabilities (collectively, "Losses")
arising out of or attributable to the use of a Fund Prototype by the
Fund or the Transfer Agent, its agents, employees, representatives, or
any other person acting on a Fund's behalf, except to the extent that
such Losses arise out of or are attributable to the negligence, bad
faith, or willful misconduct of the Transfer Agent (or its agents,
affiliates, successors, or assigns), unless such negligence is a
result of complying with a Fund Prototype. This indemnification
obligation will survive termination of this Agreement.
(d) The Fund agrees that any modifications made by the Fund to a Fund
Prototype without the Transfer Agent's written consent or the required
written consent of any of the Transfer Agent's agents or
sub-contractors or any of their affiliates shall not increase the
liabilities or responsibilities of the Transfer Agent or that of such
agent, sub-contractor, or affiliate as custodian or limit the Transfer
Agent's ability or that of that of its agent or sub-contractor, or any
of their affiliates to resign as custodian as provided hereunder. The
Fund will furnish the Transfer Agent with a copy of each Fund
Prototype. The Transfer Agent shall not be required to review,
comment, or advise on such Fund Prototypes.
1.4 Blue Sky. The Funds shall (a) identify to the Transfer Agent in writing
those transactions and assets to be treated as exempt from blue sky
reporting for each State and (b) verify the establishment of transactions
for each State on the system prior to activation and thereafter monitor
the daily activity for each State. The responsibility of the Transfer
Agent for the Fund's blue sky State registration status is solely limited
to the initial establishment of transactions subject to blue sky
compliance by the Funds and providing a system that will enable the Funds
to monitor the total number of Shares sold in each State.
2. Third Party Administrators for Defined Contribution Plans
2.1 A Fund may decide to make available to certain of its customers a
qualified plan program (the "Program") pursuant to which such customers
("Employers") may adopt certain plans (each a "Plan," and collectively,
"Plans") for the benefit of Plan participants (the "Participants"), such
Plans being qualified under Section 401(a) of the Code, and administered
by third party administrators, which may be "administrators" as defined in
the Employee Retirement Income Security Act of 1974, as amended
("TPA(s)").
2.2 In accordance with the procedures established in Schedule 2.2 hereto
entitled "Third Party Administrator Procedures," as may be amended by the
Transfer Agent and the Funds from time to time ("Schedule 2.2"), the
Transfer Agent shall:
(a) treat Shareholder accounts established by the Plans in the name of the
Plan Trustees, the Plans or TPAs, as the case may be, as omnibus
accounts;
(b) maintain omnibus accounts on its records in the name of the TPA or its
designee as the Trustee for the benefit of the Plan; and
(c) perform all services under Section 1 as transfer agent of the Funds
and not as a record-keeper for the Plans.
2.3 Transactions identified under Section 2 of this Agreement shall be deemed
exception services ("Exception Services") when such transactions:
(a) require the Transfer Agent or its sub-agent to use methods and
procedures other than those usually employed by the Transfer Agent or
its sub-agent to perform services described under Section 1 of this
Agreement;
(b) involve the provision of information to the Transfer Agent or its
sub-agent after the commencement of the nightly processing cycle of
the transfer agency data processing system then in use by the Transfer
Agent or its sub-agent (the "System"); or
(c) require more manual intervention by the Transfer Agent or its
sub-agent, either in the entry of data or in the modification or
amendment of reports generated by the System than is usually required
by non-retirement plan and pre-nightly transactions.
3. Fees and Expenses
3.1 Fee Schedule. For the performance by the Transfer Agent pursuant to this
Agreement, the Funds agree to pay the Transfer Agent fees as set forth in
the attached fee schedule ("Schedule 3.1"). Such fees and out-of-pocket
expenses and advances identified under Section 3.2 below may be changed
from time to time subject to mutual written agreement between the Funds
and the Transfer Agent.
3.2 Out-of-Pocket Expenses. In addition to the fees paid under Section 3.1
above, the Funds agree to reimburse the Transfer Agent for the Transfer
Agent's reasonable out-of-pocket expenses, including, but not limited to,
confirmation production, postage, investor statements, telephone,
telecommunication and line charges, microfilm, microfiche, checks, forms
(including year end forms), wire fees, mailing and tabulating proxies,
records storage, costs associated with certain specialty products,
systems, or services, as applicable (such as "Investor," "Voice," "Fan,"
and "Vision"), or advances incurred by the Transfer Agent for the items
set out in Schedule 3.1 attached hereto. In addition, any other expenses
reasonably incurred by the Transfer Agent at the request or with the
consent of a Fund will be reimbursed by such Fund.
3.3 Postage. Postage for mailing of a Fund's respective dividends, proxies,
Fund reports, and other mailings to all shareholder accounts shall be
advanced to the Transfer Agent by such Fund at least seven (7) days prior
to the mailing date of such materials.
3.4 Invoices. Each Fund agrees, on behalf of each of its Portfolio, to pay all
fees and reimbursable expenses within thirty (30) days following the
receipt of the respective billing notice, except for any fees or expenses
that are subject to good faith dispute. In the event of such a dispute,
the Fund may withhold only that portion of the fee or expense subject to
the good faith dispute. The Fund will use reasonable efforts to notify the
Transfer Agent in writing within twenty-one (21) calendar days following
the receipt of each billing notice if the Fund is disputing any amounts in
good faith.
4. Representations and Warranties of the Transfer Agent
The Transfer Agent represents and warrants to the Fund that:
4.1 It is a corporation duly organized and existing and in good standing under
the laws of The Commonwealth of Massachusetts and is duly registered as a
transfer agent under the Securities Exchange Act of 1934, as amended.
4.2 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.
4.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
4.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
15.1 It has and will continue to have access (either directly or pursuant to
contractual arrangements with third parties) to the necessary facilities,
equipment, and personnel to perform its duties and obligations under this
Agreement.
15.2 It will at all times maintain in effect insurance coverage, including,
without limitation, errors and omissions, Fidelity Board, and Electronic
Data Processing coverages, at levels consistent with those customarily
maintained by other comparable transfer agents and with such policies as
the Trustees of the Funds may From time to time adopt.
5. Representations and Warranties of the Funds
Each Fund represents and warrants to the Transfer Agent that:
5.1 It is a business trust duly organized and existing and in good standing
under the laws of Massachusetts.
5.2 It is empowered under applicable laws and by its Declaration of Trust and
By-Laws to enter into and perform this Agreement.
5.3 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
5.4 It is an open-end management investment company registered under the
Investment Company Act of 1940, as amended.
5.5 A registration statement under the Securities Act of 1933, as amended, is
currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
6. Wire Transfer Operating Guidelines
6.1 The Transfer Agent is authorized to promptly debit the appropriate Fund
bank account(s) upon the receipt of a payment order in compliance with the
selected security procedure (the "Security Procedure") chosen for funds
transfer and in the amount of money that the Transfer Agent has been
instructed to transfer. The Transfer Agent shall execute payment orders in
compliance with the Security Procedure and with the Fund instructions on
the execution date, provided that such payment order is received by the
customary deadline for processing such a request, unless the payment order
specifies a later time. All payment orders and communications received
after this the customary deadline will be deemed to have been received the
next business day.
15.1 Each Fund acknowledges that the Security Procedure it has designated on
the Transfer Agent's Wire Transfer Security Procedures Customer Selection
Form (the form of which is attached hereto as Schedule 6.2) was selected
by the Fund from security procedures offered by the Transfer Agent. The
Fund shall restrict access to confidential information relating to the
Security Procedure to authorized persons as communicated to the Transfer
Agent in writing. The Fund shall notify the Transfer Agent immediately if
it has reason to believe unauthorized persons may have obtained access to
such information or of any change in the Fund's authorized personnel. The
Transfer Agent shall verify the authenticity of all Fund instructions
according to the Security Procedure.
15.2 The Transfer Agent shall process all payment orders on the basis of the
account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and the
account number, the account number shall take precedence and govern.
15.3 The Transfer Agent reserves the right to decline to process or delay the
processing of a payment order (a) which is in excess of the collected
balance in the account to be charged at the time of the Transfer Agent's
receipt of such payment order; (b) if initiating such payment order would
cause the Transfer Agent, in the Transfer Agent's sole judgement, to
exceed any volume, aggregate dollar, network, time, credit or similar
limits that are applicable to the Transfer Agent or any of its sub-agents;
or (c) if the Transfer Agent, in good faith, is unable to satisfy itself
that the transaction has been properly authorized.
6.5 The Transfer Agent shall use reasonable efforts to act on all authorized
requests to cancel or amend payment orders received in compliance with the
Security Procedure, provided that such requests are received in a timely
manner affording the Transfer Agent reasonable opportunity to act.
However, the Transfer Agent assumes no liability if the request for
amendment or cancellation cannot be satisfied.
6.6 The Transfer Agent shall assume no responsibility for failure to detect
any erroneous payment order, provided that the Transfer Agent complies
with the payment order instructions as received and the Transfer Agent
complies with the Security Procedure. The Security Procedure is
established for the purpose of authenticating payment orders only and not
for the detection of errors in payment orders.
6.7 The Transfer Agent shall assume no responsibility for lost interest with
respect to the refundable amount of any unauthorized payment order. In no
event (including failure to execute a payment order) shall the Transfer
Agent be liable for special, indirect, or consequential damages, even if
advised of the possibility of such damages.
6.8 When the Fund initiates or receives Automated Clearing House ("ACH")
credit and debit entries pursuant to these guidelines and the rules of the
National Automated Clearing House Association and the New England Clearing
House Association, the Transfer Agent or its sub-agent will act as an
"Originating Depository Financial Institution" and/or "Receiving
Depository Financial Institution," as the case may be, with respect to
such entries. Credits given by the Transfer Agent or its sub-agent with
respect to an ACH credit entry are provisional until the Transfer Agent or
its sub-agent receives final settlement for such entry from the Federal
Reserve Bank. If the Transfer Agent or its sub-agent does not receive such
final settlement, the Fund agrees that the Transfer Agent shall receive a
refund of the amount credited to the Fund in connection with such entry,
and the party making payment to the Fund via such entry shall not be
deemed to have paid the amount of the entry.
6.9 Confirmation of the Transfer Agent's execution of payment orders shall
ordinarily be provided within twenty-four (24) hours, notice of which may
be delivered through the Transfer Agent's or its sub-agent's proprietary
information systems, or by facsimile or call-back. Each Fund must notify
the Transfer Agent of any objections to the execution of an order within
thirty (30) days.
7. Data Access and Proprietary Information
7.1 Each Fund acknowledges that the databases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Transfer Agent or its sub-agent as
part of the Fund's ability to access certain Fund-related data ("Customer
Data") maintained by the Transfer Agent on databases under the control and
ownership of the Transfer Agent or its sub-agent ("Data Access Services")
constitute copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to the
Transfer Agent or its sub-agent. In no event shall Proprietary Information
be deemed Customer Data. The Fund agrees to treat all Proprietary
Information as proprietary to the Transfer Agent or its sub-agent and
further agrees that it shall not divulge any Proprietary Information to
any person or organization except as may be provided hereunder. Without
limiting the foregoing, each Fund agrees for itself and its employees and
agents to:
(a) use such programs and databases (i) solely on the Fund's computers, or
(ii) solely from equipment at the locations agreed to between the Fund
and the Transfer Agent, and (iii) solely in accordance with the
Transfer Agent's or its sub-agent's applicable user documentation;
(b) refrain from copying or duplicating in any way (other than in the
normal course of performing processing on the Fund's computer(s)) the
Proprietary Information;
(c) refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and, if such access is inadvertently
obtained, to inform the Transfer Agent in a timely manner of such fact
and dispose of such information in accordance with the Transfer
Agent's instructions;
(d) refrain from causing or allowing information transmitted from the
Transfer Agent's computer to the Fund's terminal to be retransmitted
to any other computer terminal or other device except as expressly
permitted by the Transfer Agent;
(c) allow the Fund to have access only to those authorized transactions as
agreed to between the Fund and the Transfer Agent; and
(d) honor all reasonable written requests made by the Transfer Agent to
protect at the Transfer Agent's or its sub-agent's expense the rights
of the Transfer Agent or its sub-agent in Proprietary Information at
common law, under federal copyright law and under other federal or
state law.
7.2 Proprietary Information shall not include all or any portion of any of the
foregoing items that (a) are or become publicly available without breach
of this Agreement; (b) are released for general disclosure by a written
release by the Transfer Agent or its sub-agent; or (c) are already in the
possession of the receiving party at the time or receipt without
obligation of confidentiality or breach of this Agreement.
7.3 Each Fund acknowledges that its obligation to protect the Transfer Agent's
and its sub-agent's Proprietary Information is essential to the business
interest of the Transfer Agent and that the disclosure of such Proprietary
Information in breach of this Agreement would cause the Transfer Agent or
its sub-agent immediate, substantial, and irreparable harm, the value of
which would be extremely difficult to determine. Accordingly, the parties
agree that, in addition to any other remedies that may be available at
law, in equity or otherwise for the disclosure or use of the Proprietary
Information in breach of this Agreement, the Transfer Agent or its
sub-agent shall be entitled to seek and obtain a temporary restraining
order, injunctive relief, or other equitable relief against the
continuance of such breach.
7.4 If a Fund notifies the Transfer Agent that any of the Data Access Services
do not operate in material compliance with the most recently issued user
documentation for such services, the Transfer Agent shall endeavor in a
timely manner to correct such failure. Organizations from which the
Transfer Agent or its sub-agent may obtain certain data included in the
Data Access Services are solely responsible for the contents of such data,
and the Fund agrees to make no claim against the Transfer Agent or its
sub-agent arising out of the contents of such third-party data, including,
but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL
COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH
ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE TRANSFER AGENT AND ITS
SUB-AGENTS EXPRESSLY DISCLAIM ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED
HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
7.5 If the transactions available to a Fund include the ability to originate
electronic instructions to the Transfer Agent or its sub-agent in order to
(a) effect the transfer or movement of cash or Shares; or (b) transmit
Shareholder information or other information, then in such event the
Transfer Agent and its sub-agent shall be entitled to rely on the validity
and authenticity of such instruction without undertaking any further
inquiry as long as such instruction is undertaken in conformity with
security procedures established by the Transfer Agent or its sub-agent
from time to time.
7.6 Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 7. The obligations of the Funds under
this Section shall survive any termination of this Agreement.
8. Confidentiality
8.1 Subject to the provisions of Section 8.2 hereof, the Transfer Agent and
the Funds agree that they will not, at any time during the term of this
Agreement or after its termination, reveal, divulge or make known to any
person, firm, corporation, or other business organization, any customers'
lists, trade secrets, cost figures and projections, profit figures and
projections or any other secret or confidential information whatsoever,
whether of the Transfer Agent or its sub-agent or of a Fund, used or
gained by the Transfer Agent or its sub-agent or the Fund during
performance under this Agreement. The Funds and the Transfer Agent further
covenant and agree to retain all such knowledge and information acquired
during and after the term of this Agreement respecting such lists, trade
secrets, or any secret or confidential information whatsoever in trust for
the sole benefit of the Transfer Agent or its sub-agent or the Funds and
their successors and assigns. In the event of breach of the foregoing, the
remedies provided by Section 7.3 shall be available to the party whose
confidential information is disclosed. The above prohibition of disclosure
shall not apply to the extent that the Transfer Agent must disclose such
data to its sub-agent or to agents or representatives of the Fund for
purposes of providing services under this Agreement.
8.2 In the event that any requests or demands are made for the inspection of
the Shareholder records of a Fund, other than request for records of
Shareholders pursuant to subpoenas from state or federal government
authorities, the Transfer Agent will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Transfer Agent expressly reserves, for itself and its
sub-agents, the right, however, to exhibit the Shareholder records to any
person whenever it is advised by counsel that it may be held liable for
the failure to exhibit the Shareholder records to such person or if
required by law or court order.
9. Indemnification
9.1 The Transfer Agent shall not be responsible for, and a Fund shall
indemnify and hold the Transfer Agent harmless from and against, any and
all reasonable losses, damages, costs, charges, counsel fees, payments,
expenses and liabilities arising out of or attributable to:
(a) all actions of the Transfer Agent or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such
actions are taken in good faith and without negligence or willful
misconduct;
(b) said Fund's (or its trustees', officers' or employees') lack of good
faith, negligence, or willful misconduct which arise out of the breach
of any representation or warranty by the Fund;
(c) the Transfer Agent's (and its sub-agent's) reliance upon, and any
subsequent use of or action taken or omitted by the Transfer Agent (or
its sub-agents) in good faith based on (i) any information, records,
documents, data, stock certificates, or services that are received by
the Transfer Agent or its agents or subcontractors by machine readable
input, facsimile, CRT data entry, electronic instructions, or other
similar means authorized by the Fund, and that have been prepared,
maintained, or performed by the Fund or any other person or firm on
behalf of the Fund, including, but not limited to, any previous
transfer agent or registrar and reasonably believed to be genuine,
authentic or signed by the proper person or persons; (ii) any
instructions or requests received by the Transfer Agent from the Fund
or any of its authorized officers and reasonably believed to be
genuine, authentic or signed by the proper person or persons; (iii)
any instructions or opinions of legal counsel with respect to any
matter arising in connection with the services to be performed by the
Transfer Agent under this Agreement that are provided to the Transfer
Agent after consultation with such legal counsel; or (iv) any paper or
document, reasonably believed to be genuine, authentic or signed by
the proper person or persons;
(d) the offer or sale of Shares in violation of federal or state
securities laws or regulations requiring that such Shares be
registered or in violation of any stop order or other determination or
ruling by any federal or any state agency with respect to the offer of
sale of such Shares, unless such violation of state securities law was
directly attributable to the Transfer Agent's negligence, bad faith,
or willful misconduct (with respect to this Section 9.1(d), in
addition to indemnifying and holding harmless the Transfer Agent, said
Fund shall also indemnify and hold harmless the Transfer Agent's
agents and sub-contractors);
(e) the negotiation and processing of any checks, including, without
limitation, for deposit into any bank account of the Fund so long as
the Transfer Agent complies with applicable procedures and guidelines
approved by the Fund; or
(f) the Transfer Agent's entering into any agreements required by the
National Securities Clearing Corporation ("NSCC") for the transmission
of Fund or Shareholder data through the NSCC clearing systems.
15.1 A Fund shall not be responsible for, and the Transfer Agent shall
indemnify and hold the Fund harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses, and liabilities
arising out of or attributable to any actions or omissions of the Transfer
Agent as a result of the Transfer Agent's lack of good faith, negligence,
or willful misconduct.
15.2 In order that the indemnification provisions contained in the Section 9
shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion and shall keep the other
party advised with respect to all developments concerning such claim. The
party who may be required to indemnify herunder shall have the option with
counsel selected by it to participate with the party seeking
indemnification in the defense of such claim or to defend against said
claim in its own name or in the name of the other party. The party seeking
indemnification shall in no case confess any claim or make any compromise
in any case in which the other party may be required to indemnify it
except with the other party's prior written consent (which shall not be
unreasonably withheld).
15. Standard of Care
15.1 The Transfer Agent shall at all times act in good faith and agrees to use
its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility and
shall not be liable for loss or damage due to errors unless such errors
are caused by its negligence, bad faith, or willful misconduct or that of
its employees, except as provided in Section 10.2 below. The parties agree
that any encoding or payment processing errors and the liability arising
under Section 4-209 of the Uniform Commercial Code shall be governed by
this Section 10.1.
15.2 In the case of Exception Services as defined in Section 2.3 herein, the
Transfer Agent shall be held to a standard of gross negligence.
11. Information to be Furnished by the Fund
11.1 Each Fund shall promptly furnish to the Transfer Agent the following:
(a) a certified copy of the resolution of the Board of Trustees of the
Fund authorizing the appointment of the Transfer Agent and the
execution and delivery of this Agreement;
(b) a copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto;
(c) a list of all officers of the Fund, together with specimen signatures
of those officers, who are authorized to instruct the Transfer Agent
in all matters; and
(d) two copies of the following:
1. all of its current Prospectuses and Statements of Additional
Information; and
2. all other forms commonly used by the Fund with regard to its
relationships and transactions with Shareholders of the Fund.
12. Recordkeeping
15.1 The Transfer Agent hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Funds for safekeeping of stock
certificates, check forms, and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
15.2 The Transfer Agent shall keep records relating to the services to be
performed hereunder, in such form and manner as it may deem advisable. To
the extent required by Section 31 of the Investment Company Act of 1940,
as amended, and the Rules thereunder, the Transfer Agent agrees that all
such records prepared or maintained by the Transfer Agent relating to the
services to be performed by the Transfer Agent hereunder are the property
of each Fund and will be preserved, maintained, and made available in
accordance with such Section and Rules, and will be surrendered promptly
to the Fund on and in accordance with its request.
15.3 Upon reasonable notice and during normal business hours, the Transfer
Agent shall make available to each Fund its records supporting performance
of its obligations hereunder, provided however such disclosure will not
relate in any way whatsoever to records of the Transfer Agent's other
clients.
13. Termination of Agreement
15.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days' written notice to the other.
15.2 Should the Fund exercise its right to terminate this Agreement, all
reasonable out-of-pocket expenses associated with the movement of records
and material will be borne by the Fund at cost. Additionally, the Transfer
Agent reserves the right to charge for any other reasonable expenses
associated with such termination. Payment of such expenses or costs shall
be in accordance with Section 3.4 of this Agreement.
15.3 Upon termination of this Agreement, each party shall return to the other
party all copies of confidential or proprietary materials or information
received from such other party hereunder, other than materials or
information required to be retained by such party under applicable laws or
regulations. In addition, the Transfer Agent shall promptly provide to the
Funds or a successor transfer agent all records and information required
to be maintained by the Transfer Agent hereunder. To the extent reasonably
possible, the Transfer Agent shall deliver such records and information in
machine readable form.
15.4 Upon the resignation by the Transfer Agent or any of its agents or
sub-contractors or their affiliates as custodian of a Retirement Account,
the Transfer Agent shall promptly return to the Funds and shall require
its agents or sub-contractors to promptly return to the Funds and all Fund
and Fund Shareholder records and information held or maintained by such
party in its capacity as Retirement Account custodian. To the extent
reasonably possible, such records and information shall be delivered to
the Funds in machine readable form.
15.5 If either party defaults in the performance of any material provision of
this Agreement, or commits a series of non-material defaults which in the
aggregate impair to a material extent the value of this Agreement to the
other party, and the default or deficiency or condition is not cured
within the shorter period of (a) thirty (30) days after the receipt of
written notice thereof; or (b) the period of time allowed to cure such
deficiency by applicable regulations. If the default or failure or
condition is not cured during the thirty (30) day period, then this
Agreement will terminate immediately upon receipt by the defaulting or
failing party of a second written notice from the other Party stating that
such termination is then effective. If the Funds terminate this Agreement
pursuant to this paragraph, the Funds shall be liable for all reasonable
out-of-pocket expenses associated with such termination, including any
fees due to the Sub-Transfer Agent pursuant to such applicable notice
period.
14. Assignment and Third Party Beneficiaries.
14.1 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the written consent of the other party.
Any attempt to do so in violation of this Section shall be void. Unless
specifically stated to the contrary in any written consent to an
assignment, no assignment will release or discharge the assignor from any
duty or responsibility under this Agreement.
14.2 Except as explicitly stated elsewhere in this Agreement, nothing under
this Agreement shall be construed to give any rights or benefits under
this Agreement to anyone other than the Transfer Agent and the Funds, and
the duties and responsibilities undertaken pursuant to this Agreement
shall be for the sole and exclusive benefit of the Transfer Agent and the
Fund. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
14.3 This Agreement does not constitute an agreement for a partnership or joint
venture between the Transfer Agent and the Fund.
15. Subcontractors
15.1 The Transfer Agent may, without further consent on the part of the Fund,
engage subcontractors to perform any of the obligations of the Transfer
Agent under this Agreement; provided, however, that the Transfer Agent
shall be fully responsible to the Fund for the acts and omissions of the
subcontractor as it is for its own acts and omissions.
15.1 Except as otherwise provided in Section 15.1, nothing herein shall impose
any duty upon the Transfer Agent in connection with or make the Transfer
Agent liable for the actions or omissions to act of unaffiliated third
parties, such as, by way of example and not limitation, Airborne Services,
Federal Express, United Parcel Service, the U.S. Mails, NSCC and
telecommunication companies, provided, if the Transfer Agent selected such
company, the Transfer Agent shall have exercised due care in selecting the
same.
16. Miscellaneous
16.1 Relationship of Parties. The parties agree that they are independent
contractors and not partners or co-venturers, and nothing contained herein
shall be interpreted or construed otherwise.
16.2 Amendment. This Agreement may be amended or modified by a written
agreement executed by both parties.
16.3 Massachusetts Law to Apply. This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with the laws of
The Commonwealth of Massachusetts.
16.4 Force Majeure. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond its
control, including, but not limited to, transmission errors in
transactions processed by Shareholders via on-line computer services, or
other causes reasonably beyond its control, such party shall not be liable
for damages to the other for any damages resulting from such failure to
perform or otherwise from such causes.
16.5 Consequential Damages. Neither party to this Agreement shall be liable to
the other party for consequential damages under any provision of this
Agreement or for any consequential damages arising out of any act or
failure to act hereunder.
16.6 Survival. All provisions regarding indemnification, warranty, liability,
and limits thereon and confidentiality and/or protections of proprietary
rights and trade secrets shall survive the termination of this Agreement.
16.7 Severability. If any provision or provisions of this Agreement shall be
held invalid, unlawful or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be
affected or impaired.
16.8 Priorities Clause. In the event of any conflict, discrepancy, or ambiguity
between the terms and conditions contained in this Agreement and any
schedules or attachments hereto, the terms and conditions contained in
this Agreement shall take precedence.
16.9 Waiver. No waiver by either party or any breach or default of any of the
covenants or conditions herein contained and performed by the other party
shall be construed as a waiver of any succeeding breach of the same or of
any other covenant or condition.
16.10 Merger of Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect
to the subject matter hereof whether oral or written.
16.11 Counterparts. This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall
be deemed to constitute one and the same instrument.
16.12 Reproduction of Documents. This Agreement and all schedules, exhibits,
attachments and amendments hereto may be reproduced by any photographic,
photostatic, microfilm, micro-card, miniature photographic, or other
similar process. The parties hereto each agree that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in existence and
whether or not such reproduction was made by a party in the regular course
of business, and that any enlargement, facsimile, or further reproduction
shall likewise be admissible in evidence.
16.13 Year 2000. The Transfer Agent will take reasonable steps to ensure that
its products reflect the available technology to offer products that are
Year 2000 ready, including, but not limited to, century recognition of
dates, calculations that correctly compute same century and multicentury
formulas and date values, and interface values that reflect the date
issues arising between now and the next one-hundred years. The Transfer
Agent shall not be liable for computer-related problems arising out of, or
associated with, third-party vendor computer systems or related equipment
that are incurred in connection with the change from the years 1999 to
2000, such third-party vendors including, but not limited to, the
Sub-Transfer Agent, DST Systems, Inc., and Output Technologies, Inc. The
Transfer Agent has conducted a commercially reasonable investigation of
the Sub-Transfer Agent's applicable computer systems and is not aware of
any Year 2000 issues. The Transfer Agent will notify the Fund promptly in
the event it becomes aware of any Year 2000 issues.
16.14 Notices. All notices and other communications as required or permitted
hereunder shall be in writing and sent by first class mail, postage
prepaid, addressed as follows or to such other address or addresses of
which the respective party shall have notified the other.
(a) If to Transfer Agent, to:
Nvest Services Company, Inc.
399 Boylston Street, 5th Floor
Boston, Massachusetts 02116
Attention: President
With a copy to: General Counsel
Facsimile: (617) 578-1177
(b) If to the Fund, to:
New England Funds Trust I
New England Funds Trust II
New England Funds Trust III
New England Cash Management Trust
New England Tax Exempt Money Market Trust
399 Boylston Street, 10th Floor
Boston, Massachusetts 02110
Attention: President
With a copy to: General Counsel
Facsimile: (617) 578-1191
17. Additional Funds
In the event that a Fund establishes one or more series of Shares in
addition to those named on the attached Schedule A with respect to which
it desires to have the Transfer Agent render services as transfer agent
under the terms hereof, it shall so notify the Transfer Agent in writing,
and, if the Transfer Agent agrees in writing to provide such services,
such series of Shares shall become a Portfolio hereunder.
18. Limitations of Liability of the Trustees and Shareholders
A copy of each Fund's Declaration of Trust is on file with the Secretary
of The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Fund by an officer and not
individually and that the obligations of or arising out of this instrument
are not binding upon any of the Trustees, officers or Shareholders of the
Fund individually, but are binding only upon the assets and property of
the indicated Portfolio of the Fund.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
NEW ENGLAND FUNDS TRUST I
NEW ENGLAND FUNDS TRUST II
NEW ENGLAND FUNDS TRUST III
NEW ENGLAND CASH MANAGEMENT TRUST
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
BY: /s/ Bruce R. Speca
------------------------------------
Bruce R. Speca, President
ATTEST:
- --------------------------------
NVEST SERVICES COMPANY, INC.
BY: /s/ Christopher L. Wilson
------------------------------------
Christopher L. Wilson, President
ATTEST:
- --------------------------------
<PAGE>
SCHEDULE A
LIST OF PORTFOLIOS OF NEW ENGLAND FUNDS TRUST I, NEW ENGLAND
FUNDS TRUST II, NEW ENGLAND FUNDS TRUST III, NEW ENGLAND CASH &
MANAGEMENT TRUST, NEW ENGLAND TAX EXEMPT, MONEY MARKET TRUST
1. New England Growth Fund
2. New England Capital Growth Fund
3. New England Growth & Income Fund
4. New England Equity Income Fund
5. New England Bullseye Fund
6. New England Balanced Fund
7. New England Value Fund
8. New England International Equity Fund
9. New England Star Advisers Fund
10. New England Star Worldwide Fund
11. New England Star Small Cap Fund
12. New England Bond Income Fund
13. New England High Income Fund
14. New England Government Securities Fund
15. New England Limited Term U.S. Government Fund
16. New England Strategic Income Fund
17. New England Short Term Income Fund
18. New England Municipal Income Fund
19. New England Massachusetts Tax Free Income Fund
20. New England Intermediate Term Tax Free Fund of California
21. New England Cash Management Trust - Money Market Series
22. New England Tax Exempt Money Market Trust
New England Funds Trust I Nvest Services Company, Inc.
New England Funds Trust II
New England Funds Trust III
New England Cash Management Trust
New England Tax Exempt Money Market Trust
BY: /s/ Bruce R. Speca BY: /s/ Christopher L. Wilson
---------------------------- --------------------------------
Bruce R. Speca, President Christopher L. Wilson, President
<PAGE>
SCHEDULE B
SERVICES TO BE PROVIDED BY THE TRANSFER AGENT OF NEW ENGLAND
FUNDS TRUST I, NEW ENGLAND FUNDS TRUST II, NEW ENGLAND FUNDS
TRUST III, NEW ENGLAND CASH & MANAGEMENT TRUST, NEW ENGLAND TAX
EXEMPT, MONEY MARKET TRUST
Perform the customary services of a transfer agent, dividend disbursing agent,
and, as relevant, agent in connection with accumulation, open-account or similar
plan (including any periodic investment plan or periodic withdrawal program),
including, but not limited to, the following:
1. maintain all Shareholder accounts;
2. process transactions, including, but not limited to, new account set
up, transfer of Share ownership, exchange of Shares, telephone
transactions, and literature requests;
3. prepare Shareholder meeting lists;
4. mail Shareholder proxies, Shareholder reports, and prospectuses to
current Shareholders;
5. receive and tabulate Shareholders proxies;
6. withhold taxes on U.S. resident and non-resident alien accounts;
7. prepare and file U.S. Treasury Department Forms 1099 and other
appropriate forms with respect to dividends and distributions by
federal authorities for all Shareholders;
8. prepare and mail confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts;
9. prepare and mail activity statements for Shareholders;
10. provide Shareholder account information through various means,
including, but not limited to, telephone calls, correspondence, and
research;
11. receive for acceptance orders for the purchase of Shares and promptly
deliver payment and appropriate documentation thereof to the custodian
of the Fund authorized pursuant to the Fund's Declaration of Trust
(the "Custodian");
12. pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate Shareholder account;
13. receive for acceptance redemption requests and redemption directions
either in correspondence, via telephone, facsimile transmission, or
through NSCC or any other method deemed appropriate by the Fund and
deliver the appropriate documentation thereof to the Custodian;
14. at the appropriate time as and when it receives monies paid to it by
the Custodian with respect to any redemption, pay over or cause to be
paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
15. with respect to the transactions in items 11, 12, 13 and 14 above, the
Transfer Agent shall execute transactions directly with broker-dealers
authorized by the Fund;
16. effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
17. prepare and transmit payments for dividends and distributions declared
by the Fund on behalf of the applicable Portfolio;
18. maintain such bank accounts (which accounts may be in the name of the
Transfer Agent or a subagent thereof) as the Transfer Agent shall deem
necessary to the performance of its duties hereunder, including, but
not limited to, the processing of Share purchases and redemptions and
the payment of Portfolio dividends; any income or expense associated
with any such account shall accrue to or be borne by the Transfer
Agent;
19. if applicable, issue replacement certificates for those certificates
alleged to have been lost, stolen, or destroyed upon receipt by the
Transfer Agent of indemnification satisfactory to the Transfer Agent
and protecting the Transfer Agent and the Fund; the Transfer Agent, at
its option, may issue replacement certificates in place of mutilated
stock certificates upon presentation thereof and without such
indemnity;
20. report abandoned property to the various states as authorized by the
Fund according to policies and principles agreed upon by the Fund and
the Transfer Agent;
21. maintain records of account for and advise the Fund and its
Shareholders as to the foregoing;
22. record the issuance of Shares of the Fund and maintain a record of the
total number of Shares of the Fund that are authorized, based upon
data provided to it by the Fund, and issued and outstanding; the
Transfer Agent shall also provide the Fund on a regular basis with the
total number of Shares that are authorized and issued and outstanding
and shall have no obligation, when recording the issuance of Shares,
to monitor the issuance of such Shares or to take cognizance of any
laws relating to the issue or sale of such Shares, which functions
shall be the sole responsibility of the Fund;
23. maintain a daily record and produce a daily report for the Fund of all
transactions, receipts, and disbursements of money and securities to
and from Shareholders and deliver a copy of such report for the Fund
for each business day to the Fund no later than 10:00 AM Eastern Time,
or such earlier time as the Fund may reasonably require, on the next
business day; and
24. register and maintain accounts through Networking and accept and
effectuate the purchase, redemption, transfer and exchange of Shares
in such accounts through Fund/SERV (Networking and Fund/SERV being
programs operated by NSCC on behalf of NSCC's participants, including
the Fund), in accordance with instructions transmitted to and received
by the Transfer Agent by transmission from NSCC on behalf of
broker-dealers and banks, which have been established, or in
accordance with the instructions of authorized persons as hereinafter
defined on the dealer file maintained by the Transfer Agent; issue
instructions to the Fund's banks for the settlement of transactions
between the Fund and NSCC (acting on behalf of its broker-dealer and
bank participants); provide account and transaction information from
the affected Fund's records on the System in accordance with NSCC's
Networking and Fund/SERV rules for those broker-dealers; and maintain
Shareholder accounts on the System through Networking.
NEW ENGLAND FUNDS TRUST I NVEST SERVICES COMPANY, INC.
NEW ENGLAND FUNDS TRUST II
NEW ENGLAND FUNDS TRUST III
NEW ENGLAND CASH MANAGEMENT TRUST
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
BY: /s/ Bruce R. Speca BY: /s/ Christopher L. Wilson
---------------------------- --------------------------------
Bruce R. Speca, President Christopher L. Wilson, President
<PAGE>
SCHEDULE 2.2
THIRD PARTY ADMINISTRATOR PROCEDURES
DATED ___________________
1. On each Business Day, the TPA shall receive, on behalf of and as agent
of the Fund(s), Instructions (as hereinafter defined) from the Plan.
Instructions shall mean as to each Fund (i) orders by the Plan for the
purchases of Shares, and (ii) requests by the Plan for the redemption
of Shares; in each case, based on the Plan's receipt of purchase
orders and redemption requests by Participants in proper form by the
time required by the terms of the Plan, but not later than the time of
day at which the net asset value of a Fund is calculated, as described
from time to time in that Fund's prospectus. Each Business Day on
which the TPA receives Instructions shall be a "Trade Date."
2. The TPA shall communicate the TPA's acceptance of such Instructions to
the applicable Plan.
3. On the next succeeding Business Day following the Trade Date on which
it accepted Instructions for the purchase and redemption of Shares
(TD+1), the TPA shall notify the Transfer Agent of the net amount of
such purchases or redemptions, as the case may be, for each Plan. In
the case of net purchases by any Plan, the TPA shall instruct the
Trustees of such Plan to transmit the aggregate purchase price for
Shares by wire transfer to the Transfer Agent on TD+1. In the case of
net redemptions by any Plan, the TPA shall instruct the Fund's
custodian to transmit the redemption proceeds for Shares by wire
transfer to the Trustees of such Plan on TD+1. The times at which such
notification and transmission shall occur on TD+1 shall be as mutually
agreed upon by each Fund, the TPA, and the Transfer Agent.
4. The TPA shall maintain separate records for each Plan, which records
shall reflect Shares purchased and redeemed, including the date and
price for all transactions, and Share balances. The TPA shall maintain
on behalf of each of the Plans a single master account with the
Transfer Agent and such account shall be in the name of that Plan, the
TPA, or the nominee of either thereof as the record owner of Shares
owned by such Plan.
5. The TPA shall maintain records of all proceeds of redemptions of
Shares and all other distributions not reinvested in Shares.
6. The TPA shall prepare, and transmit to each of the Plans, periodic
account statements showing the total number of Shares owned by that
Plan as of the statement closing date, purchases and redemptions of
Shares by the Plan during the period covered by the statement, and the
dividends and other distributions paid to the Plan on Shares during
the statement period (whether paid in cash or reinvested in Shares).
7. The TPA shall, at the request and expense of each Fund, transmit to
the Plans prospectuses, proxy materials, reports and other information
provided by each Fund for delivery to its shareholders.
8. The TPA shall, at the request of each Fund, prepare and transmit to
each Fund or any agent designated by it such periodic reports covering
Shares of each Plan as each Fund shall reasonably conclude are
necessary to enable the Fund to comply with state Blue Sky
requirements.
9. The TPA shall transmit to the Plans confirmation of purchase orders
and redemption requests placed by the Plans.
10. The TPA shall, with respect to Shares, maintain account balance
information for the Plan and daily and monthly purchase summaries
expressed in Shares and dollar amounts.
11. Plan sponsors may request, or the law may require, that prospectuses,
proxy materials, periodic reports, and other materials relating to
each Fund be furnished to Participants, in which event, the Transfer
Agent or each Fund shall mail or cause to be mailed such materials to
Participants. With respect to any such mailing, the TPA shall, at the
request of the Transfer Agent or each Fund, provide at the TPA's
expense complete and accurate set of mailing labels with the name and
address of each Participant having an interest through the Plans in
Shares.
NEW ENGLAND FUNDS TRUST I NVEST SERVICES COMPANY, INC.
NEW ENGLAND FUNDS TRUST II
NEW ENGLAND FUNDS TRUST III
NEW ENGLAND CASH MANAGEMENT TRUST
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
BY: /s/ Bruce R. Speca BY: /s/ Christopher L. Wilson
---------------------------- --------------------------------
Bruce R. Speca, President Christopher L. Wilson, President
<PAGE>
SCHEDULE 3.1
FEES
DATED AS OF NOVEMBER 1, 1999
ANNUAL ACCOUNT SERVICE FEES
- --------------------------------------------------------------------------------
Each Portfolio/Class
Equity Funds (Classes A, B and C) * $20.10
Fixed Income Funds (Classes A, B and C) * $17.35
Money Market Funds (Classes A, B, C and Y) $22.00
- --------------------------------------------------------------------------------
Fees are billable on a monthly basis at the rate of 1/12 of the annual fee. A
charge is made for an account in the month that an account opens or closes.
Account service fees are the higher of open account charges plus closed account
charges or the fund minimum.
MONTHLY MINIMUMS
- --------------------------------------------------------------------------------
Each Portfolio/Class
Equity Funds (Classes A, B and C) * $1,500
Fixed Income Funds (Classes A, B and C) * $1,500
Money Market Funds (Classes A, B, C and Y) $1,500
- --------------------------------------------------------------------------------
*Class Y Shares of the Equity and Fixed Income Funds are charged an asset based,
flat fee of 10 basis points.
IRA CUSTODIAL FEES
- --------------------------------------------------------------------------------
Annual Maintenance (payable by shareholders) $15.00/Account
Out-of-pocket expenses include, but are not limited to, confirmation statements,
postage, investor statements, audio response, telephone, telecommunication and
line charges, record storage, records retention, transcripts, microfilm,
microfiche, checks, forms (including year end forms), wire fees, mailing and
tabulating proxies, costs associated with certain specialty products, systems,
or services, as applicable (such as "Investor," "Voice," "FAN," and "Vision"),
and any other expenses incurred at the specific direction of the Fund.
Subject to each party's right to terminate this Agreement pursuant to Section 13
hereof, the Transfer Agent and the Fund agree that the fees set forth in this
Schedule 3.1 shall remain in effect for a period of one year from the date of
this Agreement. Upon the expiration of such one year period, the Transfer Agent
and the Fund hereby agree to negotiate in good faith such changes to this
Schedule as they may deem necessary.
NEW ENGLAND FUNDS TRUST I NVEST SERVICES COMPANY, INC.
NEW ENGLAND FUNDS TRUST II
NEW ENGLAND FUNDS TRUST III
NEW ENGLAND CASH MANAGEMENT TRUST
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
BY: /s/ Bruce R. Speca BY: /s/ Christopher L. Wilson
---------------------------- --------------------------------
Bruce R. Speca, President Christopher L. Wilson, President
<PAGE>
SCHEDULE 6.2
WIRE TRANSFER SECURITY PROCEDURES
CUSTOMER SELECTION FORM
SECTION I
Details the types of funds transfers processed on behalf of
____________________.
Please select the appropriate security procedures from Section II for each type
of funds transfer listed in Section I.
TYPES OF FUNDS TRANSFERS
__________ Expedited Redemptions
__________ Same Day Wires
__________ Manual Wires
__________ Wire Transfers Initiated by FAX
__________ Group Divided Wire
__________ Remote Bach Transmissions
__________ ACH Transactions
SECTION II
Lists the types of security procedures offered.
SECURITY PROCEDURES
A. REPETITIVE WIRES/ACH TRANSACTIONS
B. TELEPHONE CONFIRMATION
C. ENCRYPTION
AUTHORIZATION
Nvest Services Company, Inc. is hereby instructed to implement the above checked
security procedure(s) in regard to payment orders initiated by or on behalf of
our organization or its shareholders.
- --------------------------------------------- ----------------
Authorized Signature Date
FUNDS TRANSFER SECURITY PROCEDURES DEFINITIONS
REPETITIVE WIRES
1. SHAREHOLDER GENERATED
Wires initiated from existing authorized shareholder accounts. Each wire
is sent to the same pre-established destination bank and beneficiary
account number. Only the date of the wire and dollar amount may vary from
instruction to instruction. Changes to that file can only be performed
based on written instructions coupled with a signature guarantee. The
establishment of the repetitive wire is confirmed via a written notice to
the shareholder's address of record.
2. CLIENT GENERATED
Manual wires processed on behalf of the client. Wires are initiated from
the same authorized debit account and sent to the same destination bank
and beneficiary account number each time. Only the date and the dollar
amount may vary from instruction to instruction.
TELEPHONE CONFIRMATION
Telephone confirmation will be used to verify funds transfer instructions
received via telephone, untested facsimile or mail. This security
procedure can be used to authenticate non-repetitive and repetitive wire
transfers instructions. Repetitive wires may be subject to a specific
threshold at the client's discretion.
As part of the confirmation process, customers must designate individuals
as authorized initiators and authorized confirmers. Within 24 hours of
receipt of the wire instruction and prior to execution, a Transfer Agent
associate will contact someone other than the originator at the customer's
location to authenticate the instructions. Additionally, a confirmation
log will be maintained to provide an evidentiary control as well as
providing an invaluable operational tool for resolving any disputes.
ENCRYPTION
Delivery of wire transfer is completed via computer to computer data
communications. Recommended security procedures include encryption, the
process by which data traveling over communication lines is
cryptographically transformed (encrypted). This control is appropriate not
only for terminal based initiation, but also being used by some
institutions in the form of both encrypted facsimile and encrypted voice
communication. This delivery mechanism is typically used for high volume
business such as shareholder redemptions and dividends.
TELEPHONE COMMUNICATIONS
All telephone communication between the Transfer Agent and the client will
be handled on recorded telephone lines.
TRANSFERS INITIATED VIA FACSIMILE TRANSMISSION
Transfers initiated via fax may use either repetitive wire security
procedures, telephone confirmation or a combination of both.
OPTIONAL SECURITY PROCEDURE
Client may establish telephone confirmation procedures to authenticate
repetitive manual wires initiated via telephone, untested facsimile or
mail in excess of certain dollar amounts using the attached forms.
<PAGE>
FUNDS TRANSFER OPERATING GUIDELINES
1. OBLIGATION OF THE SENDER: The Transfer Agent is authorized to promptly
debit the appropriate Fund account(s) upon the receipt of a payment order
in compliance with the selected security procedure (the "Security
Procedure") chosen for funds transfer and in the amount of money that the
Transfer Agent has been instructed to transfer. The Transfer Agent shall
execute payment orders in compliance with the Security Procedure and with
the Fund instructions on the execution date provided that such payment
order is received by the customary deadline for processing such a request,
unless the payment order specifies a later time. All payment orders and
communications received after this the customary deadline will be deemed to
have been received the next business day.
2. SECURITY PROCEDURE: The Fund acknowledges that the Security Procedure it
has designated on the Selection Form was selected by the Fund from security
procedures offered by the Transfer Agent. The Fund shall restrict access to
confidential information relating to the Security Procedure to authorized
persons as communicated to the Transfer Agent in writing. The Fund must
notify the Transfer Agent immediately if it has reason to believe
unauthorized persons may have obtained access to such information or of any
change in the Fund's authorized personnel. The Transfer Agent shall verify
the authenticity of all Fund instructions according to the Security
Procedure.
3. ACCOUNT NUMBERS: The Transfer Agent shall process all payment orders on the
basis of the account number contained in the payment order. In the event
discrepancy between any name indicated on the payment order and the account
number, the account number shall take precedence and govern.
4. REJECTION: The Transfer Agent reserves the right to decline to process or
delay the processing of a payment order which (a) is in excess of the
collected balance in the account to be charged at the time of the Transfer
Agent's receipt of such payment order; (b) if initiating such payment order
would cause the Transfer Agent, in the Transfer Agent's sole judgment, to
exceed any volume, aggregate dollar, network, time, credit or similar
limits that are applicable to the Transfer Agent; or (c) if the Transfer
Agent, in good faith, is unable to satisfy itself that the transaction has
been properly authorized.
5. CANCELLATION OF AMENDMENT: The Transfer Agent shall use reasonable efforts
to act on all authorized requests to cancel or amend payment orders
received in compliance with the Security Procedure provided that such
requests are received in a timely manner affording the Transfer Agent
reasonable opportunity to act. However, the Transfer Agent assumes no
liability if the request for amendment or cancellation cannot be satisfied.
6. ERRORS: The Transfer Agent shall assume no responsibility for failure to
detect any erroneous payment order provided that the Transfer Agent
complies with the payment order instructions as received and the Transfer
Agent complies with the Security Procedure. The Security Procedure is
established for the purpose of authenticating payment orders only and not
for the detection of errors in payment orders.
7. INTEREST AND LIABILITY LIMITS: The Transfer Agent shall assume no
responsibility for lost interest with respect to the refundable amount of
any unauthorized payment order. In no event (including failure to execute a
payment order) shall the Transfer Agent be liable for special, indirect or
consequential damages, even if advised of the possibility of such damages.
8. AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS: When
the Fund initiates or receives Automated Clearing House credit and debit
entries pursuant to these guidelines and the rules of the National
Automated Clearing House Association and the New England Clearing House
Association, the Transfer Agent will act as an Originating Depository
Financial Institution and/or Receiving Depository Financial Institution, as
the case may be, with respect to such entries. Credits given by the
Transfer Agent with respect to an ACH credit entry are provisional until
the Transfer Agent receives final settlement, the Fund agrees that the
Transfer Agent shall receive a refund of the amount credited to the Fund in
connection with such entry, and the party making payment to the Fund via
such entry shall not be deemed to have paid the amount of the entry.
9. CONFIRMATION STATEMENTS: Confirmation of Transfer Agent's execution of
payment orders shall ordinarily be provided within twenty four (24) hours,
notice of which may be delivered through the Transfer Agent's or its
subagent's proprietary information systems, or by facsimile or call-back.
The Fund must report any objections to the execution of an order within
thirty (30) days.
I understand and agree to the terms and conditions described above. I am
authorized to sign on behalf of each of the mutual funds or other entities named
on Schedule __ attached.
BY: _______________________________________ DATE: __________________
NAME: _____________________________________
TITLE: ____________________________________
<PAGE>
SCHEDULE ___
LIST OF MUTUAL FUNDS
<PAGE>
SECTIONS I AND II SHOULD BE COMPLETED BY ALL CLIENTS
PLEASE TYPE ALL DOCUMENTATION
SECTION I
CLIENT/FUND
- --------------------------------------------------------------------------------
STREET: APT:
- --------------------------------------------------------------------------------
CITY: STATE: ZIP:
- --------------------------------------------------------------------------------
PHONE NUMBER: FAX NUMBER:
- --------------------------------------------------------------------------------
SECTION II
Please list the number of all demand deposit accounts (DDAs) from which you
intend to initiate wire transfers
<TABLE>
<CAPTION>
MAXIMUM $ LIMIT MAXIMUM $ LIMIT
DDA NUMBER PER TRANSACTION DDA NUMBER PER TRANSACTION
(8 DIGITS) (IF ANY) (8 DIGITS) (IF ANY)
<S> <C> <C> <C>
1. 1.
- -------------------------- ----------------------- ---------------------- ------------------------
2. 2.
- -------------------------- ----------------------- ---------------------- ------------------------
3. 3.
- -------------------------- ----------------------- ---------------------- ------------------------
4. 4.
- -------------------------- ----------------------- ---------------------- ------------------------
5. 5.
- -------------------------- ----------------------- ---------------------- ------------------------
6. 6.
- -------------------------- ----------------------- ---------------------- ------------------------
</TABLE>
<PAGE>
Exhibit (h)(6)
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made as of the 1st day of December 1999, by and between Nvest
Services Company, Inc., a Massachusetts corporation ("NSC"), and New England
Funds Trust I, New England Funds Trust II, New England Funds Trust III, New
England Cash Management Trust and New England Tax Exempt Money Market Trust
(collectively, the "Trusts").
WITNESSETH:
WHEREAS, each Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trusts desire to employ NSC to provide certain administrative
services to the Trusts in the manner and on the terms set forth in this
Agreement, and NSC wishes to perform such services;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties hereby agree as follows:
1. APPOINTMENT AND ACCEPTANCE. The Trusts hereby employ NSC to act as
Administrator of the Trusts on the terms set forth in this agreement. NSC hereby
accepts such employment and agrees to furnish the services and to assume the
obligations herein set forth for the compensation herein provided. The Trusts
will initially consist of the series and/or classes of shares (each a "Fund" and
collectively, the "Funds") listed on Schedule A to this Agreement. In the event
that any of the Trusts establish one or more additional Funds with respect to
which such Trust wishes to employ NSC to act as Administrator hereunder, the
Trust shall notify NSC in writing. Upon written acceptance by NSC, such Fund
shall become subject to the provisions of this Agreement to the same extent as
the existing Funds, except to the extent that such provisions (including those
relating to the compensation and expenses payable by the Trusts and its Funds)
may be modified with respect to each additional Fund in writing by the Trust and
NSC at the time of the addition of the Fund.
2. SERVICES PROVIDED BY NSC.
(a) NSC shall perform or arrange for the performance of the various
administrative and clerical services listed in Schedule B hereto. The
administrative services provided hereunder shall be subject to the
control, supervision and direction of the Trusts and the review and
comment by the Trusts' auditors and legal counsel and shall be
performed in accordance with procedures which may be established from
time to time between the Trusts and NSC. NSC shall provide the office
space, facilities, equipment and the personnel required by it to
perform the services contemplated herein.
(b) In providing any or all of the services listed in Schedule B hereto, and
in satisfaction of its obligations to provide such services, NSC may enter
into agreements with one or more other third parties to provide such
services to the Trusts; provided, however, that NSC shall be as fully
responsible to the Trusts for the acts and omissions of any such third
party service providers as it would be for its own acts or omissions
hereunder.
3. COMPENSATION AND EXPENSES.
(a) For the services provided by NSC hereunder, the Trusts shall pay NSC the
greater of the following:
(1) an annual minimum fee payable in equal monthly installments equal to
$2,300,000. This minimum fee would only apply when and if the collective
average net assets of the Trusts dropped below $7,000,000,000; or
(2) a monthly fee (accrued daily) based on the Trusts' average daily net
assets during the calendar month, such fee being calculated at the
annualized rates set forth below:
ANNUALIZED FEE RATE
AVERAGE DAILY NET ASSETS AS A % OF AVERAGE DAILY NET ASSETS
------------------------ ----------------------------------
$0 - $5 billion 0.0350%
Next $5 billion 0.0325%
Over $10 billion 0.0300%
(b) In addition, the Trusts shall reimburse NSC for its reasonable
out-of-pocket expenses as well as any other advances incurred by NSC with
the consent of the Trusts with respect to its provision of services
hereunder. It is agreed that the expenses for Blue Sky administrative
services performed and vendor costs incurred will be paid directly by the
Trusts.
(c) For any period less than a full calendar month, any fees payable to NSC
for such period shall be pro-rated for such lesser period. All of the
foregoing fees and expenses will be billed monthly in arrears by NSC. The
Trusts shall pay such fees and reimburse such expenses promptly upon
receipt of an invoice therefor and, in no event, later than five (5)
business days after receipt of the invoice.
(d) The Trusts agrees promptly to reimburse NSC for any equipment and supplies
specially ordered by or for the Trusts through NSC at the request or with
the consent of the Trusts, and for any other expenses not contemplated by
this Agreement that NSC may incur on behalf of, at the request of, or with
the consent of the Trusts.
(e) The Trusts will bear all expenses that are incurred in its operation
and not specifically assumed by NSC. Expenses to be borne by the
Trusts, include, but are not limited to: organizational expenses; cost
of services of independent accountants and outside legal and tax
counsel (including such counsel's review of each Trust's registration
statement, proxy materials, federal and state tax qualification as a
regulated investment company and other reports and materials prepared
by NSC under this Agreement); cost of any services contracted for by
the Trusts directly from parties other than NSC; cost of trading
operations and brokerage fees, commissions and transfer taxes in
connection with the purchase and sale of securities for the Funds;
investment advisory fees; taxes, insurance premiums and other fees and
expenses applicable to its operation; costs incidental to any meetings
of shareholders including, but not limited to, legal and accounting
fees, proxy filing fees and the costs of preparation, printing and
mailing of any proxy materials; costs incidental to Board meetings,
including fees and expenses of Board members; the salary and expenses
of any non-affiliated officer or director/trustee or any employee of
the Trusts; costs incidental to the preparation, printing and
distribution of the Trusts' registration statements and any amendments
thereto and shareholder reports; cost of typesetting and printing of
prospectuses; cost of preparation and filing of each of the Fund's tax
returns, Form N-1A and Form N-SAR, and all notices, registrations and
amendments associated with applicable federal and state tax and
securities laws; all applicable registration fees and filing fees
required under federal and state securities laws; fidelity bond and
directors' and officers' liability insurance; and cost of independent
pricing services used in computing each Fund's net asset value.
4. LIMITATION OF LIABILITY; INDEMNIFICATION.
(a) NSC shall not be liable to the Trusts for any error of judgment or
mistake of law or for any loss arising out of any act or omission by
NSC, or any persons engaged pursuant to Section 2(b) hereof, including
officers, agents, and employees of NSC and its affiliates, in the
performance of its duties hereunder; provided, however, that nothing
contained herein shall be construed to protect NSC against any
liability to the Trusts, the Funds, or the shareholders to which NSC
shall otherwise be subject by reason of its willful misfeasance, bad
faith, or negligence in the performance of its duties or the reckless
disregard of its obligations and duties hereunder.
(b) NSC will indemnify and hold harmless the Trusts, their officers,
employees, and agents and any persons who control the Trusts
(collectively, the "Trusts Indemnified Parties") and hold each of them
harmless from any losses, claims, damages, liabilities, or actions in
respect thereof to which the Trusts Indemnified Parties may become
subject, including amounts paid in settlement with the prior written
consent of NSC, insofar as such losses, claims, damages, liabilities,
or actions in respect thereof arise out of or result from the failure
of NSC to comply with the terms of this Agreement.
NSC will reimburse the Trusts for reasonable legal or other expenses
reasonably incurred by the Trusts in connection with investigating or
defending against any such loss, claim, damage, liability, or action. NSC
shall not be liable to the Trusts for any action taken or omitted by the
Trusts in bad faith or with willful misfeasance or negligence or with
reckless disregard by the Trusts of their respective obligations and
duties hereunder. The indemnities herein shall, upon the same terms and
conditions, extend to and inure to the benefit of each of the officers of
the Trusts and any person controlling the Trusts.
(c) The obligations set forth in this Section 4 shall survive the termination
of this Agreement.
5. ACTIVITIES OF NSC NOT EXCLUSIVE; DUAL INTERESTS.
(a) The services of NSC under this Agreement are not to be deemed exclusive,
and NSC and any person controlled by or under common control with NSC
shall be free to render similar services to others.
(b) It is understood that any of the officers, employees, and agents of the
Trusts or the Manager may be a shareholder, director, officer,
employee, or agent of, or be otherwise interested in, NSC, any
affiliated person of NSC, any organization in which NSC may have an
interest, or any organization that may have an interest in the Trusts.
Except as otherwise provided by specific provisions of applicable law,
the existence of any such dual interest shall not affect the validity
of this Agreement or any of the transactions hereunder.
6. REPRESENTATIONS AND WARRANTIES.
(a) The Trusts each represents and warrants to NSC that this Agreement has
been duly authorized by each of them and, when executed and delivered,
will constitute a legal, valid, and binding obligation of the Trusts,
enforceable against the Trusts in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting the rights and remedies of creditors and
secured parties.
(b) NSC represents and warrants to the Trusts that this Agreement has been
duly authorized by NSC and, when executed and delivered by NSC, will
constitute a legal, valid, and binding obligation of NSC, enforceable
against NSC in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium, and other laws of general
application affecting the rights and remedies of creditors and secured
parties.
7. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) This Agreement shall become effective as of the date first above written
and, unless otherwise terminated, shall continue indefinitely; provided,
however, that this Agreement may be terminated at any time without the
payment of any penalty by either party on not less than sixty (60) days'
written notice to the other party.
(b) This Agreement shall automatically terminate for any Fund in the attached
Schedule A upon the termination of that Fund's Advisory Agreement.
(c) Unless otherwise terminated, this Agreement shall continue in effect for
one year from the date of execution, and from year to year thereafter so
long as such continuance is specifically approved at least annually by the
Board of Trustees of the Trusts.
(d) NSC hereby agrees that any books and records prepared hereunder with
respect to the Trusts are the property of the Trusts and shall be readily
accessible to the Trusts and their respective trustees, officers and
agents during normal business hours. NSC further agrees that, upon the
termination of this Agreement or otherwise upon request, NSC will
surrender promptly to the Trusts copies of all such books and records.
8. AMENDMENTS AND WAIVERS. This Agreement may be amended by the parties
hereto only if such amendment is specifically approved by the Trusts' Board of
Trustees, and such amendment is set forth in a written instrument executed by
each of the parties hereto. At any time, any of the provisions hereof may be
waived by the written mutual consent of the parties hereto.
9. NOTICES. All notices or other communications hereunder to either party
shall be in writing and shall be deemed to be received on the earlier of the
date actually received or on the fourth day after the postmark if such notice is
mailed first class postage prepaid. Notices shall be sent to the addresses set
forth below or to such other address as either party may designate by written
notice to the other.
If to NSC:
Nvest Services Company, Inc.
399 Boylston Street
Boston, MA 02116
Attention: President
With a copy to: General Counsel
If to the Trusts:
New England Funds Trust I
New England Funds Trust II
New England Funds Trust III
New England Cash Management Trust
New England Tax Exempt Money Market Trust
399 Boylston Street
Boston, MA 02110
Attention: President
With a copy to: Secretary
Notice shall also be deemed sufficient if given electronically or by telex,
telecopier, telegram, or other similar means of same day delivery (with a
confirming copy by mail as provided herein).
10. ADDITIONAL PROVISIONS
(a) Year 2000. Neither party shall be held liable for computer-related problems
arising out of or associated with third party vendor computer systems or
related equipment that are incurred in connection with the change from the
years 1999 to 2000.
(b) Separate Portfolios. This Agreement shall be construed to be made by the
Trusts as a separate agreement with respect to each Fund, and under no
circumstances shall the rights, obligations, or remedies with respect to a
particular Fund be deemed to constitute a right, obligation, or remedy
applicable to any other Fund.
(c) Entire Agreement. This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and supersedes any prior
arrangements, agreements, or understandings.
(d) Severability. If any term or provision of this Agreement or the application
thereof to any person or circumstance is held to be invalid or unenforceable
to any extent, the remainder of this Agreement or the application of such
provision to other persons or circumstances shall not be affected thereby
and shall be enforced to the fullest extent permitted by law.
(e) Governing Law. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of The Commonwealth of Massachusetts
as then in effect.
(f) Counterparts. This Agreement may be executed by the parties hereto in one or
more counterparts, and, if so executed, the separate instruments shall
constitute one agreement.
(g) Headings. Headings used in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
NVEST SERVICES COMPANY, INC.
By: /s/ Christopher L. Wilson
------------------------------
Name: Christopher L. Wilson
Title: President & Chief Executive Officer
NEW ENGLAND FUNDS TRUST I
NEW ENGLAND FUNDS TRUST II
NEW ENGLAND FUNDS TRUST III
NEW ENGLAND CASH MANAGEMENT TRUST
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
By: /s/ Neal G. Litvack
------------------------------
Name: Neal G. Litvack
Title: President
<PAGE>
SCHEDULE A
TRUST PORTFOLIOS
1. New England Growth Fund
2. New England Capital Growth Fund
3. New England Growth & Income Fund
4. New England Equity Income Fund
5. New England Bullseye Fund
6. New England Balanced Fund
7. New England Value Fund
8. New England International Equity Fund
9. New England Star Advisers Fund
10. New England Star Worldwide Fund
11. New England Star Small Cap Fund
12. New England Bond Income Fund
13. New England High Income Fund
14. New England Government Securities Fund
15. New England Limited Term U.S. Government Fund
16. New England Strategic Income Fund
17. New England Short Term Income Fund
18. New England Municipal Income Fund
19. New England Massachusetts Tax Free Income Fund
20. New England Intermediate Term Tax Free Fund of California
21. New England Cash Management Trust - Money Market Series
22. New England Tax Exempt Money Market Trust
<PAGE>
SCHEDULE B
DESCRIPTION OF SERVICES PROVIDED
NSC shall perform or arrange for the performance of the following administration
and clerical service:
CORPORATE SECRETARIAL SERVICES
1. provide Secretary and Assistant Secretaries for the Trusts and other
officers as requested;
2. maintain general corporate calendar, tracking all legal and regulatory
compliance through annual cycles;
3. prepare Board materials for quarterly Board meetings and Board
committee meetings, including agenda and background materials for
annual review of advisory and distribution fees, presentation of
issues to the Board, prepare minutes and follow-up on matters raised
at meetings;
4. maintain charter documents for the Trusts;
5. prepare organizational Board meeting materials for new Funds;
6. draft contracts, assisting in negotiation and planning, as
appropriate, for example advisory, distribution and selling
agreements, transfer agency and custodian agreements, 12b-1 and
shareholder servicing plans and related agreements and various other
agreements and amendments;
7. prepare and file proxy solicitation materials, oversee solicitation
and tabulation efforts, conduct shareholder meetings and provide legal
presence at meetings;
REGISTRATION AND DISCLOSURE ASSISTANCE SERVICES
8. prepare and file amendments to the Funds' registration statement,
including updating prospectuses and SAIs;
9. prepare and file prospectus and SAI supplements, as needed;
10. prepare and file other regulatory documents, including N-SARs, Rule
24f-2/24e-2 Notices;
11. negotiate, obtain and file fidelity bonds and monitor compliance with
Rule 17g-1 and Rule 17d-1(7) under the 1940 Act;
12. negotiate, obtain and monitor directors' and officers' errors and
omissions policies;
13. prepare and file shareholder meeting materials and assist with all
shareholder communications;
14. coordinate and monitor state Blue Sky qualification through an
experienced vendor partner;
LEGAL CONSULTING AND PLANNING SERVICES
15. provide general legal advice on matters relating to portfolio
management, Fund operations, mutual fund sales, development of
advertising materials, changing or improving prospectus disclosure,
and any potential changes in each Fund's investment policies,
operations, or structure;
16. communicate significant emerging regulatory and legislative
developments to the Adviser, the Trusts and the Board and provide
related planning assistance;
17. develop or assist in developing guidelines and procedures to improve
overall compliance by the Trusts and Funds;
18. provide advice with regard to litigation matters, routine fund
examinations and investigations by regulatory agencies;
19. provide advice regarding long-term planning for the Funds, including
creation of new funds or portfolios, corporate structural changes,
mergers, acquisitions, and other asset gathering plans including new
distribution methods;
20. maintain effective communications with fund counsel and counsel to the
independent Trustees, if any;
21. create and implement timing and responsibility system for outside
legal counsel when necessary to implement major projects and the legal
management of such projects;
22. monitor activities and billing practices of counsel performing
services for the Funds or in connection with related fund activities;
23. provide consultation and advice for resolving compliance questions
along with the Adviser, its counsel, the Trusts and fund counsel;
24. provide active involvement with the management of SEC and other
regulatory examinations;
25. maintain the Trust's Code of Ethics and monitor compliance of
personnel;
TRANSFER AGENT MONITORING SERVICES
26. ensure that the content of confirmations, statements, annual and
semi-annual reports, disclosure statements and shareholder
administrative communications conform to regulatory requirements and
are distributed within the mandated time frames;
27. monitor and review transfer agent activity in order to evaluate the
status of regulatory compliance, protect the integrity of the funds
and shareholders, search for systemic weaknesses, and examine for
potential liability and fraud;
28. investigate and research customer and other complaints to determine
liability, facilitate resolution and promote equitable treatment of
all parties;
29. consult with transfer agent and other staff regarding prospectus and
SAI provisions and requirements, distribution issues including payment
programs, sub-transfer agent arrangements and other regulatory issues;
TREASURY FINANCIAL SERVICES
30. provide Treasurer and Assistant Treasurers for the Trusts as
requested;
31. generate portfolio schedules utilizing State Street Safire system;
32. create financial statements and financial highlight tables;
33. maintain and update the notes to the financials;
34. supply State Street Bank with a listing of audit reports and
schedules;
35. coordinate with external auditors for annual audit;
36. review financial statements for completeness accuracy and full
disclosure;
37. coordinate ROCSOP adjustments with auditors;
38. determine and monitor expense accrual for each fund;
39. verify management and 12b-1 fees calculated by State Street;
40. review fund waivers and deferrals;
41. calculate total returns for each fund and respective classes using the
Fundstation system;
42. oversee and review custodial bank services including maintenance of
books and records;
43. provide service bureaus with funds statistical information;
44. oversee the determination and publication of the Funds' net asset
values;
45. review the calculation, submit for approval by an officer of the
Funds', and arrange for the payment of the Funds' expenses;
46. oversee and review the calculation of fees paid to the Funds' manager,
subadvisers, custodian, transfer agent and distributor and submit to
an officer for Funds' approval;
TREASURY REGULATORY SERVICES
47. prepare and file annual and semi-annual N-SAR forms with the SEC;
48. provide Trustees with condensed portfolio information;
49. review securities lending activity;
50. review pricing errors;
51. review fair value pricing;
52. review stale pricing;
53. review collateral segregation;
54. provide bi-monthly summaries of pricing overrides to management;
55. provide a review of expense caps and management fee waivers to
management;
56. review short sales;
57. review derivatives positions;
58. review brokerage commissions;
59. review dividends and capital gain distributions;
TREASURY TAX SERVICES
60. provide annual tax information (Form 1099) for each fund or class of
shares to shareholders and transfer agents;
61. calculate distribution of capital gains, income and spill back
requirements;
62. provide estimates of capital gains;
63. provide 1099 information to vendors;
64. provide service bureaus, brokers and various parties with tax
information noticed;
65. prepare excise tax returns;
66. prepare income tax returns;
67. prepare tax identification number filings;
68. perform IRS sub-Chapter M testing for 25% diversification, 50%
diversification, 90% gross income, 90% income distribution requirement
(annually), and 98% excise distribution requirement (annually);
TREASURY COMPLIANCE SERVICES
69. perform oversight review to ensure investment manager compliance with
investment policies and limitations;
70. obtain and review investment manager certification on adhering to all
investment policies, restrictions and guidelines;
71. monitor SEC diversification with 75% diversification test and Section
12 diversification test;
72. review bi-monthly designated collateral on all fund derivative and
delayed delivery positions;
TREASURY SPECIAL SERVICES
73. administer daily review of securities lending with Goldman Sachs and
State Street Bank;
74. ensure semiannual review of Funds for opportunities with lending and
review of current income levels;
75. establish opportunities with investment manager and brokers for
directed commission programs;
76. monitor line of credit arrangement and payment of commitment fees;
77. maintain Trustee payments and monitor deferred compensation
arrangements;
78. provide Trustees with Form 1099 information;
79. generate expense proformas for new products;
80. negotiate with vendors to ensure new products are brought in at the
lowest costs;
81. ensure all aspects of new products are operationally ready.
<PAGE>
Exhibit (h)(10)
May 1, 2000
Nvest Funds Trust I
Nvest Funds Trust II
Nvest Funds Trust III
Nvest Tax Exempt Money Market Trust
Boston, MA 02116
Re: Fee Waiver/Expense Reimbursement
Ladies and Gentlemen:
Nvest Funds Management, L.P. notifies you that it will waive its
management fee (and, to the extent necessary, bear other expenses of the Funds
listed below) through May 1, 2001 to the extent that expenses of each class of a
Fund, exclusive of brokerage, interest, taxes and deferred organizational and
extraordinary expenses, would excess the following annual rates:
Name of Fund Expense Cap
------------ -----------
Nvest Bullseye Fund 1.75% for Class A shares
2.50% for Class B shares
2.50% for Class C shares
Nvest Equity Income Fund 1.50% for Class A shares
2.25% for Class B shares
2.25% for Class C shares
Nvest Massachusetts Tax Free 1.20% for Class A shares
Income Fund 1.85% for Class B shares
Nvest Intermediate Term Tax Free 0.85% for Class A shares
Fund of California 1.60% for Class B shares
Nvest Short Term Corporate 0.90% for Class A shares
Income Fund 1.65% for Class B shares
1.65% for Class C shares
0.60% for Class Y shares
<PAGE>
With respect to each Fund, Nvest Funds Management shall be permitted to
recover expenses it has borne subsequent to the effective date of this agreement
(whether through reduction of its management fee or otherwise) in later periods
to the extent that a Fund's expenses fall below the annual rates set forth
above. Provided, however, that a Fund is not obligated to pay any such deferred
fees more than one year after the end of the fiscal year in which the fee was
deferred.
During the period covered by this letter agreement, the expense cap
arrangement set forth above for each of the Funds may only be modified by a
majority vote of the "non-interested" Trustees of the Trusts affected.
For purposes of determining any such waiver or expense reimbursement,
expenses of the class of the Funds shall not reflect the application of balance
credits made available by the Funds' custodian or arrangements under which
broker-dealers that execute portfolio transactions for the Funds' agree to bear
some portion of Fund expenses.
We understand and intend that you will rely on this undertaking in
preparing and filing the Registration Statements on Form N-1A for the above
referenced Funds with the Securities and Exchange Commission, in accruing each
Fund's expenses for purposes of calculating its net asset value per share and
for other purposes permitted under Form N-1A and/or the Investment Company Act
of 1940, as amended, and expressly permit you to do so.
Nvest Funds Management, L.P.
By: /s/ John E. Pelletier
-----------------------
John E. Pelletier
Title: Senior Vice President, General
Counsel, Secretary & Clerk
<PAGE>
Exhibit (j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our reports dated February 11, 2000, relating to the
financial statements and financial highlights which appears in the December 31,
1999 Annual Reports to Shareholders of Nvest Funds Trust I, which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the heading "Financial Highlights" in the
Prospectuses and under the heading "Independent Accountants" in the Statements
of Additional Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 26, 2000
<PAGE>
Exhibit (p)(1)
NEW ENGLAND FUNDS
NEW ENGLAND FUNDS TRUST I
NEW ENGLAND FUNDS TRUST II
NEW ENGLAND FUNDS TRUST III
NEW ENGLAND FUNDS TRUST IV
NEW ENGLAND CASH MANAGEMENT TRUST
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
NEW ENGLAND ZENITH FUND
NEW ENGLAND VARIABLE ANNUITY FUND I
CODE OF ETHICS
In order to ensure that all acts, practices and courses of business
engaged in by personnel of the above Funds, their advisers and underwriters
reflect high standards and comply with the requirements of Section 17(j) of the
Investment Company Act of 1940 and Rule 17j-1 thereunder, the Board of Trustees
or Managers of each Fund has determined that the Fund shall adopt this Code of
Ethics.
It is the policy of the Funds that all Fund personnel, their advisers and
underwriters should (1) at all times place the interests of Fund shareholders
first; (2) conduct all personal securities transactions in a manner that is
consistent with this Code of Ethics and in such a manner as to avoid any actual
or potential conflict of interest or any abuse of the individual's position of
trust and responsibility; and (3) adhere to the fundamental standard that Fund
personnel, their advisers and underwriters should not take inappropriate
advantage of their position.
Each of the Advisers and the Underwriters, as defined below, imposes
reporting and review requirements and restrictions on the personal securities
transactions of its personnel. Copies of the codes and policies of these
organizations have been furnished to the Trustees and Managers. The Trustees and
Managers have determined that, in addition to the requirements of each Fund's
Code of Ethics, the standards and reporting and review requirements established
by these organizations will be appropriately applied by each of the Funds to
those of its officers and those of its Trustees or Managers who are affiliated
with these organizations.
The provisions of the codes and policies of the Advisers and the
Underwriters are incorporated in this Code of Ethics as the provisions
applicable to officers, Trustees, Managers or advisory persons of the Fund who
are officers, partners, directors or employees of these organizations. A
violation of any such incorporated code or policy by any access person covered
by that code or policy with respect to transactions covered herein shall
constitute a violation of this Code.
1. Definitions
(a) "Fund" or "Funds" means one or more of New England Funds Trust
I, New England Funds Trust II, New England Funds Trust III, New England Cash
Management Trust, New England Tax Exempt Money Market Trust, New England Zenith
Fund, and New England Variable Annuity Fund I and their respective series.
(b) "Access person" means any director, officer, general partner or
advisory person of a Fund.
(c) "Adviser" means each entity that serves as an investment adviser
or sub-adviser to any Fund.
(d) "Advisory person" means (i) any employee of the Fund or of any
company in a control relationship to the Fund, who, in connection with his or
her regular functions or duties, makes, participates in, or obtains information
regarding the purchase or sale of a security by the Fund, or whose functions
relate to the making of any recommendations with respect to such purchases or
sales; and (ii) any natural person in a control relationship to the Fund who
obtains information concerning recommendations made to the Fund with regard to
the purchase or sale of a security.
(e) A security is "being considered for purchase or sale" when a
decision or recommendation to purchase or sell a security has been made and
communicated and, with respect to the person making the decision or
recommendation, when such person seriously considers making such a decision or
recommendation.
(f) "Beneficial ownership" shall be interpreted in the same manner
as it would be in determining whether a person is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934 and the rules and regulations
thereunder, except that the determination of direct or indirect beneficial
ownership shall apply to all securities which an access person has or acquires.
(g) "Control" shall have the same meaning as that set forth in
Section 2(a)(9) of the Investment Company Act.
(h) "Disinterested Trustee" or "disinterested Manager" means a
Trustee or Manager of a Fund who is not an "interested person" of the Fund
within the meaning of Section 2(a)(19) of the Investment Company Act.
(i) "Purchase or sale of a security" includes, inter alia, the
writing of an option to purchase or sell a security.
(j) "Security" shall have the meaning set forth in Section 2(a)(36)
of the Investment Company Act, except that it shall not include shares of
registered open-end investment companies, securities issued by the Government of
the United States, short term debt securities which are "government securities"
within the meaning of Section 2(a)(16) of the Investment Company Act, bankers'
acceptances, bank certificates of deposit or commercial paper.
(k) "Security held or to be acquired" by a Fund means any security
which, within the most recent 15 days, (i) is or has been held by the Fund, or
(ii) is being or has been considered by the Fund or its Adviser for purchase by
the Fund.
(l) "Underwriter" means New England Funds, L.P., with respect to New
England Funds Trust I, New England Funds Trust II, New England Funds Trust III,
New England Cash Management Trust and New England Tax Exempt Money Market Trust
and New England Securities Corporation with respect to New England Zenith Fund
and New England Variable Annuity Fund I.
2. Exempted Transactions
The prohibitions of Section 3 of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the access
person has no direct or indirect influence or control.
(b) Purchases or sales which are non-volitional on the part of
either the access person or the Fund.
(c) Purchases which are part of an automatic dividend reinvestment
plan.
(d) Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities, to the extent
such rights were acquired from such issuer, and sales of such rights so
acquired.
3. Prohibitions
No access person shall purchase or sell, directly or indirectly, any
security in which he or she has, or by reason of such transaction acquires, any
direct or indirect beneficial ownership and which he or she knows or should have
known at the time of such purchase or sale:
(a) is being considered for purchase or sale by the Fund; or
(b) is being purchased or sold by the Fund.
4. Reporting
(a) Every access person shall report to the Fund the information
described in Section 4(c) of this Code with respect to transactions in any
security in which such access person has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership in the security; provided,
however, that an access person shall not be required to make a report with
respect to transactions effected for any account over which such person does not
have any direct or indirect influence or control.
(b) Notwithstanding Section 4(a) of this Code, an access person need
not make a report where the report would duplicate information reported pursuant
to Rules 204-2(a)(12) or 204-2(a)(13) under the Investment Advisers Act of 1940
or pursuant to codes of ethics or policies and procedures with respect to the
flow and use of material nonpublic (inside) information adopted by an Adviser or
an Underwriter (collectively, "Adviser's or Underwriter's Codes"). Reports which
have been filed with an Adviser or Underwriter shall be subject to inspection by
appropriate representatives of the Fund, including the President and Secretary
of the Fund, and the Adviser and Underwriter shall promptly notify the President
and Secretary of the Fund of any violation of this Code or of an Adviser's or
Underwriter's Code.
(c) A disinterested Trustee or Manager of the Fund need only report
a transaction in a security if such Trustee or Manager, at the time of that
transaction, knew or, in the ordinary course of fulfilling his or her official
duties as a Trustee or Manager of the Fund, should have known that, during the
15-day period immediately preceding the date of the transaction by the Trustee
or Manager, such security was purchased or sold by the Fund or was being
considered by the Fund or its investment adviser for purchase or sale by the
Fund.
(d) Every report shall be made not later that 10 days after the end
of the calendar quarter in which the transaction to which the report relates was
effected, and shall contain the following information:
(i) The date of the transaction, the title and the number of
shares, and the principal amount of each security involved;
(ii) The nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);
(iii) The price at which the transaction was effected;
(iv) The name of the broker, dealer or bank with or through
whom the transaction was effected; and
(v) Identification of factors potentially relevant to a
conflict of interest analysis, of which the access person is aware,
including the existence of any substantial economic relationship
between his or her transactions and transactions of or securities
held or to be acquired by the Fund.
(e) Any such report may contain a statement that the report shall
not be construed as an admission by the person making such report that he or she
has any direct or indirect beneficial ownership in the security to which the
report relates.
5. Sanctions
Upon discovering a violation of this Code, the Board of Trustees or
Managers of the Fund and/or the Adviser or the Underwriter may impose such
sanctions as it or they deem appropriate, including, inter alia, a letter of
censure or suspension or termination of the relationship to the Fund or of the
employment by the Adviser or the Underwriter of the violator. Any sanctions
imposed by an Adviser or an Underwriter with respect to this Code or to an
Adviser's or Underwriter's Code shall periodically be reported to the Board of
Trustees or Managers of the Fund with respect to whose securities the violation
occurred.
<PAGE>
Exhibit (p)(2)
NVEST FUNDS MANAGEMENT, L.P.
NVEST FUNDS DISTRIBUTOR, L.P.
CODE OF ETHICS
REVISED, AUGUST 1999
I. INTRODUCTION
Nvest Funds Management, L.P. ("NFM"), as a registered investment adviser, and
Nvest Funds Distributor, L.P. ("NFD"), as the principal underwriter for
registered investment companies, (each a "Firm" and, collectively, the "Firms")
must conduct operations in compliance with the Investment Company Act of 1940
(the "Act"), the Investment Advisers Act of 1940 (in the case of NFM), the
Securities Exchange Act of 1934 (in the case of NFD), and other federal and
state securities laws (collectively, the "Securities Laws").
In addition, the Firms recognize that their reputation for fairness and
integrity is vital to their success. Accordingly, the Code of Ethics ("this
Code") requires the Firms' general partner, the officers and directors of the
general partner, and all the Firms' officers and employees (collectively,
"Members of the Firms") to adhere to certain rules in order to avoid the
appearance of impropriety. Members of the Firms are expected to uphold the
highest standards of care and fair dealing in any matters involving the clients
of the Firms or their affiliates.
It is important to note that NFM and NFD are not in the business of providing
investment advice or engaging in the investment decision-making process for any
client or registered investment company, in particular, for any registered
investment company for which NFM is the adviser or NFD acts as distributor,
principal underwriter or administrator ("the Funds"). The Firms engage in
monitoring the management activity of investment advisers who subadvise certain
portfolios.
Most officers, directors and other Members of the Firms are regarded as Advisory
Persons, as defined below, and along with virtually all other Members of the
Firms have no involvement in or access to information regarding investment
decisions. A limited number of Members of the Firms are regarded as Access
Persons, as defined below, because they have occasional or regular opportunity
for access to information regarding portfolio transactions. Throughout the
organization, Members of the Firms do not make or influence decisions regarding
investment transactions in the Funds. As a result, Part VI, Sections 2 through 5
of this Code, relating to personal securities transactions, only apply to
Members of the Firms who are Access Persons and Part VI, Sections 1 and 6, apply
to both Access Persons and Advisory Persons. Periodically, the Firms' Legal
Department (the "Legal Department") and/or Compliance Department (the
"Compliance Department") may determine that other Members of the Firms are
subject to Part VI, Sections 2 through 5 of this Code, and/or Part VI, Sections
1and 6.
The Compliance Department will maintain a list of Access Persons, Advisory
Persons and of others subject to reporting requirements under the Firms'
Statement of Policies and Procedures With Respect to the Flow and Use of
Material Nonpublic (Inside) Information ("The Statement of Policy on Inside
Information"). Anyone who does not receive quarterly report forms from the Firm
but has reason to believe that he or she is an Access Person or an Advisory
Person shall notify the Firms' Director of Compliance (the "Director of
Compliance").
II. DEFINITIONS
(A) "Access person" is (i) any director, officer or employee of the Firms or
of any company in a control relationship to the Firms who, in connection
with his or her regular functions or duties, makes, participates in or
obtains information regarding the purchase or sale of a security by a
Fund, or whose functions relate to the making of any recommendations with
respect to such purchases or sales; and (ii) any natural person in a
control relationship to the Firms who obtains information concerning
recommendations made to the Funds with regard to the purchase or sale of a
security.
A person who normally only assists in the preparation of public reports,
or receives public reports but receives no information about current
recommendations or trading, is not an "Access Person." Under the
definition of "Access Person" the phrase "makes . . . the purchase or
sales" includes someone who places orders or otherwise arranges
transactions.
The Firms' determination is that management staff who are Members of the
Firms' Fund Administration, Legal, Compliance and Product Development
Departments or members of the NFM Investment Committee are those who have
occasional or regular opportunity for access to information regarding
portfolio transactions. Other Members of the Firms, who are not otherwise
subject to this Code, may become subject to this Code if they obtain
current information concerning which securities are being purchased or
sold by the Funds or a subadviser to the Funds. Any Members of the Firms
who obtain such information must immediately notify the ' General Counsel
or Director of Compliance and abide by the provisions of the Statement of
Policy on Inside Information.
An Access Person of the Firms does not include an employee of a company in
a control relationship to the Firms where such company is required to have
a code of ethics containing provisions reasonably necessary to prevent the
Access Persons from engaging in any act, practice or course of business
prohibited by Rule 17j-1(a) and such employee is required to report his
transactions to such company.
(B) "Advisory person" with respect to NFM means any director or officer of NFM
(including directors and officers of the Firms' corporate general partner)
or Managing Director of NFD (including directors and officers of the
Firms' corporate general partner) who, in connection with his or her
regular functions or duties, does not make, participate in or obtain
information regarding the purchase or sale of a security by the Funds, or
whose functions do not relate to the making of any recommendations with
respect to such purchases or sales.
(C) A security is "being considered for purchase or sale" when a decision or
recommendation to purchase or sell a security has been made and
communicated and, with respect to the person making the decision or
recommendation, when such person seriously considers making such a
decision or recommendation.
(D) "Beneficial ownership" shall be interpreted in the same manner as it would
be in determining whether a person is subject to the provisions of Section
16 of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder from time to time in effect, except that the
determination of direct or indirect beneficial ownership shall apply to
all securities which an access person has or acquires.
(E) "Control" shall have the same meaning as set forth in Section 2(a)(9) of
the Act. Section 2(a)(9) provides that "control" means, among other
things, the power to exercise a controlling influence
over the management or policies of a company, unless such power is
solely the result of an official position with such company.
(F) "Security" shall have the meaning set forth in Section 2(a)(36) of the
Act, except that it shall not include shares of registered open-end
investment companies for which neither the firm or any company affiliated
with the firm acts as adviser or distributor, securities issued by the
Government of the United States, short term debt securities which are
"government securities" within the meaning of Section 2(a)(16) of the Act,
bankers' acceptances, bank certificates of deposit and commercial paper.
(G) "Security held or to be acquired" by a Fund means any security which,
within the most recent fifteen days, (i) is or has been held by a Fund, or
(ii) is being or has been considered by a Fund or any investment adviser
of a Fund for purchase by a Fund.
(H) "Fund" means any registered investment company for which NFM serves as
investment adviser or for which NFD or New England Securities Corporation
serves as principal underwriter.
III. OUTSIDE AFFILIATIONS
No Members of the Firms shall become an officer, trustee or director of any
company (except an investment company managed by an affiliate of the Firm)
without the written approval of the Firms' General Counsel (the "General
Counsel").
No Members of the Firms shall accept an appointment as an executor,
administrator, trustee, guardian or conservator (other than in family
situations) without the written approval of the General Counsel.
IV. GIFTS TO OR FROM BROKERS OR CLIENTS
No Members of the Firms shall accept or receive on his or her own behalf or on
behalf of a Firm any gift or other accommodations from a business contact or
broker, securities salesman or client (a "business contact") that might create a
conflict of interest or interfere with the impartial discharge of his or her
responsibilities to the Funds, or place the recipient in a difficult or
embarrassing position. This prohibition applies equally to gifts to a Member's
close relatives or to those who share the same household as a Member.
No Members of the Firms shall give on his or her own behalf or on behalf of the
Firms any gift or other accommodation to a business contact that may be
construed as an improper attempt to influence the donee.
V. USE OF INSIDE INFORMATION
Members of the Firms shall adhere to the Firms' Statement of Policy on Inside
Information, which should be read in conjunction with this Code.
VI. PERSONAL SECURITIES TRANSACTIONS
1. FUND OPPORTUNITIES
The Firms put the Funds' interests first. If an Access and/or Advisory Person
learns of an investment opportunity of limited availability that would be
suitable for the Funds, the Access and/or Advisory Person may not invest in that
opportunity for his or her own account without the express prior approval of the
General Counsel or, in his absence, the Director of Compliance.
The foregoing principle applies in all situations. In addition, in furtherance
of this principle, Access Persons will adhere to the following restrictions on
their personal investing activity.
2. INITIAL PUBLIC OFFERINGS
No Access Person may acquire securities in an initial public offering.
3. PRIVATE PLACEMENTS
No Access Person may acquire securities in a private placement without the
written prior approval of the General Counsel or, in his absence, the Director
of Compliance.
Any Access Person who now or hereafter owns a privately-placed security and who
becomes involved in an investment decision involving the issuer of the security
shall disclose his or her ownership of the private placement to the General
Counsel or, in his absence, the Director of Compliance, as soon as practicable
after becoming involved in the decision-making process.
Any Access Person who owns a private placement of an issuer must refrain from
deliberations regarding client purchases or sales of securities issued by the
same issuer.
4. BLACKOUT PERIODS
Except as set forth below, no Access Person may purchase or sell a security (or
an option on that security or a security convertible to that security) on any
day during which he or she knows (before trading) that a buy or sell order in
the same security (or an option on that security or a security convertible to
that security) is pending for a Fund.
Except as set forth below, no Access Person may purchase or sell securities,
which he or she knows before trading, were purchased or sold by a Fund within
seven calendar days before and after the Fund buys or sells the security.
The prohibitions of this section do not apply to transactions in the following
securities:
[ ] Securities issued or guaranteed by any government that is a member of
the Organization for Economic Cooperation and Development, or any agency
or authority thereof.
[ ] Common or preferred stocks of a class that is publicly-traded, issued by
companies with a market capitalization in excess of 10 billion U.S.
dollars (or the equivalent in foreign currency).
[ ] Commodity futures contracts, including futures contracts on interest
rate instruments or securities indices, options on such contracts and
options on securities indices.
The provisions of this section do not apply to the following transactions:
[ ] Transactions that occur by operation of law or in any account over which
neither the firm or any advisory representative has any direct or indirect
influence or control or under any other circumstance in which the Access
Person does not exercise any discretion to buy or sell.
[ ] Purchases of securities pursuant to an automatic dividend reinvestment
plan.
[ ] Purchases pursuant to the exercise of rights issued pro rata to all
holders of the class of securities held by the Access Person and received
by the Access Person from the issuer.
5. PRE-TRADE CLEARANCE
Given the nature of NFM's current advisory operations, which are restricted to
post-trade oversight of other investment advisers, and NFD's role as
distributor, principal underwriter or administrator of the Funds, the Firms have
determined that preclearance of transactions is not practicable. Nonetheless,
the Firms reserve the right to require any Access Person to preclear
transactions at any time and, if requested by a Firm, an Access Person will
obtain the approval of such Firm before buying or selling any security, for such
period (which may be indefinite) as such Firm shall determine.
6. DISCLOSURE REQUIREMENTS AND REPORTS
Broker Statements
All Access and/or Advisory Persons may direct their brokers to supply such Firm
with duplicate confirmation statements and periodic account statements. It is
the recommendation of the Firm that each Access or Advisory Person is to direct
his or her broker(s) to send duplicate confirmation and account statements to
the Firm routinely.
Quarterly Reports
Within ten days following the end of each quarter, each Access or Advisory
Person must file a signed securities transaction form with the Firms' Legal
Department. On that form each Access and/or Advisory Person must report the
security transactions carried out during the quarter for all accounts in which
he or she has a beneficial interest, except accounts where the Access and/or
Advisory Person has no direct or indirect influence or control over investments,
or accounts for which transactions have been reported by means of duplicate
confirmations and account statements. All transactions in securities must be
included in the quarterly reports other than transactions in securities excepted
from the definition of "security" under this Code and in securities purchased as
part of an automatic dividend reinvestment plan.
Every report shall contain the following information for each transaction:
a) a description of the security or other interest acquired;
b) the date of the transaction, the number of shares, and the principal
amount of each security involved;
c) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
d) the price at which the transaction was effected; and
e) the name of the broker, dealer or bank with or through which the
transaction was effected.
This form must be filed whether or not any security transactions have been
carried out. In instances where there have been no transactions, that fact
should be stated.
Any such report may contain a statement that the report shall not be construed
as an admission that the Access and/or Advisory Person has any direct or
indirect beneficial ownership in a security to which the report relates and no
report shall be considered as an admission that any transaction reported
constitutes a violation of this Code.
Any person required to make such a report may satisfy his or her obligations
hereunder by sending duplicate confirmations of such trades to the Firms' Legal
Department, Attention: Director of Compliance.
Reports of Holdings
Upon commencement of employment, each Access and/or Advisory Person shall file
with the Legal Department a report listing all personal securities holdings.
VII. REVIEW AND ENFORCEMENT
The Compliance and/or Legal Department will review transaction reports for
potential violations of this Code. It is the policy of the firm to investigate
all instances of trading during Black Out Periods on the part of Access and/or
Advisory Persons and other apparent or technical violations on the part of
Access Persons to determine if a substantive conflict exists resulting in an
actual violation.
An individual may not participate in a determination of whether he or she has
committed a violation of this Code or of the imposition of any resulting
sanction. If anyone contemplates making a transaction that may conflict with the
provisions of this Code, he or she shall contact the General Counsel or, in his
absence, the Director of Compliance prior to going ahead with the transaction.
The Firms may impose such sanctions, as it deems appropriate for violations of
this Code, including, among other things, a letter of censure or suspension or
termination of the employment of the violator.
The Firms will treat information submitted in the quarterly reports as
confidential. However, the Firms shall present the results of their review of
the reports to the Board of Directors of the general partner and the boards of
the Funds on an annual basis and more frequently if appropriate.
VIII. MAINTENANCE OF RECORDS
The Firms will maintain the following records, to the extent and in the manner
set forth below, and will make such records available to the Securities and
Exchange Commission or any representative thereof at any time and from time to
time for reasonable periodic, special or other examination:
1. A copy of the Firms' Code, as in effect any time within the past five
years, shall be preserved in an easily accessible place;
2. A record of any violation of such Code, and of any action taken as a
result of such violation, shall be preserved in an easily accessible
place for a period of not less than five years following the end of the
fiscal year in which the violation occurs;
3. A copy of each report of a securities transaction shall be preserved
for a period of not less than five years from the end of the fiscal
year in which it is made, the first two years in an easily accessible
place; and
4. A list of all persons who are, or within the past five years have been,
required to make reports pursuant to Part VI, Section 6 shall be
maintained in an easily accessible place.
IX. ANNUAL CERTIFICATION
All Members of the Firms shall certify annually in writing that they have read
and understand this Code and that they have complied with all of its provisions.
Access Persons shall further certify that they have complied with the reporting
requirements of Part VI, Section 6, of this Code.
<PAGE>
ADDENDUM
NVEST FUNDS MANAGEMENT, L.P.
NVEST FUNDS DISTRIBUTOR, L.P.
CODE OF ETHICS
MARCH 2000
The SEC has recently amended Rule 17j-1 under the Investment Company Act of
1940. This rule addresses conflicts of interest that can arise from personal
trading activities of Investment Advisor Personnel. These amendments have
resulted in certain changes to the current NFM Code of Ethics and will
ultimately result in a new Code being established in 2000. Until the new Code is
established this addendum is designed to update the current Code to satisfy the
requirements of the revised Rule 17j-1.
NFM has created two classes of reporting persons that must report under the Code
of Ethics. ACCESS PERSONS are those individuals whose job function within the
company may expose them to material nonpublic information, ADVISORY PERSONS are
typically not exposed to this type of information and are required to report
under their code due to their status as an officer of the advisor. Specific
reporting requirements have not changed and can be found in the attached copy of
the NFM Code of Ethics.
All NFM Access/Advisory Persons must file an Annual certification of portfolio
holdings, those employed or designated an Access/Advisory Person after 3/1/2000
must file an initial holdings report within 10 days of their start/designation
date.
All Access/Advisory Persons must complete a Personal Securities Transaction
Report for each reporting period, whether or not they had any reportable
transactions. This report has been amended to gather all of the necessary
information required under the amended rule, including disclosure of any
securities accounts opened through a bank or broker-dealer during the reporting
period. These reports are due no later than the 10th day following the end of
each calendar quarter.
NFM Access/Advisory Persons must obtain written authorization from the
Compliance Officer before participating in a private placement of securities.
The request for approval must contain a description of the private placement,
the nature of your participation, and identify any potential conflicts of
interest that may exist.
Access Persons are PROHIBITED from acquiring securities in an initial public
offering (IPO). Advisory Persons are permitted to take part in an IPO provided
written authorization is obtained from the Compliance Officer before
participation.
Please contact the Compliance Officer with any questions about this addendum,
the NFM Code of Ethics or your individual reporting requirements.
<PAGE>
NVEST FUNDS DISTRIBUTOR, L.P.
NVEST FUNDS MANAGEMENT, L.P.
STATEMENT OF POLICIES AND PROCEDURES WITH RESPECT TO THE FLOW AND
USE OF MATERIAL NONPUBLIC (INSIDE) INFORMATION
INTRODUCTION
Nvest Funds Distributor, L.P.'s and Nvest Funds Management, L.P.'s ("NFD"
and "NFM," respectively, each a "Firm" and, collectively, the "Firms")
reputation for integrity and high ethical standards in the conduct of their
affairs is of paramount importance to all of us. To preserve this reputation, it
is essential that all securities transactions be effected in conformity with
applicable securities laws. In particular, it has been the Firms' long-standing
policy that no member of a Firm should knowingly trade in securities on the
basis of material nonpublic information. This is sometimes referred to as
"insider trading."
The Firms operate under a written Code of Ethics (the "Code"). The Code
prohibits trading by the general partner of the Firms, the officers and
directors of the general partner and all of the Firms' officers and employees
(collectively, "members of the Firms") which is in conflict with trading by the
mutual funds advised, distributed or traded by Nvest Companies, L.P. ("Nvest")
and its affiliates, including the firms (the "Funds"). The Code establishes a
broad range of restrictions and trading procedures for members of the Firms.
This Statement of Policies and Procedures (this "Statement") constitutes a
written supplement to the principles in the Code.
In November, 1988, the Insider Trading and Securities Fraud Enforcement
Act of 1988 (the "Act") was enacted into law. The Act is designed to add to the
enforcement of the securities laws, particularly in the area of insider trading,
by imposing severe penalties on persons who violate the Federal securities laws
by trading on material, nonpublic information. The Act also imposes on
broker-dealers, such as NFD, and investment advisers, such as NFM, the explicit
obligation to establish, maintain and enforce written policies and procedures
reasonably designed to prevent the misuse of inside information.
In addition, in recent years, insider trading has become a top enforcement
priority of the Securities and Exchange Commission (the "SEC") and the United
States Attorneys. As a result of insider trading violations, both the Firms and
the member(s) of the Firms involved could be subject to disciplinary action or
fines by the SEC, damage actions brought by private parties and criminal
prosecution.
PURPOSE OF STATEMENT
The purpose of this Statement is to explain: (1) the general prohibitions
regarding insider trading and the meaning of the key concepts underlying the
prohibition, (2) the sanctions for insider trading and expanded liability for
controlling persons, (3) your obligations in the event you learn of material,
nonpublic information, and (4) the Firms' educational programs regarding insider
trading.
APPLICABILITY
This Statement applies to all members of the Firms.
I. THE BASIC INSIDER TRADING PROHIBITION
The Act does not define insider trading. However, in general, the "insider
trading" doctrine under the Federal securities laws prohibits any person from
knowingly or recklessly breaching a duty owed by that person, including the
following:
(a) trading on the basis of material, nonpublic information,
(b) tipping such information to others,
(c) recommending the purchase or sale of securities on the basis of such
information, or
(d) providing substantive assistance to someone who is engaged in any of
the above activities.
Examples may include trading by a person in a position of trust or
confidence with advance knowledge of announcements concerning material nonpublic
information about:
(a) changes in previously disclosed financial information,
(b) introduction of significant new products,
(c) extraordinary borrowings,
(d) major litigation,
(e) severe liquidity problems, or
(f) substantial revisions in earnings' estimates.
Material nonpublic information can also include information about the
trading activities or proposed trading activities of a mutual fund investment
adviser, such as NFM, or other institutional investor.
A. Who is an Insider? The concept of "insider" is broad. It includes
officers, directors and employees of a company. A person can be a "temporary
insider" if he or she enters into a special confidential relationship in the
conduct of a company's affairs. The duty of an insider is to keep material
nonpublic information confidential until it is sufficiently disseminated to the
public.
B. What is material information? Information is material if a "reasonable"
investor would be motivated to buy, sell or hold a security as a result of
acquiring the information. Examples include: a prospective dividend increase or
decrease, plans for a corporate merger or reorganization, or knowledge about a
favorable or uncomplimentary article about a company before it is published.
When in doubt, members of the Firms should assume that information is material
unless advised to the contrary by the Firms' Legal Department (the "Legal
Department").
C. What is Nonpublic Information? Information is nonpublic until it is
effectively communicated to the market place. For example, information that has
been filed with the SEC or published by Dow Jones, The Wall Street Journal or
other national or local media would be considered public. Selective disclosure
to a few investors does not make information public.
II. SANCTIONS AND LIABILITIES
Insider trading violations may result in severe sanctions being imposed on
the individual(s) involved and on the Firms and affiliated companies. These
could involve SEC administrative sanctions, such as being barred from employment
in the securities industry, SEC suits for disgorgement and civil penalties of,
in the aggregate, up to four times profits gained or losses avoided by the
trading, private damage suits brought by persons who traded in the market at
about the same time as the person who traded on inside information, and criminal
prosecutions which could result in substantial fines and jail sentences. Even in
the absence of legal action, violations of insider trading prohibitions or
failure to comply with this Statement and the Code may result in termination of
your employment and referral to the appropriate authorities.
The Legal Department shall review member and related account trading for
compliance with applicable laws and regulations. The term "related account"
refers to the immediate family of members of the Firms (i.e., parents, in-laws,
husband or wife, brother or sister and children) to whose support the member
contributes, directly or indirectly, or an account in which the member has a
beneficial interest.
III. YOUR OBLIGATIONS
A. No member of a Firm or related account may purchase or sell a security
while knowingly in possession of material, nonpublic information relating to
such security, or tip the information to others, or recommend purchase or sale
of a security on the basis of that information.
B. No member of a Firm may knowingly employ a manipulative or deceptive
device with respect to a security. The SEC takes the view that such devices
include "frontrunning" (e.g., trading a security or a related security
instrument (such as an option) while in possession of material nonpublic
information concerning an imminent block transaction in that security or a
related security or instrument).
C. All members of the Firms shall comply with all applicable requirements
set forth in the Statement.
D. All members of the Firms whose jobs give them occasional or regular
exposure to confidential information about companies are considered Access
Persons under the Statement. Other Officers of the Adviser and Managing
Directors of NFD are not viewed as exposed to confidential information and are
considered Advisory Persons. The Firms' General Counsel (the "General Counsel")
or the Firms' Compliance Director (the "Compliance Director") will identify and
maintain a list of Access and Advisory Persons and will notify such persons that
they have been so identified. Access and Advisory Persons under the Code shall
also comply with the procedures for reporting personal securities transactions
as outlined in the Code, and report personal securities transactions on a
quarterly basis by the 10th day of the month following end of the quarter for
which the report is due. In addition, as provided in Section IV.B of this
Statement, all members shall certify in writing that they have complied with
this Statement on an annual basis.
E. A member of a Firm who is an Access or Advisory Person under the Code
shall not disclose to others, except in the normal performance of his/her
business duties, material nonpublic information relating to the trading
activities of the Funds.
F. Whenever a member of a Firm receives what he or she believes may be
material, nonpublic information about a security or becomes aware that such
information has been used by another member in the purchase or sale of a
security or that another member has employed a manipulative and deceptive
device, he or she shall immediately notify the General Counsel or, in his
absence, the Director of Compliance. "Immediately" means as soon as humanly
practical. Members of a Firm are expected to bring this information immediately
to the attention of the General Counsel or, in his absence, the Director of
Compliance and refrain from disclosing the information to anyone else, including
other persons within the Firms.
G. No member of a Firm, except in the normal performance of his/her
business duties, shall have access to the information maintained for or
generated by portfolio managers or research analysts for the Funds.
H. As part of an organization offering multiple financial services, the
Firms will take whatever steps may be required to isolate effectively material,
nonpublic information about securities in a manner to avoid unnecessary
interruption of the free flow of information that is essential to the efficiency
of financial markets. While one subsidiary or division of Nvest may be
legitimately in possession of material, nonpublic information concerning a
securities issuer, the organization of Nvest as a whole may be at risk because
another subsidiary or division has effected a transaction in, or otherwise taken
action relating to, that issuer's securities. Consequently, if a member of a
Firm is legitimately in possession of material, nonpublic information about a
securities issuer in the normal performance of his or her business duties, he or
she shall immediately notify the General Counsel or, in his absence, the
Director of Compliance who shall determine the appropriate safeguards to be
established.
I. No member of a Firm, shall become an officer, trustee or director of
any company whose shares are publicly traded (except an investment company
managed by or distributed by a Firm or an affiliate of the Firms) without the
approval of the General Counsel. If such approval is obtained, trading by the
member in the securities of that company shall be subject to prior approval by
the General Counsel. The member shall not discuss material nonpublic information
concerning that company with other members of the Firms at any time.
J. All members of a Firm must consult with the General Counsel before
communicating (orally or in writing) with the SEC or any other regulatory agency
about insider trading or related matters.
K. All members of a Firm must consult with the General Counsel before
communicating (orally or in writing) with any representative of the newspapers
or other mass media on insider trading or any related matter.
IV. MEMBER EDUCATION
To ensure that every member of the Firms understands the policies and
procedures with respect to insider trading, the following shall occur:
A. INITIAL REVIEW FOR NEW MEMBERS. All new members of the Firms shall be
given a copy of this Statement along with the Code at the time of their
employment and shall be required to read and acknowledge in writing their
receipt of each.
B. PERIODIC REVIEW. The General Counsel shall review this Statement and
the Code at least annually. The Firms require that members of the Firms
acknowledge receipt and certify compliance with this Statement in writing on an
annual basis.
C. CONTINUING EDUCATION PROGRAMS. The General Counsel and/or the Director
of Compliance shall conduct continuing education programs or disseminate
information, as necessary, to inform members of changes in this Statement or the
Code and to inform members of important developments in the area of insider
trading.
D. QUESTIONS. If you have any questions whatsoever with respect to the
interpretation or application of this Statement, you should contact the General
Counsel (x1132) or the Director of Compliance (x1741).
<PAGE>
Exhibit p(3)
CAPITAL GROWTH MANAGEMENT
LIMITED PARTNERSHIP
CODE
(As revised March 1, 2000)
PART I - BUSINESS PRACTICES
Understanding as to Clients' Accounts, Company Records, etc.
Clients' accounts are the property of Capital Growth Management and not of
any individual member of the firm. This applies to all clients for whom the firm
acts as investment counsel or adviser, regardless of how or through whom the
client relationship originated and regardless of who may be the individual
consultant on a particular client's affairs.
You agree that, upon the termination of your employment, you will not take
with you any of our records, correspondence, files, forms, documents or data of
any nature whatsoever pertaining to our clients, procedures, or research
activities, and that you will not prepare or take with you any copies of the
same, and that you will not, before or after termination of your employment,
make any of such records or other information or data available to any other
person or firm.
All information in our files pertaining to the clients of the firm or our
forms, procedures, research or counseling activities is confidential property of
the firm.
Client Information
Our relationship with clients is entirely confidential and no disclosure
of the name or of any detail of the personal circumstances of a client shall be
made to anyone not a member of the firm without the specific permission of the
client.
Outside Affiliations
No member of the firm shall become an officer, trustee or director of any
company whose shares are publicly traded (except an investment company managed
by Capital Growth Management or a Capital Growth Management affiliate) without
the advance approval of the Chairman or President of the General Partner of
Capital Growth Management. Capital Growth Management cannot be in the position
of receiving or being able to receive inside information. Therefore, exceptions
will be made only in extremely unusual situations.
No member of the firm shall accept an appointment as an executor,
administrator, trustee, guardian or conservator (other than in family
situations) without approval by the Chairman or President of the General Partner
of Capital Growth Management.
Gifts from Third Parties
In order to avoid a conflict of interest, the impairment of the impartial
discharge of your responsibilities to our clients, or any other difficulty or
embarrassment, you shall not accept any gift presented on your own behalf, on
the firm's behalf, or on behalf of any member of your family or any other person
designated by you from any person with whom the firm does business, including
brokers, securities salesmen, clients, or vendors of any kind. The only
exception to this restriction shall be for occasional small gifts of de minimis
value which present no possibility of influencing your judgment.
Publishing Articles and Books
You shall not publish any book or article bearing on investments or
finance or allied subjects except with the specific approval of the Chairman or
President of the General Partner of Capital Growth Management. This also applies
to public talks or interviews.
Use of Inside Information
You agree to adhere to the firm's Statement of Policy on Inside
Information which should be read in conjunction with this Code.
<PAGE>
PART II - PERSONAL SECURITIES TRANSACTIONS
The primary purpose of the Capital Growth Management Code is to protect
the interests of all our clients. Our Code is very important to each member of
the firm in maintaining the high standards and reputation of Capital Growth
Management and guarding against an inadvertent violation of the securities laws
which might jeopardize your future in the investment business.
There are two points in particular that should be constantly kept in mind.
1. Capital Growth Management holds itself out as a professional
investment counsel firm which provides unbiased advice - that is,
advice based solely on the merits of the individual investment
and undiluted by any conflicts of interest which could prejudice
the investment decision in any way. Thus, the very nature of our
business requires that the main thrust of our Code be the
elimination of any conflicts that could jeopardize our unbiased
investment approach.
2. The second point we stress is the fiduciary nature of the
relationship with our clients. This fiduciary relationship has been
stressed by the SEC and state and federal courts, including the U.S.
Supreme Court, and is highlighted in ERISA. Capital Growth
Management is considered to be a fiduciary with respect to all its
investment counsel clients, including both ERISA and non-ERISA
accounts.
This means that the same standards that are uniformly applied to trustees,
guardians and other fiduciaries are applied to Capital Growth Management
in its client relationships. These standards oblige Capital Growth
Management to act honestly and fairly in all respects in our dealings with
clients and to serve their interests with undivided loyalty.
You are obliged to put the interests of the Capital Growth Management
clients before your own personal interests. This is an obligation we all assume
as members of an investment counsel firm.
This rule has particular significance with reference to the flow of
investment information our personnel receive from brokers. Such brokerage
information is the property of Capital Growth Management and is to be used for
the benefit of the Capital Growth Management clientele. It should not be used
for the personal advantage of the individual member of the firm who receives
such information if such use conflicts with the interests of Capital Growth
Management clients. This is a clear principle of law resulting from the
fiduciary nature of our client relationship and our obligation to serve clients
with undivided loyalty.
I. Basic Philosophy
Capital Growth Management recognizes the fundamental value to its clients
in developing an organization of sound, experienced and practical investment
people. The actual experience of investing one's own capital, whether it be
small or large, is a valuable means of learning firsthand the opportunities,
risks and characteristics of the investment markets. Therefore, Capital Growth
Management encourages sound, personal investment by members of the firm.
On the other hand, Capital Growth Management as a firm must make certain
that there is no abuse of our responsibilities to clients or to the reputation
and professional standing of our organization or any of its members.
In formulating the Capital Growth Management Code, we have made every
effort to produce a framework which will adequately protect the interests of our
clients and our firm, while at the same time permitting as much freedom as we
believe reasonable and permissible for the firm's individual members in carrying
out their own personal investments.
II. Securities Transactions Covered by the Code
1. Employees of Capital Growth Management
The restrictions of the Capital Growth Management Code are applicable to
the securities transactions of all employees of Capital Growth Management.
The restrictions of the Capital Growth Management Code also apply to
directors, officers and general partners of Capital Growth Management and its
General Partner, and all individuals in a control relationship to Capital Growth
Management who obtain information concerning investment recommendations to the
CGM Funds or any other registered investment company advised by Capital Growth
Management. References in this Code to CGM employees include all other persons
to whom this Code applies.
Capital Growth Management will identify and inform all persons subject to
the reporting requirements under this Code.
2. Employee Accounts
The Code applies to securities transactions for all accounts in which you
have a "beneficial interest", except any such account where you have no
influence or control over investments.
Whether you have a "beneficial interest" in an account will be determined
pursuant to Rule 16a-1(a)(2) of the Securities Exchange Act of 1934 and
interpretative releases of the Securities and Exchange Commission. Under these
rules a beneficial interest in securities exists whenever you derive any
economic benefit from the income from the securities or whenever you can
exercise a controlling influence over the purchase, sale or voting of the
securities. You may also have a beneficial interest in securities if you have
the opportunity to indirectly participate in profits from the securities
through, among other things, trusts, partnerships, or immediate family members.
Accordingly, you are normally considered to have a beneficial interest in:
a. Securities owned by you, whether or not registered in your name.
b. Securities held in a trust, estate or other account in which you,
your spouse, minor children or other relatives who share the same
home with you have a (direct or indirect) present or future interest
in the income or principal.
c. Securities owned by your spouse or minor children.
d. Securities owed by other relatives who share the same home with you.
e. Securities in the name of another person where you can obtain title
to the securities at once or at some future time.
3. Fund Trustees
The Code does not apply to trustees of the mutual funds managed by Capital
Growth Management who are not employees of our firm. The restrictions on the
securities transactions of the outside Fund trustees and the requirements for
filing reports of their transactions are governed by the Codes of Ethics of the
Funds.
III. The Rule of Reason, Conscience and Integrity
The primary rule of the Capital Growth Management Code is the Rule of
Reason, Conscience and Integrity. You have the responsibility of carrying out
your own personal transactions to ensure that you are not benefiting in your
personal investments at the expense of any Capital Growth Management client and
that you are not in any way taking advantage of or "trading" on the knowledge
you may have of the market impact of transactions carried out by Capital Growth
Management for any of its clients.
Using your own conscience as a person of integrity, you should be the best
judge in regard to compliance with this basic approach to personal investing.
This rule imposes a stricter standard upon members of Capital Growth
Management than the general standard of federal and state laws, which prohibit
any act, practice or course of business which would operate as a fraud or deceit
upon clients.
IV. Specific Restrictions on all Purchase and Sale Transactions
In addition to the Rule of Reason, Conscience and Integrity, the following
specific restrictions in this Section IV applies to all securities transactions
for accounts subject to the Code, except the exempt transactions which follow
the rule:
NO EMPLOYEE OF CAPITAL GROWTH MANAGEMENT MAY PURCHASE A SECURITY IF
SECURITIES OF THE SAME ISSUER ARE HELD IN ANY OF THE FIRM'S CLIENT ACCOUNTS. The
Employee is required to determine whether or not securities of the same issuer
are held in any client account or whether there is a pending "buy" order prior
to engaging in any trading for his or her own account. For employees located at
the 222 Berkeley Street offices, this determination shall take the form of
written verification from Leslie Lake. If the employee already holds a security
at the time that securities of the same issuer are purchased for a client
account, he or she may not sell such security for his or her own account until
either (i) at least seven days after all securities of the same issuer are
purchased for any client account (i.e., seven days after all pending "buy"
orders of securities of the same issuer for all client accounts have been
completed), or (ii) client accounts no longer hold any securities of the same
issuer.
Because it is important for Capital Growth Management to avoid even the
appearance of impropriety, the preceding restriction applies to all employees,
whether or not they are actively involved in portfolio management, securities
analysis or trading on behalf of clients.
ADDITIONAL RESTRICTION FOR PORTFOLIO MANAGERS: A Portfolio Manager may not
buy or sell a security within seven calendar days before or after any Fund which
he or she manages trades in the security.
This Section IV applies to all types of securities transactions, provided
the following securities or transactions are exempted from this general rule:
o Purchases or sales of direct obligations of the Government of the United
States, shares of registered open-end investment companies, bankers'
acceptances, bank certificates of deposit or commercial paper;
o Purchases which are part of an automatic dividend reinvestment plan;
o Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer; and
o Purchases and sales of publicly traded securities of any issuers whose
total market capitalization is less than $100 million (which issuers
are, as a class, considered to be inappropriate investments for the
funds managed by the firm).
Any prohibition against purchase or sale of a security in this Section IV
includes a prohibition against the short sale of the security, the purchase or
sale of a bond or preferred stock which is convertible into that security or the
purchase or sale of an option, warrant, or other right to purchase or sell that
security.
V. Additional Restrictions
The following additional restrictions have been adopted for specific types
of transactions for the reasons indicated below. These prohibitions apply to
direct investments, short sales and options trading in such securities.
1. No employee may purchase securities issued by any company the principal
business of which is brokerage, underwriting or investment banking except for
companies on the following list (which shall be updated from time to time):
Bear Stearns Merrill Lynch
Donaldson, Lufkin & Jenrette Morgan Stanley Dean Witter
Edwards, A.G. Paine Webber
Jefferies Group Schwab, Charles
Lehman Brothers Solomon-Smith Barney
Reason: To avoid investments which might influence the selection of
brokers for client transactions. The companies listed above are those whose
capitalizations are sufficiently high and whose brokerage or underwriting
activities are sufficiently large so as to mitigate concerns about improper
influence.
2. No employee may participate as a purchaser or acquire beneficial ownership
of any security in an initial public offering of securities. For this purpose
"initial public offering" means an offering of securities registered under the
Securities Act of 1933, the issuer of which, immediately before the
registration, was not subject to the reporting requirements of Sections 13 or
15(d) of the Securities Exchange Act of 1934.
Reason: to avoid use or the appearance of the use of brokerage
business for our clients to obtain favorable treatment from brokers
distributing new issues.
3. No employee may participate as a purchaser or acquire beneficial ownership
of any security in any private offering of securities. Where the employee
already has a holding of such securities, he or she need not divest such
holdings, but shall play no role in any further consideration by Capital Growth
Management of any investment in such issuer. For this purpose "private offering"
means an offering that is exempt from registration under the Securities Act of
1933 pursuant to Section 4(2) or 4(6) of the Act, Regulation A under the Act, or
Rule 504, 505 or 506 under the Act.
Reason: to avoid a conflict of interest between the employee entering into
or holding such investment and clients of Capital Growth Management both at the
time that the investment is made available to the employee and at the time that
an investment in the same issuer is being considered for client accounts.
4. No employee may participate in any investment club, hedge fund, limited
partnership, or other private investment pool, unless such employee: (i)
receives the advance approval of the Chairman or President of the General
Partner of Capital Growth Management, and (ii) verifies in writing that such
employee does not provide investment advice to such investment pool or its
participants, or that such investment pool has agreed to become subject to all
of the requirements of this Code.
Reason: the same restrictions which apply to your personal trading
must apply to the investment pool, unless your involvement is entirely
passive.
5. No employee may invest in either a public or private real estate
investment trust ("REIT") unless such employee receives the written approval of
the Chairman and President of the General Partner of Capital Growth Management
in advance of such investment. The President and the Chairman of Capital Growth
Management may not invest in REIT's without the other's written approval in
advance of such investment. The Review Officer shall report to the Board of
Trustees of each of CGM Trust and CGM Capital Development Fund at least
quarterly concerning all purchases and sales of REIT's by employees of Capital
Growth Management during the prior year.
Reason: A substantial portion of CGM Realty Fund's portfolio is invested
in REIT's; this restriction is designed to minimize the possibility of a
conflict of interest with the investment strategy of this fund.
All profits realized in violation of any restriction in this Code shall be
immediately paid over to Capital Growth Management, which shall, in its
discretion, allocate such profits among its clients, or contribute them to
charity. Any such profits shall be calculated net of any federal, state, local,
or foreign taxes paid or payable on the profits.
VI. Disclosure Requirements and Reports
Each employee must comply with the reporting requirements described below.
For purposes of this Section VI, the term "security" includes stocks, bonds,
notes, partnership interests, options, warrants, debentures, puts and calls on
securities, mining interests, ADRs, and any other interest or instrument
commonly known as a "security." However, the term "security" does not include:
o direct obligations of the Government of the United States,
o bankers' acceptances,
o bank certificates of deposit,
o commercial paper,
o high quality short-term debt instruments,
o repurchase agreements, and
o shares of registered open-end investment companies, i.e. mutual funds.
Any report made pursuant to this Section VI may contain a statement that
the report shall not be construed as an admission that you have any direct or
indirect beneficial ownership in a security to which the report relates and no
report shall be considered as an admission that any transaction reported
constitutes a violation of the Code. Reports need not be made with respect to
accounts where you have no direct or indirect influence or control over
investments.
1. Initial Reports
All new employees shall supply the Review Officer with a list of all
brokerage and banking accounts in which any securities are held for the
employee's direct or indirect beneficial interest and the securities held in
each such account (including the names of the brokerage firms or banks and the
title, number of shares and principal amount of each security beneficially
owned). In addition, new employees shall affirm that they have no affiliations
or positions with a public company not permitted by this Code.
This initial report shall be submitted by each employee no later than ten
days after becoming an employee and shall contain the date the report is
submitted by the employee.
2. Monthly Reports
Within ten days following the end of each month, you must file a signed
securities transaction form with the Review Officer. On that form you must
report the security transactions carried out during the month for all accounts
in which you have a "beneficial interest", except accounts where you have no
direct or indirect influence or control over investments. The monthly reports
shall contain (a) the date of the transaction, (b) the title, interest rate and
maturity date (if applicable), number of shares and principal amount of each
security, (c) the nature of the transaction (i.e., purchase, sale, other), (d)
the price of the security at which the transaction was effected and (e) the name
of the brokerage firm or bank through which the transaction was effected.
The monthly report also must contain, with respect to any account you
established in which securities were held during the month for your direct or
indirect benefit, the (a) name of the brokerage firm or bank with which you
established the account and (b) the date the account was established.
These monthly reports must be submitted by every employee of Capital
Growth Management and must contain the date the report is submitted by the
employee.
Monthly reports must be filed whether or not any security transactions
have been carried out. In instances where there have been no transactions, that
fact should be so noted.
Employees shall keep copies of all broker confirmations and statements for
all accounts in which they have a beneficial interest, and shall be prepared to
supply them to the Review Officer upon request.
3. Annual Report
On an annual basis, no later than 20 days after each December 31st, each
employee shall supply the Review Officer with an annual report containing: (a)
the title, number of shares and principal amount of each security in which the
employee has any direct or indirect beneficial ownership and (b) the name of any
brokerage firm or bank with which the employee maintains an account in which any
securities are held for the direct or indirect benefit of the employee. In the
annual report each employee shall either certify that he or she has fully
complied with this Code or shall fully disclose any and all failures to do so.
The information contained in the annual report must be current as of a date no
more than 30 days before the report is submitted and must contain the date the
report is submitted by the employee.
VII. Review and Enforcement
Mr. Kemp serves as the Review Officer for this Code. Mr. Heebner shall
serve as Alternate Review Officer for Mr. Kemp.
It will be the responsibility of the Review Officer to review these
transactions promptly with the objective of catching at an early date any
conflict with the specific rules or general principles and philosophy of this
Code. It will be the Review Officer's responsibility to use common sense and
judgment in regard to the character and nature of individual securities
transactions as reported, to point out at once any apparent violation to the
individual, and to take appropriate action.
You cannot participate in a determination of whether you have committed a
violation of this Code or of the imposition of any resulting sanction. If a
contemplated securities transaction may apparently conflict with the provisions
of this Code, you should contact the Review Officer prior to going ahead with
the transaction. Information submitted in the initial, monthly, and annual
reports will be treated as confidential by the Review Officer, provided it may
be made available to the Securities and Exchange Commission and other government
agencies.
An employee shall report to the Review Officer any failure on his or her
part to comply with this Code immediately upon occurrence.
If you believe that adherence to any of the restrictions in Sections IV or
V of the Code will cause you a serious and undue hardship because of unusual
personal circumstances (e.g., the need to raise cash to pay an extraordinary
medical expense) you may submit a request for an exemption in writing to the
Review Officer. The Review Officer's determination will be final. Such relief
from the requirements of the Code will be granted only rarely.
VIII. Maintenance of Records
Capital Growth Management will maintain the following records at its
principal place of business, to the extent and in the manner set forth below,
and will make such records available to the Securities and Exchange Commission
or any representative thereof at any time and from time to time for reasonable
periodic, special or other examination:
1. A copy of each Capital Growth Management Code which is, or any time
within the past five years has been, in effect shall be preserved in
an easily accessible place.
2. A record of any violation of such Code, and of any action taken as a
result of such violation, shall be preserved in an easily accessible
place for a period of not less than five years following the end of
the fiscal year in which the violation occurs.
3. A copy of each report made under this Code shall be preserved for a
period of not less than five years from the end of the fiscal year
in which it is made, the first two years in an easily accessible
place.
4. A list of all persons who are, or within the past five years have
been, required to make reports pursuant to this Code or who are or
were responsible for reviewing these reports shall be maintained in
an easily accessible place.
5. A copy of each report concerning this Code furnished by Capital
Growth Management to the Board of any Fund pursuant to the
Investment Company Act shall be maintained for at least five years
after the end of the fiscal year in which it is made, the first two
years in an easily accessible place.
6. A record of any decisions, and the reasons supporting the decisions,
to approve the acquisition of securities under Section VII of this
Code shall be maintained for at least five years after the end of
the fiscal year in which the approval is granted.
IX. Amendments and Reporting to Funds
Any material change to this Code of Ethics must be approved by the Boards
of Trustees of the CGM Funds and any other registered investment company advised
by Capital Growth Management, including a majority of trustees who are not
interested persons of Capital Growth Management, no later than six months after
adoption of the material change.
No less frequently than annually, Capital Growth Management must furnish
to the Boards of Trustees of the CGM Funds and any other registered investment
company advised by Capital Growth Management a report that:
1. describes any issues arising under this Code of Ethics or procedures
of Capital Growth Management since the last report to the Board,
including, but not limited to, information about material violations
of this Code of Ethics or procedures and sanctions imposed in
response to the material violations; and
2. certifies that Capital Growth Management has adopted procedures
reasonably necessary to prevent its employees from violating this
Code of Ethics.
<PAGE>
Exhibit (p)(4)
WESTPEAK INVESTMENT ADVISORS, L.P.
Code of Ethics
Adopted as of April 1, 1998
It is important to remember at all times that the interests of our clients
and the shareholders of the funds that we advise must come first. In order to
maintain that priority, all personal securities transactions must be conducted
in a manner consistent with this Code of Ethics ("Code"). We must be vigilant in
maintaining the integrity of our business by avoiding any actual or potential
conflicts of interest or any abuse of our position of trust and responsibility.
All provisions of this Code will be interpreted in such a way as to give full
effect to the principles stated in this preamble.
I. Definitions
(A) "Access person" means any director, officer or advisory person of
Westpeak.
(B) "Advisory person" means (i) any employee of Westpeak (or of any
company in a control relationship to Westpeak) who, in connection with
his or her regular functions or duties, makes, participates in, or
obtains information regarding the purchase or sale of a security by a
Fund, or whose functions relate to the making of any recommendations
with respect to such purchases or sales; and (ii) any natural person
in a control relationship to Westpeak who obtains information
concerning recommendations made to a Fund with regard to the purchase
or sale of a security.
(C) "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions
of Section 16 of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder from time to time in effect,
except that the determination of direct or indirect beneficial
ownership shall apply to all securities which an access person has or
acquires. In general, a Westpeak employee is deemed to have beneficial
ownership of securities owned by the employee's spouse, by children
residing in the employee's household or by children who are
financially dependent on the employee, or other securities over which
the employee has control. Refer to Appendix A attached to this Code
for a fuller explanation of the meaning of "beneficial ownership."
(D) "Compliance Officer" shall refer to the Westpeak officer holding this
title (currently Philip J. Cooper, Executive Vice President -
Portfolio Management) or, in the Compliance Officer's absence, Gerald
H. Scriver, President and Chief Executive Officer.
(E) "Control" shall have the same meaning as set forth in Section 2(a)(9)
of the Investment Company Act of 1940 (the "1940 Act"). Section
2(a)(9) provides that "control" means, among other things, the power
to exercise a controlling influence over the management or policies of
a company, unless such power is solely the result of an official
position with such company.
(F) "Fund" means each investment company for which Westpeak Investment
Advisors, L.P. ("Westpeak" or the "Company") serves as investment
adviser or subadviser and each other client for which Westpeak
provides investment advisory services.
(G) "Purchase or sale of a security" includes, inter alia, the writing of
an option to purchase or sell a security.
(H) "Security" shall have the meaning set forth in Section 2(a)(36) of the
1940 Act, except that it shall not include securities issued by the
Government of the United States (including government money market
instruments of the type issued by agencies of the federal government
or guaranteed by the federal government or its agencies), bankers'
acceptances, bank certificates of deposit, commercial paper and shares
of registered open-end investment companies, or such other securities
as may be excepted under the provisions of Rule 17j-1 under the 1940
Act from time to time in effect.
(I) "Security held or to be acquired" by a Fund means any security which,
within the most recent fifteen days, (i) is or has been held by the
Fund, or (ii) is being or has been considered by Westpeak for purchase
by the Fund.
(J) A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and
communicated or, with respect to the person making the recommendation,
when such person seriously considers making such a recommendation.
(K) A security is "being purchased or sold" by a Fund from the time when a
purchase or sale program has been communicated to the person who
places the buy and sell orders for the Fund until the time when such
program has been fully completed or terminated.
A person who normally only assists in the preparation of public reports,
or receives public reports but receives no information about current
recommendations or trading, is neither an "advisory person" nor an "access
person." A single instance or infrequent, inadvertent instances of obtaining
knowledge does not make one for all times an advisory person. Under the
definition of "advisory person" in the phrase "makes, participates in, or
obtains information regarding the purchase or sale of a security" means someone
who places orders or otherwise arranges transactions.
II. Outside Affiliations
No access person (other than members of the Board of Directors of
Westpeak's general partner who are not Westpeak employees) shall become an
officer, trustee or director of any company whose shares are publicly traded
(except an investment company managed by the Company or an affiliate of the
Company) without the approval of the Compliance Officer. This restriction on
serving as an officer, trustee or director of a public company is designed to
prevent Westpeak from being deemed to possess inside information concerning a
company that an access person may learn in serving in one of those capacities.
Therefore, exceptions will be made by the Compliance Officer only in unusual
situations, with the advice of legal counsel, as appropriate.
No access person (other than members of the Board of Directors of
Westpeak's general partner who are not Westpeak employees) shall accept an
appointment as an executor, administrator, trustee, guardian or conservator
(other than in family situations) without approval by the Compliance Officer.
III. Gifts to or from Brokers or Clients
No access person shall accept or receive on his or her own behalf or on
behalf of the Company any gift or other accommodations from a business contact
or broker, securities salesman or client (a "business contact") that might
create a conflict of interest or interfere with the impartial discharge of his
or her responsibilities to Westpeak's clients or place the recipient or Westpeak
in a difficult or embarrassing position. This prohibition applies equally to
gifts to an access person's close relatives or to those who share the same
household as an access person.
No access person shall give on his or her own behalf or on behalf of the
Company any gift or other accommodation to a business contact that may be
construed as an improper attempt to influence the recipient.
In no event should gifts to or from any one business contact have a value
that exceeds the limitation on gifts established by the NASD from time to time
(currently $100). This prohibition does not apply to normal business
entertainment.
IV. Use of Inside Information
Access persons agree to adhere to Westpeak's Statement of Policy on Inside
Information, which should be read in conjunction with this Code.
V. Personal Securities Transactions
In furtherance of the principle set out in the preamble to this Code
(i.e., that the interests of Westpeak's clients and the shareholders of the
Funds Westpeak advises come first), access persons will adhere to the following
restrictions and requirements with respect to their personal investing activity;
provided, however, that the restrictions and requirements listed below in this
Section V do not apply to any member of the Board of Directors of Westpeak's
general partner who is not a Westpeak employee and who does not have actual
knowledge of purchases or sales of securities by any Fund, or recommendations
with regard to purchases or sales of securities by any Fund.
1. Pre-Trade Clearance
No access person will purchase or sell any security in which
such person has, or by reason of such transaction acquires, any direct
or indirect beneficial ownership without the prior written approval of
the Compliance Officer. Any such approval will be valid for five
business days from the date approval is granted or such lesser time
period as the Compliance Officer determines. The Compliance Officer
will maintain records documenting all pre-trade clearance requests and
approvals.
2. Brokerage Confirmation and Statements
Access persons will direct their brokers to routinely supply
duplicate copies of all confirmations and periodic account statements
to the Compliance Officer.
3. Investment Opportunities of Limited Availability
If an access person learns of an investment opportunity of
limited availability that would be suitable for a client, the access
person must make the opportunity available to the client first, and
may not invest in that opportunity for his or her own account without
the client's consent.
4. Initial Public Offerings
No access person may acquire securities in an initial public
offering.
5. Private Placements
No access person may acquire securities in a private placement
without the express prior approval of the Compliance Officer.
Any access person who now or hereafter owns a privately-placed
security and who becomes involved in an investment decision involving
the issuer of the security shall disclose his or her ownership of the
private placement to the Compliance Officer as soon as practicable
after becoming involved in the decision-making process.
Any access person who owns a private placement of an issuer must
refrain from deliberations regarding client purchases or sales of
securities issued by the same issuer.
6. Blackout Periods
Except as set forth below, no access person may purchase or sell
securities on any day during which a buy or sell order in the same
security is pending for a Fund.
Except as set forth below, no access person may purchase or sell
a security purchased or sold by a Fund within seven calendar days
before or after the Fund buys or sells the security; provided,
however, that the prohibition on a purchase or sale by an access
person seven days before the Fund buys or sells the same security does
not apply if the access person does not have actual knowledge that
such security is being considered for purchase or sale by the Company
for a Fund.
Except as set forth below, no access person may buy and sell, or
sell and buy, the same securities (including options on securities) at
a profit within 60 calendar days. Any profits realized by such access
person on such short-term trades shall be disgorged to a charitable
organization selected by the Company. The Compliance Officer may allow
exceptions to this provision only in cases where the security must be
sold involuntarily (such as in the case of a merger involving the
issuer).
The pre-trade clearance and blackout period provisions of this
Section (Section V.1. and V.6.) do not apply to transactions in the
following securities:
o Securities that are not eligible (nor are convertible into or
exchangeable for securities that are eligible) for purchase by
any of the Funds.
o Securities issued or guaranteed by any government that is a
member of the Organization for Economic Cooperation and
Development, or any agency or authority thereof.
o Common or preferred stocks of a class that is publicly-traded,
issued by a company with a stock market capitalization in
excess of five billion U.S. dollars (or the equivalent in
foreign currency).
o Futures and options contracts on indices.
o Commodity futures contracts, including futures contracts on
interest rate instruments or indices, and options on such
contracts.
o Open-end investment management companies.
The pre-trade clearance and blackout period provisions of this Section
(Section V.1. and V.6.) do not apply to the following transactions:
o Transactions that occur by operation of law or under any other
circumstance in which the access person does not exercise any
discretion to buy or sell.
o Purchases of securities pursuant to an automatic dividend
reinvestment plan.
o Purchases pursuant to the exercise of rights issued pro rata
to all holders of the class of securities held by the access
person and received by the access person from the issuer.
VI. Annual Certification
All access persons shall certify annually that they have read and
understand this Code and that they have complied with all its provisions. A copy
of the form of annual certification is attached hereto as Appendix B. Access
persons shall further certify that they have complied with the reporting
requirements of Part VII of this Code.
VII. Reporting
(A) Every access person shall file with the Compliance Officer a report
containing the information described in Section VII(B) of this Code
with respect to transactions in any security in which such access
person has, or by reason of reason of such transaction acquires, any
direct or indirect beneficial ownership; provided, however, that such
access person shall not be required to make a report with respect to
transactions effected for any account over which such person does not
have any direct or indirect influence or control, and provided,
further, that the term "security" does not include the savings or
demand deposit accounts of access persons with banks or thrifts.
(B) Every report shall be made not later than 10 days after the end of the
calendar quarter in which the transaction to which the report relates
was effected, and shall contain the following information:
(1) The date of the transaction and the title and number of shares and
principal amount of each security involved;
(2) The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition), including information
sufficient to establish any exemption from the restrictions listed
in Section V on which the access person has relied;
(3) The price at which the transaction was effected; and
(4) The name of the broker, dealer or bank with or through whom the
transaction was effected.
(C) The making of such report shall not be construed as an admission by
the person making such report that he or she has any direct or
indirect beneficial ownership in the security to which the report
relates, and the existence of any report shall not be construed as an
admission that any transaction reported constitutes a violation of
Section V hereof.
(D) Any person required to report a transaction under this Section may
satisfy his or her obligation hereunder by providing a duplicate
confirmation/ statement of such transaction to the Compliance Officer,
as required to be routinely furnished in Section V.2.
VIII. Review and Enforcement
(A) Review
(1) The Compliance Officer shall cause the reported personal
securities transactions to be compared with completed and
contemplated portfolio transactions of the Funds to determine
whether any transactions subject to the restrictions in Section V
(each a "Reviewable Transaction") may have occurred.
(2) If the Compliance Officer determines that a Reviewable Transaction
may have occurred, he shall then determine whether a violation of
this Code may have occurred, taking into account of the exemptions
provided under Section V. Before making any determination that a
violation has been committed by a person, the Compliance Officer
shall give such person an opportunity to supply additional
information regarding the transaction in question.
(B) Enforcement
(1) If the Compliance Officer determines that a violation of this Code
may have occurred, he shall promptly report the possible violation
to the President of Westpeak, who, together with the Compliance
Officer, shall take such actions as they consider appropriate,
including imposition of any sanctions that they consider
appropriate.
(2) No person shall participate in a determination of whether he has
committed a violation of this Code or in the imposition of any
sanction against himself. If a securities transaction of the
Compliance Officer is under consideration, Westpeak's President
shall act in all respects in the manner prescribed herein for the
Compliance Officer, and, if a securities transaction of the
President is under consideration, the Compliance Officer shall
report the possible violation to the Chairman of the Board of
Directors of Westpeak's general partner.
IX. Reporting Requirement to Investment Company Clients
The Compliance Officer shall, with respect to each Fund that is an
investment company, annually furnish a written report to the board of trustees
of such Fund (i) describing issues arising under this Code since the last report
to the board, including information about violations of the Code, sanctions
imposed in response to such violations, changes made to the Code, and any
proposed changes to the Code; and (ii) certifying that Westpeak has adopted such
procedures as are reasonably necessary to prevent access persons from violating
the Code.
X. Records
(A) Westpeak shall maintain records in the manner and to the extent set
forth below, which records may be maintained on microfilm under the
conditions described in Rule 31a-2(f)(1) under the 1940 Act and shall
be available for appropriate examination by representatives of the
Securities and Exchange Commission.
(1) A copy of this Code and any other Code which is, or at any time
within the past five years has been, in effect shall be preserved
in an easily accessible place.
(2) A record of any violation of this Code and of any action taken as
a result of such violation shall be preserved in an easily
accessible place for a period of not less than five years
following the end of the fiscal year in which the violation
occurs.
(3) A copy of each report made pursuant to this Code by any access
person shall be preserved for a period of not less than five years
from the end of the fiscal year in which it is made, the first two
years in an easily accessible place.
(4) A list of all persons who are, or within the past five years have
been, required to make reports pursuant to this Code shall be
maintained in an easily accessible place.
(B) Confidentiality
All reports of securities transactions and any other information
collected or produced pursuant to this Code shall be treated as
confidential, except as regards appropriate examinations by
representatives of the Securities and Exchange Commission of any other
authorized governmental body or self-regulatory organization.
<PAGE>
APPENDIX A
"BENEFICIAL OWNERSHIP"
For purposes of the Code of Ethics, a beneficial owner of a security
includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares a direct or
indirect pecuniary interest in such security.
You have a pecuniary interest in a security if you have the opportunity,
directly or indirectly, to profit or share in the profit derived from a
transaction in such security. You are deemed to have a pecuniary interest in any
securities held by members of your immediate family sharing your household.
"Immediate family" means your son or daughter (including your legally adopted
child) or any descendants of either, your stepson or stepdaughter, your father
or mother or any ancestor of either, your stepfather or stepmother and your
spouse. Also, you are deemed to have a pecuniary interest in securities held by
a partnership of which you are a general partner, and beneficial ownership of
the securities held by such partnership will be attributed to you in proportion
to the greater of your capital account or interest in the partnership at the
time of any transaction in such securities. You are also deemed to have a
pecuniary interest in the portfolio securities held by a corporation if you are
a controlling shareholder of such corporation and have or share investment
control over such portfolio securities. Additionally, certain
performance-related fees received by brokers, dealers, banks, insurance
companies, investment companies, investment advisors, trustees and others may
give rise to pecuniary interests in securities over which such persons have
voting or investment control.
Securities owned of record or held in your name generally are considered
to be beneficially owned by you if you have a pecuniary interest in such
securities. Beneficial ownership may include securities held by others for your
benefit regardless of record ownership (e.g., securities held for you or members
of your immediate family by agents, custodians, brokers, trustees, executors or
other administrators; securities owned by you but which have not been
transferred into your name on the books of a company; and securities which you
have pledged) if you have or share a pecuniary interest in such securities.
With respect to ownership of securities held in trust, beneficial
ownership includes the ownership of securities as a trustee in instances either
where you as trustee have, or where a member of your immediate family has, a
pecuniary interest in the securities held by the trust (e.g., by virtue of being
a beneficiary of the trust).
The final determination of beneficial ownership is a question to be
determined in light of the facts of a particular case. Thus, while you may
include security holdings of other members of your family, you may nonetheless
disclaim beneficial ownership of such securities. Any uncertainty as to whether
you are the beneficial owner of a security should be brought to the attention of
the Compliance Officer.
<PAGE>
APPENDIX B
ANNUAL CODE OF ETHICS CERTIFICATION
I acknowledge that I have received a copy and read the Westpeak Investment
Advisors, L.P. Code of Ethics, dated April 1, 1998. I understand my
responsibilities under this Code of Ethics and agree to comply with all of its
terms and conditions. I will retain a copy of this Code of Ethics for future
reference.
I hereby certify that I have complied with the requirements of the
Westpeak Investment Advisors, L.P. Code of Ethics, dated April 1, 1998, and I
have disclosed or reported all personal securities transactions required to be
disclosed or reported pursuant to such Code of Ethics.
------------------------------
Dated
------------------------------
Printed Name
------------------------------
Signature
<PAGE>
Exhibit (p)(5)
LOOMIS, SAYLES & CO., L.P.
CODE OF ETHICS
-------------------------------------
POLICY ON PERSONAL TRADING AND
RELATED ACTIVITIES
BY LOOMIS, SAYLES PERSONNEL
-------------------------------------
JANUARY 14, 2000
<PAGE>
TABLE OF CONTENTS
PAGE #
1. INTRODUCTION ....................................................... 1
2. STATEMENT OF GENERAL PRINCIPLES .................................... 1
3. OVERVIEW ........................................................... 2
3.1 Provisions of the Code Applicable to You ..................... 2
3.2 A Few Key Terms .............................................. 4
4. SUBSTANTIVE RESTRICTIONS ON PERSONAL TRADING AND RELATED ACTIVITIES
--PROHIBITED OR RESTRICTED ACTIVITIES .............................. 6
4.1 Competing with Client Trades ................................. 6
4.2 Personal Use of Client Trading Knowledge ..................... 7
4.3 Disclosure of Client Trading Knowledge ....................... 7
4.4 Transacting in Securities Under Consideration or Pending
Execution .................................................... 7
4.5 Initial Public Offerings and Private Placements .............. 7
4.6 Participation in Investment Clubs and Private Pooled Vehicles 8
4.7 Good Until Canceled and Limit Orders ......................... 8
4.8 Investment Personnel Seven-Day Blackout ...................... 9
4.9 Research Analyst Three-Day Blackout Before Recommendation .... 9
4.10 Access Person Seven-Day Blackout After Recommendation ........ 10
4.11 Short Term Trading Profits ................................... 10
4.12 Short Sales .................................................. 10
4.13 Futures and Related Options .................................. 10
4.14 Acceptance of Gifts .......................................... 11
4.15 Public Company Board Service and Other Affiliations .......... 11
5. PRECLEARANCE, DOCUMENT DELIVERY AND
REPORTING PROCEDURES ............................................... 11
5.1 Preclearance ................................................. 11
5.2 Transaction Reporting Requirements ........................... 12
5.3 Initial and Annual Personal Holdings Reporting Requirements .. 14
5.4 Brokerage Confirmations and Statements ....................... 14
5.5 Review of Reports by Review Officer .......................... 14
6. EXEMPT SECURITIES AND EXEMPT TRANSACTIONS .......................... 14
6.1 Exempt Securities ............................................ 14
6.2 Exempt Transactions .......................................... 15
6.3 Exemption for Investment Personnel from Seven-Day Blackout
for Certain Transactions in Large Capitalization Stocks ...... 16
6.4 Other Exemptions Granted by the Review Officer ............... 17
7. SANCTIONS .......................................................... 17
8. RECORDKEEPING REQUIREMENTS ......................................... 18
9. MISCELLANEOUS ...................................................... 18
9.1 Confidentiality .............................................. 18
9.2 Notice to Access Persons, Investment Personnel and Research
Analysts as to Status; Notice to Review Officer of Engagement
of Independent Contractors ................................... 19
9.3 Initial and Annual Certification of Compliance ............... 19
9.4 Questions and Educational Materials .......................... 19
GLOSSARY OF TERMS......................................................... G-1
<PAGE>
LOOMIS, SAYLES & CO., L.P.
CODE OF ETHICS
-------------------------------------
POLICY ON PERSONAL TRADING AND
RELATED ACTIVITIES
-------------------------------------
1. INTRODUCTION
This Code of Ethics ("Code") of Loomis, Sayles & Co., L.P. ("Loomis,
Sayles") governs personal trading in securities and related activities by you
and, in some circumstances, your family members and others in a similar
relationship to you.
The policies in this Code reflect Loomis, Sayles' desire to detect and
prevent not only situations involving actual or potential conflicts of interest
or unethical conduct, but those situations involving even the appearance of
these.
2. STATEMENT OF GENERAL PRINCIPLES
It is the policy of Loomis, Sayles that no Loomis, Sayles personnel shall
engage in any act, practice or course of conduct that would violate this Code,
the fiduciary duty owed by Loomis, Sayles and its personnel to our clients,
Section 206 of the Investment Advisers Act of 1940, as amended (the "Advisers
Act"), the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the provisions of Section 17(j) of the Investment Company Act of
1940, as amended (the "1940 Act"), and Rule 17j-1 thereunder. The fundamental
position of Loomis, Sayles is, and has been, that we must at all times place the
interests of our clients first. Accordingly, your personal financial
transactions (and in some cases, those of your family members and others in a
similar relationship to you) and related activities must be conducted
consistently with this Code and in such a manner as to avoid any actual or
potential conflict of interest or abuse of your position of trust and
responsibility. Further, you must not take inappropriate advantage of your
position with or on behalf of any our clients.
Without limiting in any manner the fiduciary duty owed by Loomis, Sayles
personnel to clients, it should be noted that Loomis, Sayles considers it proper
that purchases and sales be made by its personnel in the marketplace of
securities owned by our clients, provided that such securities transactions
comply with the spirit of, and the specific restrictions and limitations set
forth in, this Code. Loomis, Sayles believes this policy not only encourages
investment freedom and results in investment experience, but also fosters a
continuing personal interest in such investments by those responsible for the
continuous supervision of our clients' portfolios. It is also evidence of our
confidence in the investments made for our clients.
In making personal investment decisions, however, you must exercise
extreme care to ensure that the prohibitions of this Code are not violated.
Further, you should conduct your personal investing in such a manner as to
eliminate the possibility that your time and attention are devoted to your
personal investments at the expense of time and attention that should be devoted
to management of a client's portfolio.
It is not intended that these policies will specifically address every
situation involving personal trading. These policies will be interpreted and
applied, and exceptions and amendments will be made, by Loomis, Sayles in a
manner considered fair and equitable, but in all cases with the view of placing
our clients' interests paramount. It also bears emphasis that technical
compliance with the procedures, prohibitions and limitations of this Code will
not automatically insulate you from scrutiny of, and sanctions for, securities
transactions which indicate an abuse of your fiduciary duty to any client of
Loomis, Sayles.
You are encouraged to bring any questions you may have about these
policies to the personnel in the Legal and Compliance Department, who will
assist you. BOLDFACED terms appearing in these policies have special meaning.
Please see the Glossary for definitions of these terms. Also, see the
"Explanatory Notes" appearing throughout (and made a part of) this Code for
clarification of certain provisions.
3. OVERVIEW
This Code governs personal trading and related activities by Loomis,
Sayles personnel, and in some circumstances by their family members and others
in a similar relationship to Loomis, Sayles personnel.
3.1 PROVISIONS OF THE CODE APPLICABLE TO YOU
The Code contains substantive rules you must observe. You must also follow
certain procedural requirements designed to enforce and verify compliance with
the Code. The Code also provides for sanctions for violations of either
substantive or procedural requirements. The Code consists of three types of
requirements applicable to you. These three types of Code provisions can be
summarized as follows:
3.1.1 Substantive Restrictions on Personal Trading and Related
Activities. (Section 4)
As a Loomis, Sayles employee, your personal securities trading,
outside affiliations and receipt of gifts are subject to restrictions, and in
some cases, prohibitions. Certain of these activities, such as competing with
client trades and making personal use and benefit from client trades, are
obviously unethical, and the basis for prohibitions on these activities is self
evident. Others, such as purchases of initial public offerings and private
placements, trading during specified black out periods, short-term trading and
public company board service, are restricted because they present actual or
perceived conflicts of interest. These restrictions or prohibitions are based on
SEC rules or positions, industry "best practices" recommendations, and Loomis,
Sayles, policies.
3.1.2 Preclearance, Document Delivery and Reporting. (Section 5)
With certain limited exceptions (described in Section 6) you must
pre-clear every personal securities transaction you propose to enter. You must
also arrange for the delivery by your broker to the Legal and Compliance
Department of duplicate copies of your brokerage confirmation statements and
account statements, either in paper form or, through arrangements with certain
brokers approved by the Legal and Compliance Department, electronically.
Likewise, you must report your personal securities transactions to the Legal and
Compliance Department on a monthly basis either directly, or through
arrangements, approved by the Legal and Compliance Department, by which your
broker provides the Legal and Compliance Department with electronic duplicate
copies of your brokerage confirmation statements and account statements.
Finally, you must disclose your personal securities holdings on an annual basis
(and, for new employees, upon commencing employment). Certain restrictions apply
differently to different types of personnel. You will be notified from time to
time of the category (or categories) into which you fall, and where appropriate,
of the accounts or specific securities with respect to which you are considered
to be in such category.
3.1.3 Sanctions. (Section 7)
The sanctions for violating the Code may be severe. They range from
warnings and fines to suspension or termination of employment, and, in some
cases, to referral to regulatory agencies for civil or criminal proceedings
against the individual involved.
3.2 A FEW KEY TERMS
As noted above, BOLDFACED terms have special meaning in this Code. The
application of a particular Code requirement to you may hinge on the elements of
the definition of these terms. See the Glossary at the end of this Code for
definitions of these terms. In order to have a basic understanding of the Code,
however, you must have an understanding of the terms "SECURITY" and "BENEFICIAL
OWNERSHIP" as used in the Code.
3.2.1 Security.
This Code generally relates to transactions in and ownership of
investment that is a SECURITY. For purposes of the Code, SECURITY is interpreted
as defined in Rule 17j-1 under the 1940 Act and Rule 204-2(a)(12) under the
Advisers Act or any applicable successor provision. Currently, this means any
type of equity or debt security (such as common and preferred stocks, and
corporate and government bonds or notes) and any instrument representing, or any
rights relating to, a security (such as certificates of participation,
depository receipts, put and call options, warrants, convertible securities and
securities indices).
EXCEPT that SECURITY for this purpose does not include:
o shares of registered open-end investment companies (mutual
funds) whether or not affiliated with Loomis, Sayles
o direct obligations of the United States Government (i.e.,
Treasury securities, as distinct from U.S. Government
agencies or instrumentalities)
o bankers' acceptances
o bank certificates of deposit
o commercial paper
o repurchase agreements
o other money market instruments
Explanatory Note:
Shares of closed-end funds, municipal obligations and
securities issued by agencies and instrumentalities of the
U.S. government (e.g., GNMA obligations) are Securities.
3.2.2 Beneficial Ownership.
The Code governs any SECURITY in which you have a direct or indirect
"BENEFICIAL OWNERSHIP." This term encompasses not only "ownership" by you in the
usual sense, but any interest which gives you an ability to profit or enjoy
economic benefits from a SECURITY.
BENEFICIAL OWNERSHIP for purposes of the Code is interpreted as that
term is defined from time to time in Rule 17j-1 under the 1940 Act and Rule
204-2(a)(12) under the Advisers Act or any applicable successor provision.
Currently, this means a direct or indirect "pecuniary interest" that is held or
shared by you directly or indirectly (through any contract, arrangement,
understanding, relationship or otherwise) in a SECURITY. The term "pecuniary
interest" in turn generally means your opportunity directly or indirectly to
receive or share in any profit derived from a transaction in a SECURITY whether
or not the SECURITY or the relevant account is in your name or is held in an
ordinary brokerage or retirement plan account. Although this concept is subject
to a variety of SEC rules and interpretations, you should know that you are
presumed under the Code to have an indirect pecuniary interest as a result of:
o ownership of a SECURITY by your spouse or minor children;
o ownership of a SECURITY by your other family members sharing
your household (including an adult child, a stepchild, a
grandchild, a parent, stepparent, grandparent, sibling,
mother- or father-in-law, sister- or brother-in-law, and son-
or daughter-in-law);
o your share ownership, partnership interest or similar interest
in the portfolio securities held by a corporation, general or
limited partnership or similar entity you control;
o your right to receive dividends or interest from a SECURITY
even if that right is separate or separable from the
underlying securities;
o your interest in a SECURITY held for the benefit of you alone
or for you and others in a trust or similar arrangement
(including any present or future right to income or
principal); and
o your right to acquire a SECURITY through the exercise or
conversion of a "derivative security."
Explanatory Note:
Note that you are presumed to have a BENEFICIAL OWNERSHIP in
any SECURITY held by family members who share your household.
In certain unusual cases this presumption will not apply if
the REVIEW OFFICER determines, based on all of the relevant
facts, that the attribution of these family member's SECURITY
transactions to you is inappropriate.
In the case of unmarried persons who share a household and
combine their financial resources in a manner similar to that
of married persons, each person will be presumed to have a
BENEFICIAL OWNERSHIP in the securities and
transactions of the other.
The Loomis, Sayles Funded Pension Plan, and any account of an
ACCESS PERSON, even if also a client account, will be subject
to this Code as an account in which an ACCESS Person has a
BENEFICIAL OWNERSHIP.
4. SUBSTANTIVE RESTRICTIONS ON PERSONAL TRADING AND RELATED ACTIVITIES --
PROHIBITED OR RESTRICTED ACTIVITIES
The following are substantive prohibitions and restrictions on your
personal trading and related activities. Please note that different types of
prohibitions and restrictions apply to different types of personnel. In general,
the prohibitions set forth below relating to trading activities apply to
accounts holding SECURITIES in which an ACCESS PERSON has a BENEFICIAL
OWNERSHIP. However, as noted above in the Statement of General Principles,
technical compliance with these provisions will not insulate you from scrutiny
of, and sanctions for, SECURITIES transactions which indicate an abuse of your
fiduciary duty.
4.1 COMPETING WITH CLIENT TRADES.
No ACCESS PERSON may, directly or indirectly, purchase or sell a SECURITY
in such a way that the ACCESS PERSON knew, or reasonably should have known, that
such a SECURITY transaction competes in the market with any actual or considered
SECURITY transaction for any client of Loomis, Sayles, or otherwise personally
acts to injure any Loomis, Sayles client's SECURITY transactions.
4.2 PERSONAL USE OF CLIENT TRADING KNOWLEDGE.
No ACCESS PERSON may use the knowledge of SECURITIES purchased or sold by
any client of Loomis, Sayles or SECURITIES being considered for purchase or sale
by any client of Loomis, Sayles to profit personally, directly or indirectly, by
the market effect of such transactions.
4.3 DISCLOSURE OF CLIENT TRADING KNOWLEDGE.
No ACCESS PERSON may, directly or indirectly, communicate to any person
who is not an ACCESS PERSON or other approved agent of Loomis, Sayles (e.g.,
legal counsel) any non-public information relating to any client of Loomis,
Sayles or any issuer of any SECURITY owned by any client of Loomis, Sayles,
including, without limitation, the purchase or sale or considered purchase or
sale of a SECURITY on behalf of any client of Loomis, Sayles, except to the
extent necessary to comply with applicable law or to effectuate SECURITIES
transactions on behalf of the client of Loomis, Sayles.
4.4 TRANSACTING IN SECURITIES UNDER CONSIDERATION OR PENDING
EXECUTION.
No ACCESS PERSON may, directly or indirectly, execute a personal
SECURITIES transaction on a day during on which: (a) the same SECURITY or an
EQUIVALENT SECURITY is being considered for purchase or sale by a client; or (b)
the same SECURITY or an EQUIVALENT SECURITY is the subject of a pending "buy" or
"sell" order, until that SECURITY ceases being considered for purchase or sale
or the buy or sell order is executed or withdrawn.
Explanatory Note:
You may assume that a SECURITY is not being considered for
purchase or sale or the subject of a pending buy or sell order
if you receive a preclearance to trade the SECURITY, as
described in Section 5, unless you have actual knowledge
to the contrary.
4.5 INITIAL PUBLIC OFFERINGS AND PRIVATE PLACEMENTS.
Without obtaining prior written approval from the REVIEW OFFICER, no
ACCESS PERSON may, directly or indirectly, purchase any SECURITY sold in an
INITIAL PUBLIC OFFERING or pursuant to a PRIVATE PLACEMENT TRANSACTION.
Explanatory Note:
An ACCESS PERSON seeking approval to acquire a SECURITY in an
INITIAL PUBLIC OFFERING or PRIVATE PLACEMENT TRANSACTION must
submit a request in the form prescribed by the REVIEW OFFICER
from time to time describing the issuer and the
investment.
In considering such a request, the REVIEW OFFICER will take
into account, among other considerations, whether the
investment opportunity should be reserved for Loomis, Sayles
clients, whether the opportunity is being offered to you by
virtue of your position at Loomis, Sayles and whether the
opportunity is likely to present actual or perceived conflicts
of interest with Loomis, Sayles' duties to its clients.
IT SHOULD BE UNDERSTOOD THAT APPROVAL OF THESE TRANSACTIONS
WILL BE GIVEN ONLY IN SPECIAL CIRCUMSTANCES, AND NORMALLY WILL
BE DENIED.
If you have been authorized to acquire a SECURITY in a PRIVATE
PLACEMENT TRANSACTION, you must disclose such investment when
you are involved in a client's subsequent consideration of an
investment in the issuer, even if that investment involves a
different type or class of SECURITY. In such circumstances,
the client's decision to purchase securities of the issuer
must be independently reviewed by an Investment Person with no
personal interest in the issuer.
4.6 PARTICIPATION IN INVESTMENT CLUBS AND PRIVATE POOLED VEHICLES.
No ACCESS PERSON shall participate in an investment club or invest in a
hedge fund, or similar private organized investment pool (but not on SEC
registered open-end mutual fund) without express permission of the REVIEW
OFFICER.
4.7 GOOD UNTIL CANCELED AND LIMIT ORDERS.
No ACCESS PERSON shall place any "good until canceled" or "limit" order
with any broker except that an ACCESS PERSON may utilize a "day order with a
limit" so long as the transaction is consistent with provisions of this Code,
including the preclearance procedures.
Explanatory Note:
All orders must expire at the end of the trading day they are
precleared and made. "Good until canceled" and "limit" orders
that do not expire at the end of that trading day are
inconsistent with the preclearance timing aspects of this Code
of Ethics.
4.8 INVESTMENT PERSONNEL SEVEN-DAY BLACKOUT.
Except as set forth in Section 6.3 below, no INVESTMENT PERSON shall,
directly or indirectly, purchase or sell any SECURITY within a period of seven
(7) calendar days before and after the date that a client with respect to which
he or she is designated by the REVIEW OFFICER as an INVESTMENT PERSON has
purchased or sold such SECURITY.
Explanatory Note:
The "seven days before" element of this restriction is based
on the premise that an INVESTMENT PERSON can normally be
expected to know, when he or she is effecting a personal
trade, whether any client as to which he is designated an
INVESTMENT PERSON will be trading in the same SECURITY seven
days later. An INVESTMENT PERSON has an affirmative obligation
to recommend and/or effect suitable and attractive trades for
clients regardless of whether such trade will cause a prior
personal trade to be considered in apparent violation of this
restriction. It would constitute a breach of fiduciary duty
and a violation of this Code to delay or fail to make any such
recommendation or transaction in order to avoid a conflict
with this restriction.
Of course, in particular cases a change of circumstance, a
firm or client initiated liquidation, rebalancing or other
decision or similar event may occur after an INVESTMENT
PERSON'S personal trade which gives rise to an opportunity or
necessity for his or her client to trade in that Security
which did not exist or was not anticipated by that person at
the time of that person's personal trade. The REVIEW OFFICER
will review any extenuating circumstances which may warrant
waiving of any remedial actions in a particular situation
involving an apparently inadvertent violation of this
restriction.
4.9 RESEARCH ANALYST THREE-DAY BLACKOUT BEFORE RECOMMENDATION.
During the three (3) business day period before the issuance of a
RECOMMENDATION by a RESEARCH ANALYST with respect to a SECURITY, that RESEARCH
ANALYST may not purchase or sell that SECURITY.
Explanatory Note:
Of course, in particular cases a news release, change of
circumstance or similar event may occur after a RESEARCH
ANALYST'S personal trade which gives rise to a need, or makes
it appropriate, for a RESEARCH ANALYST to issue a
RECOMMENDATION which news, circumstance or event did not exist
or was not anticipated by a RESEARCH ANALYST at the time of
the RESEARCH ANALYST'S personal trade. The REVIEW OFFICER will
review any extenuating circumstances which may warrant waiving
of any remedial sanctions in a particular situation involving
an apparently inadvertent violation of this restriction. A
RESEARCH ANALYST has an affirmative duty to make unbiased
RECOMMENDATIONS and issue reports, both with respect to their
timing and substance, without regard to his or her personal
interest. It would constitute a breach of a RESEARCH ANALYST'S
fiduciary duty and a violation of this Code to delay or fail
to issue a RECOMMENDATION in order to avoid a conflict with
this provision.
4.10 ACCESS PERSON SEVEN-DAY BLACKOUT AFTER RECOMMENDATION.
During the seven (7) day period after a RECOMMENDATION is issued with
respect to a SECURITY, no ACCESS PERSON may purchase or sell that SECURITY.
4.11 SHORT TERM TRADING PROFITS.
No ACCESS PERSON may profit from the purchase and sale, or conversely the
sale and purchase, of the same or equivalent SECURITY within 60 calendar days.
Any profits generated on such transactions (calculated in a manner determined
appropriate under the circumstances by the REVIEW OFFICER) will be disgorged.
Exceptions may be requested (in advance) from the REVIEW OFFICER. Such
exceptions will be granted only in cases in which there are extenuating
circumstances and no actual or apparent conflict exists between such
transactions and a client's transactions.
4.12 SHORT SALES.
No ACCESS PERSON may purchase a put option or sell a call option, sell a
SECURITY short or otherwise take a short position in a SECURITY then being
managed by Loomis, Sayles on a discretionary basis in a client account, unless
there is a corresponding long position in the underlying SECURITY. Short selling
against the box is permitted, as is purchasing a put or selling a call option on
a broad based index.
4.13 FUTURES AND RELATED OPTIONS.
No ACCESS PERSON shall use futures or related options on a SECURITY to
evade the restrictions of this Code. In other words, no ACCESS PERSON may use
futures or related options transactions with respect to a SECURITY if this Code
would prohibit taking the same position directly in the SECURITY.
4.14 ACCEPTANCE OF GIFTS.
Without obtaining prior written approval of the REVIEW OFFICER, no ACCESS
PERSON may accept any gift or other thing of more than de minimis value from any
person or entity that does business with Loomis, Sayles. The REVIEW OFFICER
will, from time to time, issue guidelines as to the type and value of items that
would be considered subject to this restriction.
4.15 PUBLIC COMPANY BOARD SERVICE AND OTHER AFFILIATIONS.
No ACCESS PERSON may serve on the board of directors of any publicly
traded company, absent prior written approval by the REVIEW OFFICER. In
determining whether to approve such board service, the REVIEW OFFICER will
consider whether such service will involve an actual or perceived conflict of
interest with client trading, place impediments on Loomis Sayles' ability to
trade on behalf of clients or otherwise materially interfere with the effective
discharge of Loomis Sayles' or the ACCESS PERSON'S duties to clients. Likewise,
absent prior written approval by the REVIEW OFFICER, no ACCESS PERSON shall
accept any other service, employment, engagement, connection, association or
affiliation in or with any enterprise, business or otherwise which may present
such actual or perceived conflicts, place impediments on trading or otherwise
materially interfere with the effective discharge of Loomis Sayles' or the
ACCESS PERSON'S responsibilities to clients.
5. PRECLEARANCE, DOCUMENT DELIVERY AND REPORTING PROCEDURES
5.1 PRECLEARANCE
With certain limited exceptions, set forth in Section 6 below, every
ACCESS PERSON must pre-clear (by written, telephonic or electronic means
specified by the REVIEW OFFICER from time to time) all personal SECURITY
transactions in which he or she has or would acquire BENEFICIAL OWNERSHIP. Any
transaction approved pursuant to the preclearance request procedure must be
executed by the end of the trading day on which it is approved unless the REVIEW
OFFICER extends the preclearance for an additional trading day. If the ACCESS
PERSON'S trade has not been executed by the end of the same trading day (or the
next trading day in the case of an extension), the "preclearance" will lapse and
the ACCESS PERSON may not trade without again seeking and obtaining preclearance
of the intended trade.
Pre-clearance requests will be accepted and responded to only during hours
specified by the REVIEW OFFICER from time to time.
If after preclearance is given and before it has lapsed, an ACCESS PERSON
becomes aware that a SECURITY as to which he or she obtained pre-clearance has
become the subject of a buy or sell order or has become a SECURITY being
considered for purchase or sale, the ACCESS PERSON who obtained the preclearance
must consider the preclearance revoked. If the transaction has already been
executed before the ACCESS PERSON becomes aware of such facts no violation will
be considered to occur as a result of the ACCESS PERSON'S transactions.
Generally preclearance will be denied:
o if Loomis, Sayles has an unfilled order for that SECURITY
placed with a broker-dealer, the SECURITY is on the Loomis,
Sayles "Restricted List" or "Concentration List" (or such
other trading restriction list as Loomis, Sayles, may from
time to time establish) or the SECURITY is otherwise being
considered for purchase or sale,
o if the trade is otherwise prohibited under the substantive
rules set forth in Section 4 above (e.g., the requesting
person is an INVESTMENT PERSON and his or her client accounts
have traded in the same SECURITY within seven calendar days).
If an ACCESS PERSON has actual knowledge that a requested transaction is
nevertheless in violation of this Code, approval of the request will not protect
the ACCESS PERSON from being considered in violation of the Code.
5.2 TRANSACTION REPORTING REQUIREMENTS
5.2.1 Accounts Subject to Reporting.
Unless utilizing an alternative reporting procedure described in
Section 5.2.3 below, each ACCESS PERSON must file (by paper or electronic means
specified by the REVIEW OFFICER from time to time) a report on all SECURITY
transactions made during each monthly period in which such ACCESS PERSON has, or
by reason of such transactions acquires or disposes of, any BENEFICIAL OWNERSHIP
of a SECURITY, or as to which the ACCESS PERSON has any direct or indirect
influence or control (even if such ACCESS PERSON has no BENEFICIAL OWNERSHIP in
such SECURITY). (Official Loomis, Sayles client accounts in which no Loomis,
Sayles employee has a BENEFICIAL OWNERSHIP are not control accounts for this
purpose.) Control accounts subject to reporting include accounts managed by an
ACCESS PERSON, accounts of trusts for which an ACCESS PERSON serve as trustee or
co-trustee and similar accounts. Such report is required whether or not such
transactions were precleared or subject to preclearance.
5.2.2 Transaction Reporting Procedure.
Every transaction report must be made not later than ten (10)
calendar days after the end of each calendar month in which the transaction(s)
to which the report relates was effected. All reports must contain the
information required from time to time by Rule 17j-1 under the 1940 Act and Rule
204-2(a)(12) under the Advisers Act or any applicable successor provision. A
list of the specific items of information then required will be set forth in a
reporting form or other materials provided by the REVIEW OFFICER from time to
time.
If no transactions in any securities required to be reported were
effected during a monthly period by an ACCESS PERSON, such ACCESS PERSON shall
nevertheless submit a report within the time-frame specified above stating that
no reportable securities transactions were effected.
In addition, with respect to each account maintained by the ACCESS
PERSON during the period subject to reporting under Section 5.2.1, whether or
not a transaction occurred in such an account, the transaction report must
contain the brokerage account identification information required from time to
time by Rule 17j-1 under the 1940 Act and Rule 204-2(a)(12) under the Advisers
Act or any applicable successor provision. A list of the specific items of
information then required will be set forth in a reporting form or other
materials provided by the REVIEW OFFICER from time to time.
Every report concerning a securities transaction prohibited under
Section 4, with respect to which the ACCESS PERSON relies upon one of the
exemptions from substantive restrictions or preclearance requirements provided
in Section 6 shall contain a brief statement of the exemption relied upon and
the circumstances of the transactions.
5.2.3 Alternative Transaction Reporting Procedures
The REVIEW OFFICER may from time to time specify one or more
personal trading arrangements that permit or require the use of approved
alternative reporting procedures. These arrangements may include effecting all
transactions through a Loomis, Sayles trading desk or through approved brokerage
firms, or similar arrangements, in each case that would permit the REVIEW
OFFICER to receive directly electronic or other information reports on the
ACCESS PERSON'S trading without the intervention of the ACCESS PERSON.
5.3 INITIAL AND ANNUAL PERSONAL HOLDINGS REPORTING REQUIREMENTS
Within 10 days after becoming an ACCESS PERSON, each ACCESS PERSON must
file with the REVIEW OFFICER a report (by paper or electronic means specified by
the REVIEW OFFICER from time to time) of such SECURITIES in which such ACCESS
PERSON has a BENEFICIAL OWNERSHIP or as to which such ACCESS PERSON has direct
or indirect influence or control. In addition, at least annually thereafter, by
a date specified by the REVIEW OFFICER, each ACCESS PERSON must file with the
REVIEW OFFICER a dated report on a form and in a manner specified by the REVIEW
OFFICER of SECURITIES in which such ACCESS PERSON has a BENEFICIAL OWNERSHIP or
over which such ACCESS PERSON has direct or indirect influence or control. In
the case of the initial holdings report, the information must be as of the date
the person became an ACCESS PERSON. In the case of the annual holdings report,
the information in the report shall be as of a date within 30 days of filing the
report. In each case, this report must contain the information required from
time to time by Rule 17j-1 under the 1940 Act and Rule 204-2(a)(12) under the
Advisers Act or any applicable successor provision. A list of the specific items
of information then required will be set forth in a reporting form or other
materials provided by the REVIEW OFFICER from time to time.
5.4 BROKERAGE CONFIRMATIONS AND STATEMENTS
Each ACCESS PERSON must arrange for his or her broker to supply to the
REVIEW OFFICER, on a timely basis, duplicate copies of all confirmations of all
SECURITY transactions and copies of periodic statements for all accounts holding
SECURITIES in which the ACCESS PERSON has BENEFICIAL OWNERSHIP or as to which
such ACCESS PERSON has direct or indirect influence or control. ACCESS PERSONS
who maintain accounts with institutions that agree to provide such information
in an approved electronic format may be eligible for an exemption from some of
the transaction reports required by the Code with respect to those accounts. See
Section 5.2.3.
5.5 REVIEW OF REPORTS BY REVIEW OFFICER
The REVIEW OFFICER shall establish procedures as the REVIEW OFFICER may
from time to time determine appropriate, for the review of the information
required to be compiled under this Code regarding transactions by ACCESS
PERSONS.
6. EXEMPT SECURITIES AND EXEMPT TRANSACTIONS
6.1 EXEMPT SECURITIES
Transactions in the following types of SECURITIES are exempt from the
substantive trading restrictions and the preclearance requirements, but not
reporting, requirements of this Code:
o shares of unit investment trusts as to which entity's
investment portfolio the ACCESS PERSON has no direct or
indirect influence or control (other than open-ended
registered investment companies, shares of which are not
considered "securities" at all for these purposes);
o bonds issued or guaranteed by any sovereign government or its
agencies, instrumentalities or authorities or supra-national
issuers (other than direct U.S. government obligations which
are not considered "SECURITIES" at all for these purposes) in
each case, as designated by the REVIEW OFFICER from time to
time;
o SECURITIES of small, private businesses owned or operated
by the family of the ACCESS PERSON; and
o "index baskets" and options, futures or other derivatives in
each case tied to recognized broad market indices.
6.2 EXEMPT TRANSACTIONS.
The following types of transactions are exempt from the trading
restrictions, and the preclearance requirements, but not reporting, requirements
of this Code:
o purchases or sales of SECURITIES for an account over which
you have no direct or indirect influence or control;
o purchases or sales of SECURITIES which occur as a result of
operation of law, or any margin call (provided such margin
call does not result from your withdrawal of collateral within
10 days before the call and you have no involvement in the
selection of the specific SECURITIES to be sold);
o purchases of SECURITIES which are part of an automatic
dividend reinvestment plan, automatic payroll deduction
program, automatic cash purchase or withdrawal program or
other similar automatic transaction program, but only to the
extent you have made no voluntary adjustment (up or down) in
the rate at which you purchase or sell;
o purchases of SECURITIES made by exercising rights distributed
by an issuer pro rata to all other holders of a class of its
SECURITIES or other interests, to the extent such rights were
acquired by you from the issuer, and sales of such rights so
acquired;
o tenders of SECURITIES pursuant to tender offers which are
expressly conditioned on the tender offeror's acquisition of
all of the SECURITIES of the same class; and
o transactions in SECURITIES by your spouse (or person in a
similar relationship such that the presumption of
BENEFICIAL OWNERSHIP arises) employed at another investment
firm or similar entity, provided that: (a) you have no
direct or indirect influence or control over the
transaction; (b) the transactions are effected solely
through an account separate from your account and (c) the
REVIEW OFFICER has specifically exempted the spousal or
similar account from certain trading restrictions and
preclearance requirements.
Explanatory Note:
Transactions in such spousal or similar relationship accounts
that are exempted from trading restrictions and preclearance
requirements will be subject to special scrutiny and may be
subject to additional policies or restrictions in the
discretion of the REVIEW OFFICER to ensure that these accounts
are not being used to circumvent the policies and purposes of
this Code.
6.3 EXEMPTION FOR INVESTMENT PERSONNEL FROM SEVEN-DAY BLACKOUT FOR
CERTAIN TRANSACTIONS IN LARGE CAPITALIZATION STOCKS.
An INVESTMENT PERSON may, without regard to the Investment Personnel
Seven-Day Blackout restriction set forth in Section 4.8 above, purchase or sell
a publicly traded equity security of an issuer having a market capitalization of
at least U.S. $5 billion in one or more transactions having an aggregate value
not exceeding U.S. $10,000 in any one day. Such transactions shall otherwise be
subject to all other substantive and procedural provisions of this Code,
including the preclearance provisions.
6.4 OTHER EXEMPTIONS GRANTED BY THE REVIEW OFFICER.
Subject to applicable law, the REVIEW OFFICER may from time to time grant
exemptions from the trading restrictions, preclearance requirements or other
provisions of this Code with respect to particular individuals, types of
transactions or SECURITIES, where in the opinion of the REVIEW OFFICER such an
exemption is appropriate in light of all the surrounding circumstances.
7. SANCTIONS
Any violation of the substantive or procedural requirements of this Code
will result in the imposition of such sanctions as the REVIEW OFFICER may deem
appropriate under the circumstances of the particular violation, as well as the
violator's past history of violations. These sanctions may include, but are not
limited to:
o a letter of caution or warning;
o payment of monies, such as a fine, disgorgement of profits
generated or payment of losses avoided, or restitution to an
affected client;
o suspension of personal trading privileges;
o actions affecting employment status, such as suspension of
employment without pay, demotion or termination of
employment; and
o referral to the SEC, other civil authorities or criminal
authorities;
In applying sanctions, the REVIEW OFFICER will be guided by sanctions
guidelines established by senior management, from time to time, setting forth
suggested sanctions for specific types of violations, including a schedule of
escalating penalties for repeat violations in some areas. Serious violations,
including those involving deception, dishonesty or knowing breaches of law or
fiduciary duty, will result in one or more of the most severe violations
regardless of the violator's history of prior compliance.
Fines, penalties and disgorged profits will be donated to a charity
selected by the relevant employee or as determined by the REVIEW OFFICER.
8. RECORDKEEPING REQUIREMENTS
Loomis, Sayles shall maintain and preserve records relating to this Code
of the type and in the manner and form and for the time period prescribed from
time to time by applicable law. Currently, Loomis, Sayles is required by law to
maintain and preserve:
o in an easily accessible place, a copy of this Code (and any
prior code of ethics that was in effect at any time during the
past five years) for a period of five years;
o in an easily accessible place a record of any violation of
this Code and of any action taken as a result of such
violation for a period of five years following the end of the
fiscal year in which the violation occurs;
o a copy of each report (or information provided in lieu of a
report) submitted under this Code for a period of five years,
provided that for the first two years such copy must be
preserved in an easily accessible place;
o in an easily accessible place, a list of all persons who are,
or within the past five years were, required to make, or were
responsible for reviewing, reports pursuant to this Code;
o a copy of each report provided to any INVESTMENT COMPANY as
required by paragraph (c)(2)(ii) of Rule 17j-1 under the 1940
Act or any successor provision for a period of five years
following the end of the fiscal year in which such report is
made, provided that for the first two years such record shall
be preserved in an easily accessible place; and
o a written record of any decision, and the reasons supporting
any decision, to approve the purchase by an ACCESS PERSON of
any SECURITY in an INITIAL PUBLIC OFFERING or PRIVATE
PLACEMENT TRANSACTION for a period of five years following the
end of the fiscal year in which the approval is granted.
9. MISCELLANEOUS
9.1 CONFIDENTIALITY
Information obtained from any ACCESS PERSON hereunder will normally be
kept in strict confidence by Loomis, Sayles, but may under certain circumstances
be provided to third parties. For example, reports of SECURITIES transactions
and violations hereunder will be made available to the SEC or any other
regulatory or self-regulatory organization to the extent required by law or
regulation, and in certain circumstances, may in Loomis, Sayles' discretion be
made available to other civil and criminal authorities. In addition, information
regarding violations of this Code may be provided to clients or former clients
of Loomis, Sayles.
9.2 NOTICE TO ACCESS PERSONS, INVESTMENT PERSONNEL AND RESEARCH
ANALYSTS AS TO STATUS; NOTICE TO REVIEW OFFICER OF ENGAGEMENT OF
INDEPENDENT CONTRACTORS
Loomis, Sayles shall periodically identify all persons who are considered
to be "ACCESS PERSONS," " INVESTMENT PERSONNEL" and "RESEARCH ANALYSTS" and any
accounts or types of accounts or SECURITIES covered as to which a designation of
INVESTMENT PERSONNEL or RESEARCH ANALYSTS may apply, inform such persons of
their respective reporting and duties under the Code and provide such persons
with copies of this Code.
Any person engaging an independent contractor shall notify the REVIEW
OFFICER of this engagement and provide to the REVIEW OFFICER information
concerning the independent contractor sufficient to permit the REVIEW OFFICER to
make a determination as to whether such independent contractor shall be
designated as an ACCESS PERSON.
9.3 INITIAL AND ANNUAL CERTIFICATION OF COMPLIANCE
Each ACCESS PERSON must, upon becoming an ACCESS PERSON and annually
thereafter, (by paper or electronic means specified by the REVIEW OFFICER from
time to time) acknowledge that he or she has received, read and understands this
Code and recognizes that he or she is subject hereto, and certify that he or she
will (in the case of a new ACCESS PERSON) and has during the past year (in the
case of an annual certification) complied with the requirements of this Code of
Ethics, except as otherwise disclosed in writing to the REVIEW OFFICER.
9.4 QUESTIONS AND EDUCATIONAL MATERIALS
You are encouraged to bring to the Legal and Compliance Department any
questions you may have about interpreting or complying with this Code, about
SECURITY accounts or personal trading activities of you or of your family or
household members, about your legal or ethical responsibilities or about similar
matters that may involve this Code.
The Legal and Compliance Department may from time to time circulate
educational materials or bulletins designed to assist you in understanding and
carrying out your duties under this Code.
<PAGE>
GLOSSARY OF TERMS
The BOLDFACE terms used throughout this policy have the following
meanings:
1. "ACCESS PERSON" means an "access person" as defined from time to
time in Rule 17j-1 under the 1940 Act or any applicable successor
provision. Currently, this means any director, general partner or
officer of Loomis, Sayles, or any ADVISORY PERSON (as defined below)
of Loomis, Sayles.
2. "ADVISORY PERSON" means an "advisory person" and "advisory
representative" as defined from time to time in Rule 17j-1 under
the 1940 Act and Rule 204-2(a)(12) under the Advisers Act,
respectively, or any applicable successor provision. Currently,
this means (i) every employee of Loomis, Sayles (or of any
company in a CONTROL relationship to Loomis, Sayles), who, in
connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase or
sale of a SECURITY by Loomis, Sayles on behalf of clients, or
whose functions relate to the making of any recommendations with
respect to such purchases or sales; and (ii) every natural person
in a CONTROL relationship to Loomis, Sayles who obtains
information concerning recommendations made to a client with
regard to the purchase or sale of a SECURITY. ADVISORY PERSON
also includes: (a) any other employee designated by the REVIEW
OFFICER as an ADVISORY PERSON under this Code; and (b) any
independent contractor (or similar person) engaged by Loomis,
Sayles designated as such by the REVIEW OFFICER as a result of
such independent contractor's access to information about the
purchase or sale of SECURITIES by Loomis, Sayles on behalf of
clients (by being present in Loomis, Sayles offices, having
access to computer data or otherwise).
3. "BENEFICIAL OWNERSHIP" is defined in Section 3.2.2 of the Code.
4. "CONTROL" means "control" as defined from time to time in Rule 17j-1
under the 1940 Act and Rule 204-2(a)(12) under the Advisers Act or
any applicable successor provision. Currently, this means the power
to exercise a controlling influence over the management or policies
of Loomis, Sayles, unless such power is solely the result of an
official position with Loomis, Sayles.
5. "INITIAL PUBLIC OFFERING" means an "initial public offering" as
defined from time to time in Rule 17j-l under the 1940 Act or any
applicable successor provision. Currently, this means any offering
of securities registered under the Securities Act of 1933 the issuer
of which immediately before the offering, was not subject to the
reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934.
6. "INVESTMENT COMPANY" means any INVESTMENT COMPANY registered as such
under the 1940 Act and for which Loomis, Sayles serves as investment
adviser or subadviser.
7. "INVESTMENT PERSON" means all PORTFOLIO MANAGERS of Loomis,
Sayles and other ADVISORY PERSONS who assist the PORTFOLIO
MANAGERS in making and implementing investment decisions for an
INVESTMENT COMPANY or other client of Loomis, Sayles, including,
but not limited to, designated RESEARCH ANALYSTS and traders of
Loomis, Sayles. A person is considered an INVESTMENT PERSON only
as to those client accounts or types of client accounts as to
which he or she is designated by the REVIEW OFFICER as such. As
to other accounts, he or she is simply an ACCESS PERSON.
8. "PORTFOLIO MANAGER" means any individual employed by Loomis, Sayles
who has been designated as a PORTFOLIO MANAGER by Loomis, Sayles. A
person is considered a PORTFOLIO MANAGER only as to those client
accounts as to which he or she is designated by the REVIEW OFFICER
as such. As to other client accounts, he or she is simply an ACCESS
PERSON.
9. "PRIVATE PLACEMENT TRANSACTION" means a "limited offering" as
defined from time to time in Rule 17j-l under the 1940 Act or any
applicable successor provision. Currently, this means an offering
exempt from registration under the Securities Act of 1933 pursuant
to Section 4(2) or 4(6) or Rule 504, 505 or 506 under that Act.
10. "RECOMMENDATION" means any initial rating or change therein, in the
case of an equity SECURITY, or any initial rating or status, or
change therein in the case of a fixed income SECURITY in either case
issued by a RESEARCH ANALYST.
11. "RESEARCH ANALYST" means any individual employed by Loomis, Sayles
who has been designated as a RESEARCH ANALYST by Loomis, Sayles. A
person is considered a RESEARCH ANALYST only as to those SECURITIES
which he or she is assigned to cover and about which he or she
issues research reports to other INVESTMENT PERSONNEL. As to other
accounts, he or she is simply an ACCESS PERSON.
12. "REVIEW OFFICER" means the General Counsel or such other officer
or employee of Loomis, Sayles designated from time to time by
Loomis, Sayles to receive and review reports of purchases and
sales by ACCESS PERSONS, and to address issues of personal
trading. "ALTERNATE REVIEW OFFICER(S)" means the employee or
employees of Loomis, Sayles designated from time to time by
Loomis, Sayles to receive and review reports of purchases and
sales, and to address issues of personal trading, by the REVIEW
OFFICER, and to act for the REVIEW OFFICER in the absence of the
REVIEW OFFICER.
13. "SECURITY" is defined in Section 3.2.1 of the Code.
<PAGE>
Exhibit (p)(6)
[logo] JANUS
JANUS ETHICS RULES
"ACT IN THE BEST INTEREST OF OUR INVESTORS & EARN THEIR
CONFIDENCE WITH EVERY ACTION"
- -------------------------------------------------------------------------------
CODE OF ETHICS
INSIDER TRADING POLICY
GIFT POLICY
OUTSIDE EMPLOYMENT POLICY
- -------------------------------------------------------------------------------
LAST REVISED MARCH 1, 2000
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
DEFINITIONS.............................................................. 1
INTRODUCTION............................................................. 4
CAUTION REGARDING PERSONAL TRADING ACTIVITIES...................... 4
COMMUNICATIONS WITH OUTSIDE TRUSTEES/DIRECTORS..................... 4
CODE OF ETHICS........................................................... 5
OVERVIEW........................................................... 5
GENERAL PROHIBITIONS............................................... 5
TRADING RESTRICTIONS............................................... 6
EXCLUDED TRANSACTIONS........................................ 6
DISCLOSURE OF CONFLICTS...................................... 7
PRECLEARANCE................................................. 7
TRADING BAN ON PORTFOLIO MANAGERS AND ASSISTANT PORTFOLIO
MANAGERS .................................................... 8
BAN ON IPOs AND HOT ISSUES................................... 8
60 DAY RULE.................................................. 8
BLACKOUT PERIOD.............................................. 8
FIFTEEN DAY RULE............................................. 8
SEVEN DAY RULE............................................... 9
SHORT SALES.................................................. 9
HEDGE FUNDS, INVESTMENT CLUBS, AND OTHER INVESTMENTS......... 9
PRECLEARANCE PROCEDURES............................................ 9
GENERAL PRECLEARANCE......................................... 9
PRECLEARANCE REQUIREMENTS FOR INVESTMENT PERSONNEL........... 10
PRECLEARANCE OF COMPANY STOCK................................ 10
PRECLEARANCE OF TENDER OFFERS AND STOCK PURCHASE PLANS....... 11
FOUR DAY EFFECTIVE PERIOD.................................... 11
REPORTING REQUIREMENTS............................................. 11
ACCOUNT STATEMENTS........................................... 11
HOLDINGS REPORTS............................................. 12
PERSONAL SECURITIES TRANSACTION REPORTS...................... 12
NON-INFLUENCE AND NON-CONTROL ACCOUNTS....................... 12
OTHER REQUIRED FORMS............................................... 13
ACKNOWLEDGMENT OF RECEIPT FORM............................... 13
ANNUAL CERTIFICATION FORM.................................... 13
OUTSIDE DIRECTOR/TRUSTEE REPRESENTATION FORM................. 13
INSIDER TRADING POLICY................................................... 14
BACKGROUND INFORMATION............................................. 14
WHO IS AN INSIDER?........................................... 15
WHEN IS INFORMATION NONPUBLIC?............................... 15
WHAT IS MATERIAL INFORMATION?................................ 15
WHEN IS INFORMATION MISAPPROPRIATED?......................... 15
PENALTIES FOR INSIDER TRADING................................ 16
WHO IS A CONTROLLING PERSON?................................. 16
PROCEDURES TO IMPLEMENT POLICY..................................... 16
IDENTIFYING MATERIAL INSIDE INFORMATION...................... 16
REPORTING INSIDE INFORMATION................................. 17
WATCH AND RESTRICTED LISTS................................... 17
PROTECTING INFORMATION....................................... 18
RESPONSIBILITY TO MONITOR TRANSACTIONS....................... 19
RECORD RETENTION............................................. 19
TENDER OFFERS................................................ 19
GIFT POLICY.............................................................. 20
GIFT GIVING........................................................ 20
GIFT RECEIVING..................................................... 20
CUSTOMARY BUSINESS AMENITIES....................................... 20
OUTSIDE EMPLOYMENT POLICY................................................ 21
PENALTY GUIDELINES....................................................... 22
OVERVIEW........................................................... 22
PENALTY GUIDELINES .............................................. 22
SUPERVISORY AND COMPLIANCE PROCEDURES.................................... 23
SUPERVISORY PROCEDURES............................................. 23
PREVENTION OF VIOLATIONS..................................... 23
DETECTION OF VIOLATIONS...................................... 23
COMPLIANCE PROCEDURES.............................................. 24
REPORTS OF POTENTIAL DEVIATIONS OR VIOLATIONS................ 24
ANNUAL REPORTS............................................... 24
RECORDS...................................................... 24
INSPECTION................................................... 25
CONFIDENTIALITY.............................................. 25
FILING OF REPORTS............................................ 25
THE ETHICS COMMITTEE............................................... 25
MEMBERSHIP OF THE COMMITTEE.................................. 25
COMMITTEE MEETINGS........................................... 25
SPECIAL DISCRETION........................................... 26
GENERAL INFORMATION ABOUT THE ETHICS RULES............................... 27
DESIGNEES.................................................... 27
ENFORCEMENT.................................................. 27
INTERNAL USE................................................. 27
FORMS ................................................................... 28
<PAGE>
JANUS ETHICS RULES
"ACT IN THE BEST INTEREST OF OUR INVESTORS - EARN THEIR
CONFIDENCE WITH EVERY ACTION"
- -------------------------------------------------------------------------------
DEFINITIONS
- -------------------------------------------------------------------------------
The following definitions are used throughout this document. You are responsible
for reading and being familiar with each definition.
1. "Access Person" shall mean:
1) Any trustee, director, officer or Advisory Person of the Janus Funds or
JCC;
2) Any director or officer of JDI who in the ordinary course of his or her
business makes, participates in or obtains information regarding the
purchase or sale of securities for the Janus Funds or for the advisory
clients or whose functions or duties as part of the ordinary course of
his or her business relate to the making of any recommendation to the
Janus Funds or advisory clients regarding the purchase or sale of
securities; and
3) Any other persons designated by the Ethics Committee as having access to
current trading information.
2. "Advisory Person" shall mean:
1) Any employee of the Janus Funds or JCC (or of any company in a control
relationship to the Janus Funds or JCC) who in connection with his or her
regular functions or duties, makes, participates in or obtains
information regarding the purchase or sale of a security by the Funds or
for the account of advisory clients, or whose functions relate to the
making of any recommendations with respect to such purchases and sales;
and
2) Any natural person in a control relationship to the Funds or JCC who
obtains information concerning recommendations made to the Funds or for
the account of Clients with regard to the purchase or sale of a security.
3. "Beneficial Ownership" shall be interpreted in the same manner as it would
be under Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 in
determining whether a person is subject to the provisions of Section 16
except that the determination of direct or indirect Beneficial Ownership
shall apply to all Covered Securities which an Access Person has or
acquires. For example, in addition to a person's own accounts the term
"Beneficial Ownership" encompasses securities held in the name of a spouse
or equivalent domestic partnership, minor children, a relative sharing your
home, or certain trusts under which you or a related party is a beneficiary,
or held under other arrangements indicating a sharing of financial interest.
4. "Company Stock" is any stock or option issued by Janus, Stilwell Financial,
Inc. ("Stilwell") or Kansas City Southern Industries, Inc. ("KCSI").
5. "Control" shall have the same meaning as that set forth in Section 2(a)(9)
of the 1940 Act.
6. "Covered Persons" are all Directors, Trustees, officers, and full-time,
part-time or temporary employees of Janus, and persons working at Janus on a
contract basis.
7. "Covered Securities" generally include all securities (including Company
Stock), whether publicly or privately traded, and any option, future,
forward contract or other obligation involving a security or index thereof,
including an instrument whose value is derived or based on any of the above
(a "derivative"). The term Covered Security includes any separate security,
which is convertible into or exchangeable for, or which confers a right to
purchase such security. The following investments are not Covered
Securities:
] shares of registered open-end investment companies (e.g., mutual funds);
] direct obligations of the U.S. government (e.g., Treasury securities), or
any derivative thereof;
] securities representing a limited partnership interest in a real estate
limited partnership;
] high-quality money market instruments, such as certificates of deposit,
bankers acceptances, repurchase agreements, commercial paper, and U.S.
government agency obligations;
] insurance contracts, including life insurance or annuity contracts;
] direct investments in real estate, business franchises or similar
ventures; and
] physical commodities (including foreign currencies), or any derivatives
thereof.
8. "Designated Compliance Representatives" are David Kowalski and Ernie
Overholt or their designee(s).
9. "Designated Legal Representatives" are Bonnie Howe and Heidi Walter or their
designee(s).
10. "Designated Trading Operations Representatives" are Lesa Finney, John Porro,
and Mark Farrell.
11. "Directors" are directors of JCC.
12. "Executive Committee" is comprised of Thomas Bailey, Jim Craig, Thomas
Early, Steve Goodbarn, Margie Hurd, and Mark Whiston.
13. "Executive Investment Committee" is comprised of Jim Craig, Jim Goff, Helen
Hayes, Warren Lammert, and Scott Schoelzel.
14. "Ethics Committee" is comprised of Thomas Early, Steve Goodbarn, David
Kowalski and Ernie Overholt.
15. "Initial Public Offering" means an offering of securities registered under
the Securities Act of 1933, the issuer of which, immediately before the
registration, was not subject to the reporting requirements of sections 13
or 15(d) of the Securities Exchange Act of 1934.
16. "Inside Trustees and Directors" are Trustees and Directors who are also
employed by Janus.
17. "Investment Personnel" shall mean (i) a person who makes decisions regarding
the purchase or sale of securities by or on behalf of the Janus Funds or
advisory clients and any person such as an analyst or trader who directly
assists in the process, and (ii) any natural person who controls the Janus
Funds or JCC and who obtains information concerning recommendations made to
the Funds regarding the purchase or sale of Covered Securities by the Funds.
18. "Janus" is Janus Investment Fund, Janus Aspen Series, Janus Capital
Corporation, Janus Service Corporation, Janus Distributors, Inc., Janus
Capital International Ltd., Janus International (UK) Ltd., Janus Capital
Trust Manager Ltd., Janus Universal Funds, and Janus World Funds Plc.
19. "Janus Funds" are Janus Investment Fund, Janus Aspen Series, Janus Universal
Funds, and Janus World Funds Plc.
20. "JCC" is Janus Capital Corporation, Janus Capital International Ltd., Janus
International (UK) Ltd. and Janus Capital Trust Manager Ltd.
21. "JDI" is Janus Distributors, Inc.
22. "JDI's Operations Manager" is Dana Stephens and/or her designee(s).
23. "Limited Offering" means an offering that is exempt from registration under
the Securities Act of 1933 pursuant to section 4(2) or section 4(6) or
pursuant to rule 504, rule 505 or rule 506 thereunder.
24. "NASD" is the National Association of Securities Dealers, Inc.
25. "Non-Access Person" is any person that is not an Access Person.
26. "Outside Directors" are Directors who are not employed by Janus.
27. "Outside Trustees" are Trustees who are not "interested persons" of the
Janus Funds within the meaning of Section 2(a)(9) of the 1940 Act.
28. "Registered Persons" are persons registered with the NASD by JDI.
29. "Security Held or to be Acquired" means any Covered Security which, within
the most recent 15 days (i) is or has been held by the Janus Funds; or (ii)
is being or has been considered by the Janus Funds or JCC for purchase.
30. "SEC" is Securities and Exchange Commission.
31. "Trustees" are trustees of Janus Investment Fund and Janus Aspen Series.
These definitions may be updated from time to time to reflect changes in
personnel.
<PAGE>
- -------------------------------------------------------------------------------
INTRODUCTION
- -------------------------------------------------------------------------------
These Ethics Rules ("Rules") apply to all Covered Persons. The Rules apply
to transactions for your personal accounts and any other accounts you
Beneficially Own. You may be deemed the beneficial owner of any account in which
you have a direct or indirect financial interest. Such accounts include, among
others, accounts held in the name of your spouse or equivalent domestic
partnership, your minor children, a relative sharing your home, or certain
trusts under which you or such persons are a beneficiary.
The Rules are intended to ensure that you (i) at all times place first the
interests of the Janus Funds, investment companies for which Janus serves as
subadviser, and other advisory clients ("Clients"); (ii) conduct all personal
trading consistent with the Rules and in such a manner as to avoid any actual or
potential conflict of interest or any abuse of your position of trust and
responsibility; and (iii) not use any material nonpublic information in
securities trading. The Rules also establish policies regarding other matters,
such as outside employment and the giving or receiving of gifts.
You are required to read and retain these Rules and to sign and return the
attached Acknowledgment of Receipt Form to Compliance upon commencement of
employment or other services. On an annual basis thereafter, you will be
required to complete an Annual Certification Form. The Annual Certification Form
confirms that (i) you have received, read and asked any questions necessary to
understand the Rules; (ii) you agree to conduct yourself in accordance with the
Rules; and (iii) you have complied with the Rules during such time as you have
been associated with Janus. Depending on your status, you may be required to
submit additional reports and/or obtain clearances as discussed more fully
below.
Unless otherwise defined, all capitalized terms shall have the same
meaning as set forth in the Definitions section.
CAUTION REGARDING PERSONAL TRADING ACTIVITIES
Certain personal trading activities may be risky not only because of the
nature of the transactions, but also because action necessary to close out a
position may become prohibited for some Covered Persons while the position
remains open. For example, you may not be able to close out short sales and
transactions in derivatives. Furthermore, if JCC becomes aware of material
nonpublic information, or if a Client is active in a given security, some
Covered Persons may find themselves "frozen" in a position. JCC will not bear
any losses in personal accounts resulting from the application of these Rules.
COMMUNICATIONS WITH OUTSIDE TRUSTEES/DIRECTORS
As a regular business practice, JCC attempts to keep Directors and
Trustees informed with respect to its investment activities through reports and
other information provided to them in connection with board meetings and other
events. In addition, Janus personnel are encouraged to respond to inquiries from
Directors and Trustees, particularly as they relate to general strategy
considerations or economic or market conditions affecting Janus. However, it is
JCC's policy not to communicate specific trading information and/or advice on
specific issues to Outside Directors and Outside Trustees (i.e., no information
should be given on securities for which current activity is being considered for
Clients). Any pattern of repeated requests by such Directors or Trustees should
be reported to the Chief Compliance Officer or the Compliance Manager.
<PAGE>
- -------------------------------------------------------------------------------
CODE OF ETHICS
- -------------------------------------------------------------------------------
OVERVIEW
In general, it is unlawful for persons affiliated with investment
companies, their principal underwriters or their investment advisers to engage
in personal transactions in securities held or to be acquired by a registered
investment company, if such personal transactions are made in contravention of
rules which the SEC has adopted to prevent fraudulent, deceptive and
manipulative practices. Such rules require each registered investment company,
investment adviser and principal underwriter to adopt its own written code of
ethics containing provisions reasonably necessary to prevent its employees from
engaging in such conduct, and to maintain records, use reasonable diligence, and
institute such procedures as are reasonably necessary to prevent violations of
such code. This Code of Ethics ("Code") and information reported hereunder will
enable Janus to fulfill these requirements.
GENERAL PROHIBITIONS
The following activities are prohibited for applicable Covered Persons
(remember, if you work at Janus full-time, part-time, temporarily or on a
contract basis, or you are a Trustee or Director, you are a Covered Person).
Persons who violate any prohibition may be required to disgorge any profits
realized in connection with such violation to a charitable organization selected
by the Ethics Committee and may be subject to other sanctions imposed by the
Ethics Committee, as outlined in the Penalty Guidelines.
1. Covered Persons may not cause a Client to take action, or to fail to
take action, for personal benefit, rather than to benefit such Client.
For example, a Covered Person would violate this Code by causing a
Client to purchase a security owned by the Covered Person for the
purpose of supporting or increasing the price of that security or by
causing a Client to refrain from selling a security in an attempt to
protect a personal investment, such as an option on that security.
2. Covered Persons may not use knowledge of portfolio transactions made or
contemplated for Clients to profit, or cause others to profit, by the
market effect of such transactions.
3. Covered Persons may not disclose current portfolio transactions made or
contemplated for Clients as well as any other nonpublic information to
anyone outside of Janus.
4. Covered Persons may not engage in fraudulent conduct in connection with
the purchase or sale of a Security Held or to be Acquired by a Client,
including without limitation:
1) Employing any device, scheme or artifice to defraud any Client;
2) Making to any Client any untrue statement of material fact or
omitting to state to any Client a material fact necessary in order
to make the statements made, in light of the circumstances under
which they are made, not misleading;
3) Engaging in any act, practice or course of business which operates
or would operate as a fraud or deceit upon any Client;
4) Engaging in any manipulative practice with respect to any Client; or
5) Investing in derivatives to evade the restrictions of this Code.
Accordingly, individuals may not use derivatives to take positions
in securities that would be otherwise prohibited by the Code if the
positions were taken directly.
5. Investment Personnel may not serve on the board of directors of a
publicly traded company without prior written authorization from the
Ethics Committee. No such service shall be approved without a finding
by the Ethics Committee that the board service would not be
inconsistent with the interests of Clients. If board service is
authorized by the Ethics Committee, the Investment Personnel serving as
director normally should be isolated from those making investment
decisions with respect to the company involved through "Chinese Walls"
or other procedures.
TRADING RESTRICTIONS
The trading restrictions of the Code apply to all direct or indirect
acquisitions or dispositions of Covered Securities, whether by purchase, sale,
tender offers, stock purchase plan, gift, inheritance, or otherwise. Unless
otherwise noted, the following trading restrictions are applicable to any
transaction in a Covered Security Beneficially Owned by a Covered Person.
Outside Directors and Outside Trustees are exempt from certain trading
restrictions because of their limited access to current information regarding
Client investments.
Any disgorgement of profits required under any of the following provisions
shall be donated to a charitable organization selected by the Ethics Committee,
as outlined in the Penalty Guidelines. However, if disgorgement is required as a
result of trades by a portfolio manager that conflicted with that manager's own
Clients, disgorgement proceeds shall be paid directly to such Clients. If
disgorgement is required under more than one provision, the Ethics Committee
shall determine in its sole discretion the provision that shall control.(1)
- --------
(1) Unless otherwise noted, restrictions on personal transactions apply to
transactions involving Covered Securities, including any derivative thereof.
When determining the amount of disgorgement required with respect to a
derivative, consideration will be given to price differences in both the
derivative and the underlying securities, with the lesser amount being used for
purposes of computing disgorgement. For example, in determining whether
reimbursement is required when the applicable personal trade is in a derivative
and the Client transaction is in the underlying security, the amount shall be
calculated using the lesser of (a) the difference between the price paid or
received for the derivative and the closing bid or ask price (as appropriate)
for the derivative on the date of the Client transaction, or (b) the difference
between the last sale price, or the last bid or ask price (as appropriate) of
the underlying security on the date of the derivative transaction, and the price
received or paid by the Client for the underlying security. Neither preclearance
nor disgorgement shall be required if such person=s transaction is to close,
sell or exercise a derivative within five days of its expiration.
EXCLUDED TRANSACTIONS
Some or all of the trading restrictions listed below do not apply to the
following transactions; however, these transactions must still be reported to
Compliance (see Reporting Requirements):
o Tender offer transactions are exempt from all trading restrictions
except preclearance.
o The acquisition of securities through stock purchase plans are exempt
from all trading restrictions except preclearance, the trading ban on
portfolio managers and assistant portfolio managers, and the seven day
rule. (Note: the sales of securities acquired through a stock purchase
plan are subject to all of the trading restrictions of the Code).
o The acquisition of securities through stock dividends, automatic
dividend reinvestment plans, stock splits, reverse stock splits,
mergers, consolidations, spin-offs, or other similar corporate
reorganizations or distributions generally applicable to all holders of
the same class of such securities are exempt from all trading
restrictions. The acquisition of securities through the exercise of
rights issued by an issuer pro rata to all holders of a class of
securities, to the extent the rights were acquired in the issue are
exempt from all trading restrictions.
o Non-discretionary transactions in Company Stock (e.g., the acquisition
of securities through Stilwell or KCSI's Employee Stock Purchase Plan
("ESPP") or the receipt of options in Company Stock as part of a
compensation or benefit plan) are exempt from all trading restrictions.
Discretionary transactions in Company Stock issued by JCC are exempt
from all trading restrictions. Discretionary transactions in Company
Stock issued by Stilwell or KCSI (e.g., exercising options or selling
ESPP Stock) are exempt from all trading restrictions except preclearance
(See procedures for Preclearance of Company Stock).
o The acquisition of securities by gift or inheritance is exempt from all
trading restrictions. (Note: the sales of securities acquired by gift or
inheritance are subject to all trading restrictions of the Code).
o Transactions in options on and securities based on the following indexes
are exempt from all trading restrictions: S&P 500 Index, S&P MidCap 400
Index, S&P 100 Index, FTSE 100 Index or Nikkei 225 Index.
DISCLOSURE OF CONFLICTS
If an Investment Person is planning to invest or make a recommendation to
invest in a security for a Client, and such person has a material interest in
the security, such person must first disclose such interest to his or her
manager or the Chief Investment Officer. The manager or Chief Investment Office
shall conduct an independent review of the recommendation to purchase the
security for Clients. The manager or Chief Investment Officer may review the
recommendation only if he or she has no material interest in the security. A
material interest is Beneficial Ownership of any security (including
derivatives, options, warrants or rights), offices, directorships, significant
contracts, or interests or relationships that are likely to affect such person's
judgment.
PRECLEARANCE
Access Persons (except Outside Directors and Outside Trustees) must obtain
preclearance prior to engaging in any personal transaction in Covered
Securities. (See Preclearance Procedures below).
TRADING BAN ON PORTFOLIO MANAGERS AND ASSISTANT PORTFOLIO MANAGERS
Portfolio managers and their assistants are prohibited from trading
personally in Covered Securities. However, the following types of transactions
are exempt from this policy, but are subject to all applicable provisions of the
Rules, including preclearance:
] Purchases or sales of Company Stock;
] The sale of any security that is not held by any Client; and
] The sale of any security in order to raise capital to fund a significant
life event. For example, purchasing a home or automobile, or paying
medical or education expenses.
BAN ON IPOs AND HOT ISSUES
Covered Persons (except Outside Directors and Outside Trustees) may not
purchase securities in an initial public offering or in a secondary offering
that constitutes a "hot issue" as defined in NASD rules. Such securities may be
purchased or received, however, where the individual has an existing right to
purchase the security based on his or her status as an investor, policyholder or
depositor of the issuer. In addition, securities issued in reorganizations are
also outside the scope of this prohibition if the transaction involves no
investment decision on the part of the Covered Person except in connection with
a shareholder vote.
60 DAY RULE
Access Persons (except Outside Directors and Outside Trustees) shall
disgorge any profits realized in the purchase and sale, or sale and purchase, of
the same or equivalent Covered Securities within sixty (60) calendar days if a
Client held or traded the security during the sixty (60) calendar day period.
BLACKOUT PERIOD
No Access Person may engage in a transaction in a Covered Security when
such person knows or should have known at the time there to be pending, on
behalf of any Client, a "buy" or "sell" order in that same security. The
existence of pending orders will be checked by Compliance as part of the
Preclearance process. Preclearance may be given when any pending Client order is
completely executed or withdrawn.
FIFTEEN DAY RULE
Any Access Person (except Outside Directors and Outside Trustees) who buys
or sells a Covered Security within fifteen calendar days before such security is
bought or sold on behalf of any Client must disgorge any price advantage
realized. The price advantage shall be the favorable spread, if any, between the
price paid or received by such person and the least favorable price paid or
received by a Client during such period.(2) The Ethics Committee has the
authority by unanimous action to exempt any person from the fifteen-day rule if
such person is selling a security to raise capital to fund a significant life
event. For example, purchasing a home or automobile, or paying medical or
education expenses. In order for the Ethics Committee to consider such
exemption, the life event must occur within thirty (30) calendar days of the
security transaction, and the person must provide written confirmation of the
event.
- ----------------
(2) Personal purchases are matched only against subsequent Client
purchases and personal sales are matched only against subsequent Client sales
for purposes of this restriction.
SEVEN DAY RULE
Any portfolio manager or assistant portfolio manager who buys or sells a
Covered Security within seven calendar days before or after he or she trades in
that security on behalf of a Client shall disgorge any profits realized on such
transaction.
SHORT SALES
Any Access Person who sells short a Covered Security that such person
knows or should have known is held long by any Client shall disgorge any profit
realized on such transaction. This prohibition shall not apply, however, to
securities indices or derivatives thereof (such as futures contracts on the S&P
500 index). Client ownership of Covered Securities will be checked as part of
the Preclearance process.
HEDGE FUNDS, INVESTMENT CLUBS, AND OTHER INVESTMENTS
No Access Person (except Outside Directors and Outside Trustees) may
participate in hedge funds, partnerships, investment clubs, or similar
investment vehicles, unless such person does not have any direct or indirect
influence or control over the trading. Covered Persons wishing to rely upon this
provision must submit a Certification of Non-Influence and Non-Control Form to
the Compliance Manager for approval. (See Non-Influence and Non-Control Accounts
section below.)
PRECLEARANCE PROCEDURES
Access Persons must obtain preclearance for all applicable transactions in
Covered Securities in which such person has a Beneficial Interest. A
Preclearance Form must be completed and forwarded to Compliance. Compliance
shall promptly notify the person of approval or denial of the transaction.
Notification of approval or denial of the transaction may be given verbally;
however, it shall be confirmed in writing within seventy-two (72) hours of
verbal notification. When preclearance has been approved, the person then has
four business days from and including the day of first notification to execute
the trade.
GENERAL PRECLEARANCE
General preclearance shall be obtained from an authorized person from each
of the following three groups:
o A DESIGNATED LEGAL OR COMPLIANCE REPRESENTATIVE, who will present the
personal investment to the attendees of the weekly investment meeting,
whereupon an opportunity will be given to orally object. An attendee of
the weekly investment meeting shall object to such clearance if such
person knows of a conflict with a pending Client transaction or a
transaction known by such attendee to be under consideration for a
Client. Objections to such clearance should also take into account,
among other factors, whether the investment opportunity should be
reserved for a Client. If no objections are raised, the Designated Legal
or Compliance Representative shall so indicate by signing the
Preclearance Form. Such approval shall not be required for sales of
securities not held by any Clients.
In place of this authorization, Investment Personnel are required to
obtain approvals from all Executive Investment Committee members as
noted in the section below entitled Preclearance Requirements for
Investment Personnel.
o A DESIGNATED TRADING OPERATIONS REPRESENTATIVE, who may provide
clearance if such Representative knows at the time of the request of no
pending "buy" or "sell" order in the security on behalf of a Client and
no such trades are known by such person to be under consideration.
o The COMPLIANCE MANAGER, OR A DESIGNATED LEGAL OR COMPLIANCE
REPRESENTATIVE IF THE COMPLIANCE MANAGER IS NOT AVAILABLE, who may
provide clearance if no legal prohibitions are known by such person to
exist with respect to the proposed trade. Approvals for such clearance
should take into account, among other factors, the existence of any
Watch List or Restricted List and, to the extent reasonably practicable,
recent trading activity and holdings of Clients.
No authorized person may preclear a transaction in which such person has
a Beneficial Interest.
PRECLEARANCE REQUIREMENTS FOR INVESTMENT PERSONNEL
Trades by Investment Personnel may not be precleared by presentation at
the weekly investment meeting. Instead, Investment Personnel must obtain the
following management approvals. However, such approvals shall not be required
for sales of securities not held by any Clients:
] TRADES IN EQUITY SECURITIES require prior written approval from all
members of the Executive Investment Committee, Investment Person's
manager and either Ron Speaker or Sandy Rufenacht;
] TRADES IN DEBT SECURITIES require prior written approval from all senior
fixed income portfolio managers, either Jim Craig or two other Executive
Investment Committee members, and Investment Person's manager.
A portfolio manager may not preclear his or her own transaction.
PRECLEARANCE OF COMPANY STOCK
Officers of Janus and certain persons designated by Compliance who wish to
make discretionary transactions in Stilwell or KCSI securities, or derivatives
thereon, must preclear such transactions. A Company Stock Preclearance Form must
be completed and forwarded to Compliance. Compliance shall promptly notify the
person of approval or denial for the transaction. Notification of approval or
denial for the transaction may be given verbally; however, it shall be confirmed
in writing within seventy-two (72) hours of verbal notification. When
preclearance has been approved, the person then has four business days from and
including the day of first notification to execute the trade.
If such persons are subject to the provisions of Section 16(b) of the
Securities Exchange Act of 1934, trading will generally be allowed only in the
ten (10) business day period beginning seventy-two (72) hours after Stilwell or
KCSI files its quarterly results with the SEC (e.g., 10Q or 10K filing, not
earnings release). To preclear the trade, the Compliance Manager or such other
Representative shall discuss the transaction with Janus's General Counsel or
Chief Financial Officer.
PRECLEARANCE OF TENDER OFFERS AND STOCK PURCHASE PLANS
Access Persons (other than Outside Directors and Outside Trustees) who
wish to participate in a tender offer or stock purchase plan must preclear such
trades only with the Compliance Manager prior to submitting notice to
participate in such tender offer or notice of participation in such stock
purchase plan to the applicable company. To preclear the trade, the Compliance
Manager shall consider all material factors relevant to a potential conflict of
interest between the Access Person and Clients. In addition, any increase of
$100 or more to a pre-existing stock purchase plan must be precleared.
FOUR DAY EFFECTIVE PERIOD
Clearances to trade will be in effect for only four trading/business days
from and including the date of the last Authorized Person's signature (which may
not be provided more than one day after the first Authorized Person's
signature). For tender offers, stock purchase plans, exercise of Company Stock
and similar transactions, the date the request is submitted to the company
processing the transaction will be considered the trade date for purposes of
this requirement. Open orders, including stop loss orders, will generally not be
allowed unless such order is expected to be completed within the four day
effective period. It is necessary to re-preclear transactions not executed
within the four day effective period.
REPORTING REQUIREMENTS
ACCOUNT STATEMENTS
ACCESS PERSONS (other than Outside Trustees) and REGISTERED PERSONS must
notify Compliance of each brokerage account in which they have a Beneficial
Interest and must arrange for their brokers or financial institutions to provide
to Compliance, on a timely basis, duplicate account statements and confirmations
showing all transactions in brokerage or commodities accounts in which they have
a Beneficial Interest. A Personal Brokerage Account Disclosure Form should be
completed for this purpose.
PLEASE NOTE THAT, EVEN IF SUCH PERSON DOES NOT TRADE COVERED SECURITIES IN
A PARTICULAR BROKERAGE OR COMMODITIES ACCOUNT (E.G., TRADING MUTUAL FUNDS IN A
SCHWAB ACCOUNT), THE REPORTING OF DUPLICATE ACCOUNT STATEMENTS AND CONFIRMATIONS
IS STILL REQUIRED. HOWEVER, IF SUCH PERSON ONLY USES A PARTICULAR BROKERAGE
ACCOUNT FOR CHECKING ACCOUNT PURPOSES, AND NOT INVESTMENT PURPOSES, HE OR SHE
MAY IN LIEU OF REPORTING DUPLICATE ACCOUNT STATEMENTS, REPORT DUPLICATE TRADE
CONFIRMATIONS AND MAKE A QUARTERLY REPRESENTATION TO COMPLIANCE INDICATING THAT
NO INVESTMENT TRANSACTIONS OCCURRED IN THE ACCOUNT DURING THE CALENDAR QUARTER.
Reporting of accounts that do not allow any trading in Covered Securities (e.g.,
a mutual fund account held directly with the fund sponsor) is not required.
Covered Persons must notify Compliance of each reportable account at the
time it is opened, and annually thereafter, including the name of the firm and
the name under which the account is carried. A Personal Brokerage Account
Disclosure Form should be completed for this purpose.
Certain transactions might not be reported through a brokerage account,
such as private placements, inheritances or gifts. In these instances, Access
Persons must report these transactions within ten (10) calendar days using a
Personal Securities Transaction Report as noted below.
- -----------------------------------------------------------------------------
Registered Persons are reminded that they must also inform any brokerage firm
with which they open an account, at the time the account is opened, that they
are registered with JDI.
- -----------------------------------------------------------------------------
NON-ACCESS PERSONS who engage in an aggregate of $25,000 or more of
transactions in Covered Securities within a calendar year must provide
Compliance with an Annual Transaction Report listing all such transactions in
all accounts in which such person has a Beneficial Interest. Compliance will
request this information annually and will spot check all or a portion of such
transactions or accounts.
HOLDINGS REPORTS
ACCESS PERSONS (other than Outside Trustees) must, within ten (10)
calendar days after becoming an Access Person, provide Compliance with a
Holdings Report which lists all Covered Securities beneficially held and any
brokerage accounts through which such securities are maintained. In addition,
such persons must provide a brief description of any positions held (e.g.,
director, officer, other) with for-profit entities other than Janus. The report
must contain information current as of no more than thirty (30) calendar days
from the time the report is submitted.
PERSONAL SECURITIES TRANSACTION REPORTS
ACCESS PERSONS (other than Outside Trustees) must provide a Personal
Securities Transaction Report within ten (10) calendar days after any month end
showing all transactions in Covered Securities for which confirmations are known
by such person to not have been timely provided to Janus, and all such
transactions that are not effected in brokerage or commodities accounts,
including without limitation non-brokered private placements, and transactions
in securities that are in certificate form, which may include gifts,
inheritances, and other transactions in Covered Securities.
OUTSIDE TRUSTEES need only report a transaction in a Covered Security if
such person, at the time of that transaction, knew or, in the ordinary course of
fulfilling his or her official duties as a Trustee should have known, that,
during the fifteen-day period immediately preceding the date of his or her
personal transaction, such security was purchased or sold by, or was being
considered for purchase or sale on behalf of, any Janus Fund for which such
person acts as Trustee.
SUCH PERSONS MUST PROMPTLY COMPLY WITH ANY REQUEST OF THE COMPLIANCE MANAGER TO
PROVIDE TRANSACTION REPORTS REGARDLESS OF WHETHER THEIR BROKER HAS BEEN
INSTRUCTED TO PROVIDE DUPLICATE CONFIRMATIONS. SUCH REPORTS MAY BE REQUESTED,
FOR EXAMPLE, TO CHECK THAT ALL APPLICABLE CONFIRMATIONS ARE BEING RECEIVED OR TO
SUPPLEMENT THE REQUESTED CONFIRMATIONS WHERE A BROKER IS DIFFICULT TO WORK WITH
OR OTHERWISE FAILS TO PROVIDE DUPLICATE CONFIRMATIONS ON A TIMELY BASIS.
NON-INFLUENCE AND NON-CONTROL ACCOUNTS
The Rules shall not apply to any account, partnership, or similar
investment vehicle over which a Covered Person has no direct or indirect
influence or control. Covered Persons wishing to rely upon this provision are
required to receive approval from the Ethics Committee. In order to request such
approval, a Certification of Non-Influence and Non-Control Form must be
submitted to the Compliance Manager.
Any account beneficially owned by a Covered Person that is managed by JCC
in a discretionary capacity is not covered by these Rules so long as such person
has no direct or indirect influence or control over the account. The employment
relationship between the account-holder and the individual managing the account,
in the absence of other facts indicating control, will not be deemed to give
such account-holder influence or control over the account.
OTHER REQUIRED FORMS
In addition to the Preclearance Form, Preclearance Form for Company Stock,
Personal Brokerage Account Disclosure Form, Holdings Report, Report of Personal
Securities Transactions, Annual Transaction Report, and Certification of
Non-Influence and Non-Control Form discussed above, the following forms
(available through Lotus Notes) must be completed if applicable to you:
ACKNOWLEDGMENT OF RECEIPT FORM
Each Covered Person must provide Compliance with an Acknowledgment of
Receipt Form within ten (10) calendar days of commencement of employment or
other services certifying that he or she has received a current copy of the
Rules and acknowledges, as a condition of employment, that he or she will comply
with the Rules in their entirety.
ANNUAL CERTIFICATION FORM
Each Covered Person must provide Compliance annually within thirty (30)
calendar days from date of request with an Annual Certification Form certifying
that he or she:
1) Has received, read and understands the Rules;
2) Has complied with the requirements of the Rules; and
3) Has disclosed or reported all open brokerage and commodities accounts,
personal holdings and personal securities transactions required to be
disclosed or reported pursuant to the requirements of the Rules.
OUTSIDE DIRECTOR/TRUSTEE REPRESENTATION FORM
All Outside Directors and Outside Trustees must, upon commencement of
services and annually thereafter, provide Compliance with an Outside
Director/Trustee Representation Form. The Form declares that such persons agree
to refrain from trading in any securities when they are in possession of any
information regarding trading recommendations made or proposed to be made to any
Client by Janus or its officers or employees.
<PAGE>
- -------------------------------------------------------------------------------
INSIDER TRADING POLICY
- -------------------------------------------------------------------------------
BACKGROUND INFORMATION
The term "insider trading" is not defined in the federal securities
statutes, but generally is used to refer to the use of material nonpublic
information to trade in securities (whether or not one is an "insider") or to
communications of material nonpublic information to others.
While the law concerning insider trading can be complex and unclear, you
should assume that the law prohibits:
] Trading by an insider, while in possession of material nonpublic
information,
] Trading by a non-insider, while in possession of material nonpublic
information, where the information was disclosed to the non-insider
(either directly or through one or more intermediaries) in violation of
an insider's duty to keep it confidential,
] Communicating material nonpublic information to others in breach of a
duty not to disclose such information, and
] Misappropriating confidential information for securities trading
purposes, in breach of a duty owed to the source of the information to
keep the information confidential.
Trading based on material nonpublic information about an issuer does not
violate this policy unless the trader (i) is an "insider" with respect to an
issuer; (ii) receives the information from an insider or from someone that the
trader knows received the information from an insider, either directly or
indirectly, or (iii) misappropriates the nonpublic information or obtains or
misuses it in breach of a duty of trust and confidence owed to the source of the
information. Accordingly, trading based on material nonpublic information about
an issuer can be, but is not necessarily, a violation of this Policy. Trading
while in possession of material nonpublic information relating to a tender offer
is prohibited under this Policy regardless of how such information was obtained.
Application of the law of insider trading to particular transactions can
be difficult, particularly if it involves a determination about trading based on
material nonpublic information. You legitimately may be uncertain about the
application of this Policy in particular circumstances. If you have any
questions regarding the application of the Policy or you have any reason to
believe that a violation of the Policy has occurred or is about to occur, you
should contact the Chief Compliance Officer or the Compliance Manager.
The following discussion is intended to help you understand the principal
concepts involved in insider trading.
WHO IS AN INSIDER?
The concept of "insider" is broad. It includes officers, directors and
employees of a company. In addition, a person can be a "temporary insider" if he
or she enters into a special confidential relationship in the conduct of a
company's affairs and as a result is given access to information solely for the
company's purposes. A temporary insider can include, among others, a company's
attorneys, accountants, consultants, bank lending officers, and the employees of
such organizations. In addition, one or more of the Janus entities may become a
temporary insider of a company it advises or for which it performs other
services. To be considered an insider, the company must expect the outsider to
keep the disclosed nonpublic information confidential and/or the relationship
must at least imply such a duty.
WHEN IS INFORMATION NONPUBLIC?
Information remains nonpublic until it has been made public. Information
becomes public when it has been effectively communicated to the marketplace,
such as by a public filing with the SEC or other governmental agency, inclusion
in the Dow Jones "tape" or publication in The Wall Street Journal or another
publication of general circulation. Moreover, sufficient time must have passed
so that the information has been disseminated widely.
WHAT IS MATERIAL INFORMATION?
Trading on inside information is not a basis for liability unless the
information is material. "Material information" generally means information for
which there is a substantial likelihood that a reasonable investor would
consider it important in making his or her investment decisions, or information
that is reasonably certain to have a substantial effect on the price of a
company's securities. Information that should be considered material includes,
but is not limited to: dividend changes, earnings estimates, changes in
previously released earnings estimates, significant merger or acquisition
proposals or agreements, major litigation, liquidation problems, and
extraordinary management developments.
Material information may also relate to the market for a company's
securities. Information about a significant order to purchase or sell securities
may, in some contexts, be deemed material. Similarly, prepublication information
regarding reports in the financial press also may be deemed material. For
example, the Supreme Court upheld the criminal convictions of insider trading
defendants who capitalized on prepublication information about The Wall Street
Journal's "Heard on the Street" column.
WHEN IS INFORMATION MISAPPROPRIATED?
The misappropriation theory prohibits trading on the basis of non-public
information by a corporate "outsider" in breach of a duty owed not to a trading
party, but to the source of confidential information. Misappropriation of
information occurs when a person obtains the non-public information through
deception or in breach of a duty of trust and loyalty to the source of the
information.
PENALTIES FOR INSIDER TRADING
Penalties for trading on or communicating material nonpublic information
are severe, both for individuals involved in such unlawful conduct and their
employers or other controlling persons. A person can be subject to some or all
of the penalties below even if he or she does not personally benefit from the
violation. Penalties include:
] Civil injunctions
] Treble damages
] Disgorgement of profits
] Jail sentences for up to 10 years
] Fines up to ]1,000,000 (or ]2,500,000 for corporations and other
entities)
] Civil penalties for the person who committed the violation of up to
three times the profit gained or loss avoided, whether or not the person
actually benefited, and
] Civil penalties for the employer or other controlling person of up to
the greater of ]1,000,000 or three times the amount of the profit gained
or loss avoided.
In addition, any violation of the law may result in serious sanctions by
Janus, including termination of employment.
WHO IS A CONTROLLING PERSON?
Included as controlling persons are Janus and its Directors, Trustees and
officers. If you are a Director, Trustee or officer, you have a duty to act to
prevent insider trading. Failure to fulfill such a duty may result in penalties
as described above.
PROCEDURES TO IMPLEMENT POLICY
The following procedures have been established to aid the Directors,
Trustees, officers and employees of Janus in avoiding insider trading, and to
aid Janus in preventing, detecting and imposing sanctions against insider
trading.
IDENTIFYING MATERIAL INSIDE INFORMATION
Before trading for yourself or others, including the Janus Funds or other
Clients, in the securities of a company about which you may have potential
inside information, ask yourself the following questions:
] To whom has this information been provided? Has the information been
effectively communicated to the marketplace?
] Has this information been obtained from either the issuer or from
another source in breach of a duty to that source to keep the
information confidential?
] Is the information material? Is this information that an investor would
consider important in making his or her investment decisions? Is this
information that would affect the market price of the securities if
generally disclosed?
Special caution should be taken with respect to potential inside
information regarding JCC. Although JCC's shares are not publicly traded, JCC's
parent, KCSI, is a publicly traded company. KCSI owns 82% of the stock of JCC.
As a result, potential inside information regarding JCC may affect trading in
KCSI stock and should be reported pursuant to the procedures set forth below.
The following is a non-exclusive list of situations that Investment Personnel
should report immediately pursuant to the procedures below: (i) participation in
private placements; (ii) the receipt of any information from an issuer pursuant
to a confidentiality agreement; (iii) participation on or receipt of information
from a bankruptcy committee of an issuer; and (iv) receipt of information
regarding earnings or sales figures in advance of the public release of those
numbers.
REPORTING INSIDE INFORMATION
If, after consideration of the above, you believe that the information is
material and nonpublic, or if you have questions as to whether the information
is material and nonpublic, you should take the following steps:
] Do not purchase or sell the securities on behalf of yourself or others,
including Clients.
] Do not communicate the information inside or outside of Janus, other
than to the Chief Compliance Officer or the Compliance Manager.
] Immediately advise the Chief Compliance Officer or Compliance Manager of
the nature and source of such information. The Chief Compliance Officer
or Compliance Manager will review the information with the Ethics
Committee.
] Depending upon the determination made by the Ethics Committee, or by the
Chief Compliance Officer until the Committee can be convened, you may be
instructed to continue the prohibition against trading and communication
and the Compliance Manager will place the security on a Restricted List
or Watch List, as described below. Alternatively, if it is determined
that the information obtained is not material nonpublic information, you
may be allowed to trade and communicate the information.
WATCH AND RESTRICTED LISTS
Whenever the Ethics Committee or the Chief Compliance Officer determines
that a Director, Trustee, officer or employee of Janus is in possession of
material nonpublic information with respect to a company (regardless of whether
it is currently owned by any Client) such company will either be placed on a
Watch List or on a Restricted List.
WATCH LIST
If the security is placed on a Watch List, the flow of the information to
other Janus personnel will be restricted in order to allow such persons to
continue their ordinary investment activities. This procedure is commonly
referred to as a "Chinese Wall."
RESTRICTED LIST
If the Ethics Committee or the Chief Compliance Officer determines that
material nonpublic information is in the possession of a Director, Trustee,
officer, or employee of Janus and cannot be adequately isolated through the use
of a Chinese Wall, the company will be placed on the Restricted List. While a
company is on the Restricted List, no Investment Person shall initiate or
recommend any transaction in any Client account, and no Access Person shall be
precleared to transact in any account in which he or she has a beneficial
interest, with respect to the securities of such company. The Ethics Committee
or the Chief Compliance Officer will also have the discretion of placing a
company on the Restricted List even though no "break in the Chinese Wall" has or
is expected to occur with respect to the material nonpublic information about
the company. Such action may be taken by such persons for the purpose of
avoiding any appearance of the misuse of material nonpublic information.
The Ethics Committee or the Chief Compliance Officer will be responsible
for determining whether to remove a particular company from the Watch List or
Restricted List. The only persons who will have access to the Watch List or
Restricted List are members of the Ethics Committee, Designated Legal or
Compliance Representatives and such persons who are affected by the information.
The Watch List and Restricted List are highly confidential and should, under no
circumstances, be discussed with or disseminated to anyone other than the
persons noted above.
PROTECTING INFORMATION
Directors, Trustees, officers and employees of Janus shall not disclose
any nonpublic information (whether or not it is material) relating to Janus or
its securities transactions to any person outside Janus (unless such disclosure
has been authorized by the Chief Compliance Officer). Material nonpublic
information may not be communicated to anyone, including any Director, Trustee,
officer or employee of Janus, except as provided in this Policy. Access to such
information must be restricted. For example, access to files containing material
nonpublic information and computer files containing such information should be
restricted, and conversations containing such information, if appropriate at
all, should be conducted in private.
To insure the integrity of the Chinese Wall and to avoid unintended
disclosures, it is important that all employees take the following steps with
respect to confidential or nonpublic information:
] Do not discuss confidential information in public places such as
elevators, hallways or social gatherings.
] To the extent practical, limit access to the areas of the firm where
confidential information could be observed or overheard to employees
with a business need for being in the area.
] Avoid use of speakerphones in areas where unauthorized persons may
overhear conversations.
] Avoid use of wireless and cellular phones, or other means of
communication, which may be intercepted.
] Where appropriate, maintain the confidentiality of Client identities by
using code names or numbers for confidential projects.
] Exercise care to avoid placing documents containing confidential
information in areas where they may be read by unauthorized persons and
to store such documents in secure locations when they are not in use.
] Destroy copies of confidential documents no longer needed for a project
unless required to be saved pursuant to applicable record keeping
policies or requirements.
RESPONSIBILITY TO MONITOR TRANSACTIONS
Compliance will monitor transactions of Clients and employees for which
reports are received to detect the existence of any unusual trading activities
with respect to companies on the Watch and Restricted Lists. Compliance will
immediately report any unusual trading activity directly to the Compliance
Manager, and in his or her absence, the Chief Compliance Officer, who will be
responsible for determining what, if any, action should be taken.
RECORD RETENTION
Compliance shall maintain copies of the Watch List and Restricted List for
a minimum of six years.
TENDER OFFERS
Tender offers represent a particular concern in the law of insider trading
for two reasons. First, tender offer activity often produces extraordinary
fluctuations in the price of the target company's securities. Trading during
this time period is more likely to attract regulatory attention (and produces a
disproportionate percentage of insider trading cases). Second, the SEC has
adopted a rule which expressly forbids trading and "tipping" while in possession
of material nonpublic information regarding a tender offer received from the
tender offeror, the target company or anyone acting on behalf of either. Janus
employees and others subject to this Policy should exercise particular caution
any time they become aware of nonpublic information relating to a tender offer.
<PAGE>
- -------------------------------------------------------------------------------
GIFT POLICY
- -------------------------------------------------------------------------------
Gifts may be given (or accepted) only if they are in accordance with
normally accepted business practices and do not raise any question of
impropriety. A question of impropriety may be raised if a gift influences or
gives the appearance of influencing the recipient. The following outlines
Janus's policy on giving and receiving gifts to help us maintain those standards
and is applicable to all Inside Directors and Inside Trustees, officers and
employees of Janus.
GIFT GIVING
Neither you nor members of your immediate family may give any gift, series
of gifts, or other thing of value, including cash, loans, personal services, or
special discounts ("Gifts") in excess of $100 per year to any Client or any one
person or entity that does or seeks to do business with or on behalf of Janus or
any Client (collectively referred to herein as "Business Relationships").
GIFT RECEIVING
Neither you nor members of your immediate family may receive any Gift of
material value from any single Business Relationship. A Gift will be considered
material in value if it influences or gives the appearance of influencing the
recipient.
In the event the aggregate fair market value of all Gifts received by you
from any single Business Relationship is estimated to exceed $250 in any
12-month period, you must immediately notify your manager. Managers that receive
such notification must report this information to the Compliance Manager if it
appears that such Gifts may have improperly influenced the receiver. If the Gift
is made in connection with the sale or distribution of registered investment
company or variable contract securities, the aggregate fair market value of all
such Gifts received by you from any single Business Relationship may never
exceed $100 in any 12-month period.
Occasionally, Janus employees are invited to attend or participate in
conferences, tour a company's facilities, or meet with representatives of a
company. Such invitations may involve traveling and may require overnight
lodging. Generally, Janus must pay for all travel and lodging expenses provided
in connection with such activities. However, if appropriate, and with prior
approval from your manager, you may accept travel related amenities if the costs
are considered insubstantial and are not readily ascertainable.
The solicitation of a Gift is prohibited (i.e., you may not request a
Gift, such as tickets to a sporting event, be given to you).
CUSTOMARY BUSINESS AMENITIES
Customary business amenities are not considered Gifts so long as such
amenities are business related (e.g., if you are accepting tickets to a sporting
event, the offerer must go with you), reasonable in cost, appropriate as to time
and place, and neither so frequent nor so costly as to raise any question of
impropriety. Customary business amenities which you and, if appropriate, your
guests, may accept (or give) include an occasional meal, a ticket to a sporting
event or the theater, greens fees, an invitation to a reception or cocktail
party, or comparable entertainment.
<PAGE>
- -------------------------------------------------------------------------------
OUTSIDE EMPLOYMENT POLICY
- -------------------------------------------------------------------------------
No Inside Director, Inside Trustee, officer or employee of Janus shall
accept employment or compensation as a result of any business activity (other
than a passive investment), outside the scope of his relationship with Janus
unless such person has provided prompt written notice of such employment or
compensation to the Chief Compliance Officer (or, for Registered Persons, to
JDI's Operations Manager), and, in the case of securities-related employment or
compensation, has received the prior written approval of the Ethics Committee.
Registered Persons are reminded to update and submit their Outside Business
Activity Disclosure forms as appropriate pursuant to JDI's Written Supervisory
Procedures and applicable NASD rules.
<PAGE>
- -------------------------------------------------------------------------------
PENALTY GUIDELINES
- -------------------------------------------------------------------------------
OVERVIEW
Covered Persons who violate any of the requirements, restrictions, or
prohibitions of the Rules may be subject to sanctions imposed by the Ethics
Committee. The following guidelines shall be used by the Compliance Manager for
recommending remedial actions for Covered Persons who violate prohibitions or
disregard requirements of the Rules. Deviations from the Fifteen-Day Rule are
not considered to be violations under the Rules and, therefore, are not subject
to the penalty guidelines.
Upon learning of a potential deviation from, or violation of the Rules,
the Compliance Manager will provide a written recommendation of remedial action
to the Ethics Committee. The Ethics Committee has full discretion to approve
such recommendation or impose other sanctions it deems appropriate. The Ethics
Committee will take into consideration, among other things, whether the
violation was a technical violation of the Rules or inadvertent oversight (i.e.,
ill-gotten profits versus general oversight). The guidelines are designed to
promote consistency and uniformity in the imposition of sanctions and
disciplinary matters.
PENALTY GUIDELINES
Outlined below are the guidelines for the sanctions that may be imposed on
Covered Persons who fail to comply with the Rules:
] 1st violation- Compliance will send a memorandum of reprimand to the
person, copying his or her supervisor. The memorandum will generally
reinforce the person's responsibilities under the Rules, educate the
person on the severity of personal trading violations and inform the
person of the possible penalties for future violations of the Rules;
] 2nd violation- Janus's Chief Investment Officer, James Craig, will meet
with the person to discuss the violations in detail and will reinforce
the importance of complying with the Rules;
] 3rd violation- Janus's Chairman of the Board, Thomas Bailey, will meet
with the person to discuss the violations in detail and will reinforce
the importance of complying with the Rules;
] 4th violation- The Executive Committee will impose such sanctions as it
deems appropriate, including without limitation, a letter of censure,
fines, withholding of bonus payments, or suspension or termination of
employment or personal trading privileges.
In addition to the above disciplinary sanctions, such persons may be
required to disgorge any profits realized in connection with such violation. All
disgorgement proceeds collected will be donated to a charitable organization
selected by the Ethics Committee. The Ethics Committee may determine to impose
any of the sanctions set forth in item 4 above, including termination,
immediately and without notice if it determines that the severity of any
violation or violations warrants such action. All sanctions imposed will be
documented in such person's personal trading file maintained by Janus, and will
be reported to the Executive Committee.
<PAGE>
- -------------------------------------------------------------------------------
SUPERVISORY AND COMPLIANCE PROCEDURES
- -------------------------------------------------------------------------------
The Chief Compliance Officer and Compliance Manager are responsible for
implementing supervisory and compliance review procedures. Supervisory
procedures can be divided into two classifications: prevention of violations and
detection of violations. Compliance review procedures include preparation of
special and annual reports, record maintenance and review, and confidentiality
preservation.
SUPERVISORY PROCEDURES
PREVENTION OF VIOLATIONS
To prevent violations of the Rules, the Compliance Manager should, in
addition to enforcing the procedures outlined in the Rules:
1. Review and update the Rules as necessary, at least once annually,
including but not limited to a review of the Code by the Chief
Compliance Officer, the Ethics Committee and/or counsel;
2. Answer questions regarding the Rules, or refer the same to the Chief
Compliance Officer;
3. Request from all persons upon commencement of services, and annually
thereafter, any applicable forms and reports as required by the Rules;
4. Identify all Access Persons and notify them of their responsibilities
and reporting requirements;
5. Write letters to the securities firms requesting duplicate
confirmations and account statements where necessary; and
6. With such assistance from the Human Resources Department as may be
appropriate, maintain a continuing education program consisting of the
following:
1) Orienting Covered Persons who are new to Janus to the Rules, and
2) Further educating Covered Persons by distributing memos or other
materials that may be issued by outside organizations such as the
Investment Company Institute discussing the issue of insider trading
and other issues raised by the Rules.
DETECTION OF VIOLATIONS
To detect violations of these Rules, the Compliance Manager should, in
addition to enforcing the procedures outlined in the Rules:
] Implement procedures to review holding and transaction reports,
confirmations, forms and statements relative to applicable restrictions,
as provided under the Code; and
] Implement procedures to review the Restricted and Watch Lists relative
to applicable personal and Client trading activity, as provided under
the Policy.
Spot checks of certain information are permitted as noted under the Code.
COMPLIANCE PROCEDURES
REPORTS OF POTENTIAL DEVIATIONS OR VIOLATIONS
Upon learning of a potential deviation from, or violation of the Rules,
the Compliance Manager shall report such violation to the Chief Compliance
Officer, together with all documents relating to the matter. The Chief
Compliance Officer shall either present the information at the next regular
meeting of the Ethics Committee, or conduct a special meeting. The Ethics
Committee shall thereafter take such action as it deems appropriate (see Penalty
Guidelines).
ANNUAL REPORTS
The Compliance Manager shall prepare a written report to the Ethics
Committee and the Trustees at least annually. The written report to the Trustees
shall include any certification required by Rule 17j-1. This report shall set
forth the following information, and shall be confidential:
] Copies of the Rules, as revised, including a summary of any changes made
since the last report;
] Identification of any material issues arising under the Rules including
material violations requiring significant remedial action since the last
report;
] Identification of any material conflicts that arose since the last
report; and
] Recommendations, if any, regarding changes in existing restrictions or
procedures based upon Janus's experience under these Rules, evolving
industry practices, or developments in applicable laws or regulations.
The Trustees must initially approve these Rules within the time frame
required by Rule 17-1. Any material changes to these Rules must be approved
within six months.
RECORDS
Compliance shall maintain the following records on behalf of each Janus
entity:
] A copy of this Code and any amendment thereof which is or at any time
within the past five years has been in effect.
] A record of any violation of this Code, or any amendment thereof, and of
any action taken as a result of such violation.
] Files for personal securities transaction confirmations and account
statements, all reports and other forms submitted by Covered Persons
pursuant to these Rules and any other pertinent information.
] A list of all persons who are, or have been, required to make reports
pursuant to these Rules.
] A list of persons who are, or within the last five years have been
responsible for, reviewing transaction and holdings reports.
] A copy of each report made to the Trustees pursuant to this Code.
INSPECTION
The records and reports maintained by Compliance pursuant to the Rules
shall at all times be available for inspection, without prior notice, by any
member of the Ethics Committee.
CONFIDENTIALITY
All procedures, reports and records monitored, prepared or maintained
pursuant to these Rules shall be considered confidential and proprietary to
Janus and shall be maintained and protected accordingly. Except as otherwise
required by law or this Policy, such matters shall not be disclosed to anyone
other than to members of the Ethics Committee, as requested.
FILING OF REPORTS
To the extent that any report, form acknowledgment or other document is
required to be in writing and signed, such documents may be submitted in by
e-mail or other electronic form approved by Compliance. Any report filed with
the Chief Compliance Officer or Compliance Manager of JCC shall be deemed filed
with the Janus Funds.
THE ETHICS COMMITTEE
The purpose of this Section is to describe the Ethics Committee. The
Ethics Committee is created to provide an effective mechanism for monitoring
compliance with the standards and procedures contained in the Rules and to take
appropriate action at such times as violations or potential violations are
discovered.
MEMBERSHIP OF THE COMMITTEE
The Committee consists of Thomas A. Early, Vice President and General
Counsel; Steven R. Goodbarn, Vice President of Finance, Treasurer and Chief
Financial Officer; David Kowalski, Vice President and Chief Compliance
Officer; and Ernie C. Overholt, Compliance Manager. The Compliance Manager
currently serves as the Chairman of the Committee. The composition of the
Committee may be changed from time to time.
COMMITTEE MEETINGS
The Committee shall generally meet every four months or as often as
necessary to review operation of the compliance program and to consider
technical deviations from operational procedures, inadvertent oversights, or any
other potential violation of the Rules. Deviations alternatively may be
addressed by including them in the employee's personnel records maintained by
Janus. Committee meetings are primarily intended for consideration of the
general operation of the compliance program and substantive or serious
departures from standards and procedures in the Rules.
Such other persons may attend a Committee meeting, at the discretion of
the Committee, as the Committee shall deem appropriate. Any individual whose
conduct has given rise to the meeting also may be called upon, but shall not
have the right, to appear before the Committee.
It is not required that minutes of Committee meetings be maintained; in
lieu of minutes the Committee may issue a report describing any action taken.
The report shall be included in the confidential file maintained by the
Compliance Manager with respect to the particular employee or employees whose
conduct has been the subject of the meeting.
SPECIAL DISCRETION
The Committee shall have the authority by unanimous action to exempt any
person or class of persons or transaction or class of transactions from all or a
portion of the Rules, provided that:
] The Committee determines, on advice of counsel, that the particular
application of all or a portion of the Rules is not legally required;
] The Committee determines that the likelihood of any abuse of the Rules
by such exempted person(s) or as a result of such exempted transaction
is remote;
] The terms or conditions upon which any such exemption is granted is
evidenced in writing; and
] The exempted person(s) agrees to execute and deliver to the Compliance
Manager, at least annually, a signed Acknowledgment Form, which
Acknowledgment shall, by operation of this provision, include such
exemptions and the terms and conditions upon which it was granted.
The Committee shall also have the authority by unanimous action to impose
such additional requirements or restrictions as it, in its sole discretion,
determines appropriate or necessary, as outlined in the Penalty Guidelines.
Any exemption, and any additional requirement or restriction, may be
withdrawn by the Committee at any time (such withdrawal action is not required
to be unanimous).
<PAGE>
- -------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE ETHICS RULES
- -------------------------------------------------------------------------------
DESIGNEES
The Compliance Manager and the Chief Compliance Officer may appoint
designees to carry out their functions pursuant to these Rules.
ENFORCEMENT
In addition to the penalties described in the Penalty Guidelines and
elsewhere in the Rules, upon discovering a violation of the Rules, the Janus
entity with which you are associated may impose such sanctions as it deems
appropriate, including without limitation, a letter of censure or suspension or
termination of employment or personal trading privileges of the violator. All
material violations of the Rules and any sanctions imposed with respect thereto
shall be reported periodically to the Directors and Trustees and the directors
of any other Janus entity which has been directly affected by the violation.
INTERNAL USE
The Rules are intended solely for internal use by Janus and do not
constitute an admission, by or on behalf of such companies, their controlling
persons or persons they control, as to any fact, circumstance or legal
conclusion. The Rules are not intended to evidence, describe or define any
relationship of control between or among any persons. Further, the Rules are not
intended to form the basis for describing or defining any conduct by a person
that should result in such person being liable to any other person, except
insofar as the conduct of such person in violation of the Rules may constitute
sufficient cause for Janus to terminate or otherwise adversely affect such
person's relationship with Janus.
<PAGE>
Exhibit (p)(7)
HARRIS ASSOCIATES L.P., HARRIS ASSOCIATES SECURITIES L.P. AND
HARRIS ASSOCIATES INVESTMENT TRUST
CODE OF ETHICS AND STATEMENT ON INSIDER TRADING
(EFFECTIVE APRIL 18, 2000)
I. DEFINITIONS
A. FIRM OR HARRIS. The term "Firm" or "Harris" shall include Harris
Associates L.P. ("HALP") and Harris Associates Securities L.P. ("HASLP").
B. TRUST. The term "Trust" shall mean Harris Associates Investment Trust,
including any series of shares of beneficial interest of the Trust (each, a
"Fund").
C. EMPLOYEE. The term "Employee" shall include any person employed by the
Firm, whether on a full or part-time basis and all partners, officers,
shareholders and directors of the Firm.
D. ACCESS PERSON. The term "Access Person" shall have the meaning set forth
in Section 17j-1(a)(1) of the Investment Company Act of 1940 and rules
thereunder (the "Act"). Accordingly, Access Person means any director, officer,
general partner, or Advisory Person (as defined below) of the Fund or HALP, but
shall not include any trustee of the Trust who is not an "interested person" of
the Trust.
E. ADVISORY PERSON. The term "Advisory Person" shall have the meaning set
forth in Section 17j-1(a)(2) of the Act. Accordingly, Advisory Person means any
Employee of the Firm, who, in connection with his or her regular functions or
duties, makes, participates in, or obtains information regarding the purchase or
sale of Covered Securities (as defined below) by a Client (as defined below), or
whose functions relate to the making of any recommendations with respect to
purchases and sales. For the purpose of this Code, each Employee of the Firm
with an office at the Firm's principal place of business shall be deemed to be
an Advisory Person.
F. PERSONS SUBJECT TO THIS CODE. Each Employee is subject to this Code.
G. COVERED SECURITY. The term "Covered Security" shall have the meaning set
forth in Section 2(a)(36) of the Act,(1) including any right to acquire such
security, except that it shall not include securities which are direct
obligations of the Government of the United States, bankers' acceptances, bank
certificates of deposit, commercial paper, high quality short-term debit
instruments (including repurchase agreements), and shares issued by open-end
investment companies.
- --------
(1) SEC. 2(A)(36) "Security" means any note, stock, treasury stock,
bond, debenture, evidence of indebtedness, certificate of interest or
participation in any profit-sharing agreement, collateral-trust
certificate, preorganization certificate or subscription, transferable
share, investment contract, voting-trust certificate, certificate of
deposit for a security, fractional undivided interest in oil, gas, or
other mineral rights, any put, call, straddle, option, or privilege on any
security (including a certificate of deposit) or on any group or index of
securities (including any interest therein or based on the value thereof),
or any put, call, straddle, option, or privilege entered into on a
national securities exchange relating to foreign currency, or, in general,
any interest or instrument commonly known as a "security," or any
certificate of interest or participation in, temporary or interim
certificate for, receipt for, guarantee of, or warrant or right to
subscribe to or purchase, any of the foregoing.
- --------
H. BENEFICIAL INTEREST OR OWNERSHIP. The term "beneficial interest or
ownership" shall be interpreted in the same manner as it would be under Rule
16a-1(a)(2) under the Securities Exchange Act of 1934 in determining whether a
person is subject to the provisions of Section 16 of the Securities Exchange Act
of 1934 and rules thereunder, which includes any interest in which a person,
directly or indirectly, has or shares a direct or indirect pecuniary interest. A
pecuniary interest is the opportunity, directly or indirectly, to profit or
share in any profit derived from any transaction. Each person will be assumed to
have a pecuniary interest, and therefore, beneficial interest or ownership, in
all securities held by that person, that person's spouse, all members of that
person's immediate family and adults sharing the same household with that person
(other than mere roommates) and all minor children of that person and in all
accounts subject to their direct or indirect influence or control and/or through
which they obtain the substantial equivalent of ownership, such as trusts in
which they are a trustee or beneficiary, partnerships in which they are the
general partner, corporations in which they are a controlling shareholder or any
other similar arrangement. Any questions an Employee may have about whether an
interest in a security or an account constitutes beneficial interest or
ownership should be directed to the Firm's General Counsel or Compliance
Department. Examples of beneficial interest or ownership are attached as
Appendix A.
I. CLIENT. The term "Client" shall mean any client of HALP, including any
Fund.
II. CODE OF ETHICS
A. GENERAL STATEMENT
Harris seeks to foster a reputation for integrity and professionalism.
That reputation is a vital business asset. The confidence and trust placed in us
by investors in mutual funds and clients with accounts advised by the Firm is
something that is highly valued and must be protected. As a result, any activity
which creates even the suspicion of misuse of material non-public information by
the Firm or any of its Employees, which gives rise to or appears to give rise to
any breach of fiduciary duty owed to any Client, or which creates any actual or
potential conflict of interest between any Client and the Firm or any of its
Employees or even the appearance of any conflict of interest must be avoided and
is prohibited.
The Investment Company Act and rules make it illegal for any person
covered by the Code, directly or indirectly, in connection with the purchase or
sale of a security held or to be acquired by the Trust to:
a. employ any device, scheme, or artifice to defraud the Trust;
b. make any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in
light of circumstances under which they are made, not misleading or
in any way mislead the Trust regarding a material fact;
c. engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon the Trust; or
d. engage in any manipulative practice with respect to the Trust.
The restrictions on personal securities transactions contained in this Code are
intended to help the Firm monitor for compliance with these prohibitions.
Additionally, the federal securities laws require that an investment
adviser maintain a record of every transaction in any Covered Security in which
an Access Person acquires any direct or indirect beneficial interest or
ownership, except any transaction in an account in which the Access Person has
no direct or indirect control or influence.
To attempt to ensure that each Person Subject to this Code satisfies this
Code and these record keeping obligations, the Firm has developed the following
rules relating to personal securities trading, outside employment, personal
investments with external investment managers and confidentiality. The General
Counsel, Chief Executive Officer, and Compliance Officer, acting in concert, has
the authority to grant written waivers of the provisions of this Code in
appropriate instances. However, the Firm expects that waivers will be granted
only in rare instances, and some provisions of the Code that are mandated by the
Act cannot be waived.
B. RESTRICTIONS ON EMPLOYEE TRADING
No trading activity by an Employee in any security in which an Employee has any
beneficial interest or ownership which is also the subject of a Client portfolio
purchase or sale shall disadvantage or appear to disadvantage such Client
transaction. Further, the following specific restrictions apply to all trading
activity for Advisory Persons:
i) Any transaction in a security in anticipation of client orders
("frontrunning") is prohibited,
ii) Any transaction in a security which is the subject of a Firm
recommendation is prohibited until the tenth business day following the
dissemination of the recommendation, or any longer period specified in
this Code,
iii) Any transaction in a security which the Advisory Person knows or has
reason to believe is being purchased or sold or considered for purchase or
sale(2) by any investment company advised by the Firm is prohibited until
the transaction by such investment company has been completed or
consideration of such transaction has been abandoned,(3)
- --------
(2) A security is "being considered for purchase or sale", the earlier
of, when a recommendation to purchase or sell has been made and
communicated or the security is placed on the research project list and,
with respect to the person making the recommendation, when such person
seriously considers making such a recommendation.
(3) Among the clients of the Firm are private investment partnerships
(partnerships) in which various Employees of the Firm have equity
interests. This trading prohibition shall not restrict purchases or sales
for the accounts of such partnerships provided that the Trust and such
accounts are treated fairly and equitably in connection with such
purchases and sales.
- --------
iv) Any same day transaction in a security in which any investment company
advised by the Firm has a pending or actual transaction is prohibited. If
an Advisory Person places a same day trade for such security prior to the
investment company placing an order the Employee's order will be canceled,
v) Any transaction in a security within two business days after any
investment company advised by the Firm has traded in that security is
prohibited,
vi) Any transaction involving options relating to any security on the
Firm's approved list or which are held by any investment company advised
by the Firm is prohibited, and
vii) Any acquisition of an equity security in an initial public offering
is prohibited.
Additionally, no Employee of the Firm shall knowingly sell to or purchase
from the Funds or HAIT any security or other property except, in the case of the
Funds, securities issued by the Funds.
C. PERSONAL INVESTMENTS WITH EXTERNAL MONEY MANAGERS.
All investments in which an Advisory Person has any beneficial interest or
ownership placed with external investment managers (including interests in
limited partnerships or trust vehicles, managed accounts, variable annuities or
foreign entities) or in any account in which an Advisory Person has discretion
must be approved in writing by the Compliance Department and the Chief Executive
Officer prior to the commitment of initial capital.
Additionally, "Investment Personnel" must obtain approval prior to
investing or acquiring a beneficial ownership interest in a Limited Offering,
whether directly or indirectly. "Investment Personnel" is defined in Section
17j-1(a)(7) of the Act and shall be deemed to include any officer of HAI with an
office in the Firm's principal place of business; any officer of HAI who, in
connection with his or her regular functions or duties, makes or participates in
making recommendations regarding the purchase or sale of securities; any Harris
portfolio manager; any member of the Harris stock selection group; any Harris
financial analyst; or any Harris fund manager. A "Limited Offering" is generally
defined as a private placement and can include interests in real estate or oil
and gas limited partnership interests and other privately placed securities and
funds. The Investment Personnel must (i) provide notice in writing to the Chief
Executive Officer and the Compliance Department prior to acquiring ownership,
and (ii) obtain the written approval of the Chief Executive Officer and the
Compliance Department prior to acquiring ownership. The Compliance Department
shall maintain a copy of such approval and reasons supporting the approval as
provided under Section IV of this Code.
The Compliance Department will maintain a list of investment managers used
by Partnerships managed internally and a list of investment managers used by
Advisory Persons.
If an Advisory Person has been notified that an investment manager is used
by the Partnerships' managed internally, an Advisory Person must notify the
Compliance Department and the Head of the Multi-Manager Area of any material
withdrawal of their investment with such investment manager at least two working
days prior to an Advisory Person submitting any notice of such withdrawal. To
avoid a conflict of interest or the appearance of any conflict, an Advisory
Person should also note the reason for the withdrawal if it relates to the
investment manager's performance, organization or perceived ability to execute
their trading strategy.
D. ADDITIONAL RESTRICTION ON FUND MANAGERS OF INVESTMENT COMPANY ACCOUNTS.
Any Access Person who is a fund manager of any investment company that is
advised by the Firm is prohibited from buying or selling a security within
fifteen calendar days before and after the investment company that he/she
manages trades in that security. Any profits realized on trades within the
proscribed periods shall be required to be disgorged.(4)
- --------
(4) Any profits disgorged shall be given to a tax exempt charitable
organization of Harris' choosing.
- --------
E. PROCEDURES TO IMPLEMENT TRADING RESTRICTIONS AND REPORTING OBLIGATIONS.
1) TRADING THROUGH HARRIS' TRADING DESK.
All transactions in Covered Securities in which an Advisory Person has any
beneficial interest or ownership or in any accounts in which an Advisory Person
has discretion, other than fee paying accounts ("Advisory Person account"), must
be processed through the Firm's trading desk.
Transactions at other brokers or banks are not permitted except in unusual
circumstances and then only after the Advisory Person has: (i) provided notice
in writing to his/her Supervisor and the Compliance Department prior to opening
or placing an initial order in an account with such other broker or bank, (ii)
obtained the written approval of his/her Supervisor and the Compliance
Department prior to opening or placing an initial order in such account, (iii)
provided such other broker or bank with a written notice of the Advisory
Person's affiliation with Harris and request that copies of confirmations and
statements be sent to the Firm's Compliance Department, and provide a report to
the Firm that includes the name of the broker or bank with whom the account was
established, the date the account was established, and the date the report is
submitted. A copy of such written notice and request should also be provided to
his/her Supervisor and the Compliance Department.
Even after an Advisory Person has obtained approval to execute
transactions through another broker or bank, the Advisory Person must still
present the Firm's trading desk with an order ticket for an order to be executed
at the other broker or bank. In those exceptional situations in which it is
inappropriate for the Firm's trading desk to place the order, the Advisory
Person must promptly present the trading desk with a completed order ticket
reflecting the details of the transaction and clearly indicating that the
transaction has been completed.
2) MONITORING OF TRADES.
Transactions for an account of an Advisory Person that are executed
through the Firm's trading desk are to be monitored by the Trading Department
and reviewed and approved by the Chief Executive Officer (or such party to whom
he delegates). These transactions are unsolicited brokerage transactions, should
be so marked on the original order ticket and may not be executed if they are in
conflict with discretionary orders. Should a conflict arise, sharing of
executions may be approved by the Head of the Investment Advisory Department, or
in his/her absence, the Manager of the Trading Department. Employee accounts
must be opened in the 40000 office range.
The Firm will provide to the Compliance Department information (including
the title of each Covered Security involved, the date of the transaction, the
interest rate and maturity rate (if applicable), the number of shares and
principal amount of each Covered Security involved, the nature of the
transaction (i.e. buy/sell), the price at which the transaction was effected,
the name of the broker or bank through which the transaction was effected, and
the date on which the report is submitted) about transactions in the accounts of
Advisory Persons who have accounts with the Firm.
Transactions at other brokers or banks, in addition to being placed
through the trading desk, are to be monitored by the Compliance Department. To
accomplish this, an Access Person shall submit to the Compliance Department
within ten days after any transaction a report which includes the title of the
Covered Security, the date of the transaction, the interest rate and maturity
rate (if applicable), the number of shares and principal amount of each Covered
Security involved, the nature of the transaction (i.e. buy/sell), the price at
which the transaction was effected, the name of the broker or bank through which
the transaction was effected and the date on which the report is submitted. This
requirement may be satisfied by having the broker or bank send the Firm
duplicate copies of confirmations and statements, provided that such
confirmations and statements contain all of the information otherwise required
to be provided in the report. The Compliance Department will maintain copies of
all such transaction reports.
3) CANCELLATION OF TRADES.
Any transaction for an account of an Access Person is subject to
cancellation or reversal if it is determined by either the Chief Executive
Officer (or such party to whom he delegates), the Manager of the Trading
Department or the Compliance Department that the transaction is or was in
conflict with or appeared to be in conflict with any Client transaction or any
of the trading restrictions of this Code. Cancellations or reversals of
transactions may be required after an extended period past the settlement date.
The Manager of the Trading Department may also prevent the execution of orders
for an Advisory Person's account if it appears that the trade may have to be
canceled or reversed.
Client transactions include transactions for any investment company
managed by the Firm, any other discretionary advisory clients or any other
accounts managed or advised by Employees of the Firm for a fee.
The determination that a transaction of an Access Person may conflict with
a Client transaction will be subjective and individualized and may include
questions about timely and adequate dissemination of information, availability
of bids and offers, as well as many other factors deemed pertinent for that
transaction or series of transactions. It is possible that a cancellation or
reversal of a transaction could be costly to an Access Person or his/her family.
Therefore, great care is required to adhere to the Firm's trading restrictions
and avoid conflicts or the appearance of conflicts.
4) PARTICIPATION IN DIVIDEND REINVESTMENT PLANS AND SYSTEMATIC PURCHASE
PLANS.
Advisory Persons may purchase securities through dividend reinvestment
plans or systematic purchase plans without processing such transactions through
the Firm's trading desk. Purchases are permitted only after the Employee has:
(i) provided notice in writing to his/her Supervisor and the Compliance
Department prior to opening an account or placing an initial purchase, and (ii)
obtained the written approval of his/her Supervisor and the Compliance
Department prior to opening an account or placing an initial purchase. Even
after the Advisory Person has obtained approval to invest in such a plan, the
Advisory Person must provide the Compliance Department with duplicate copies of
statements within ten days after the end of each quarter. Such report or
statements must contain all of the information required to be reported with
respect to transactions in Covered Securities under II(F)(2) above. The
Compliance Department will maintain copies of all such transaction reports.
5) REPORTING ALL OTHER SECURITIES TRANSACTIONS.
Because the obligations of an investment adviser to maintain records of
Employee's personal securities transactions is broader than the type of
transactions discussed above in this Section, all Employees have the following
additional reporting obligations. Any transaction in a Covered Security not
required to be placed through the Firm's trading desk in which an Employee has
any beneficial interest or ownership (such as, real estate or oil and gas
limited partnership interests and other privately placed securities and funds)
must be reported to the Compliance Department. This report must be submitted
within ten days after the end of each quarter and include: the title, price,
number of shares and principal amount of each Covered Security involved, the
date and nature of the transaction (i.e. buy/sell), the name of the broker or
bank used, if any, interest rate and maturity, if applicable, and the date on
which the report is submitted. This report may be in any form, including a copy
of a confirmation or monthly statement. However, no report is necessary for any
transaction in an account in which the Employee has no control or influence.
6) INITIAL AND ANNUAL REPORTING REQUIREMENTS.
Each Access Person shall initially disclose in writing to the Compliance
Department within 10 business days of becoming an Access Person, and annually
thereafter within 30 business days after each calendar year-end, the title,
number of shares and principal amount of all Covered Securities beneficially
owned by such Access Person as of the date of becoming a Access Person, or as of
the preceding December 31 for annual reporting and the name of the broker or
bank with whom the Access Person maintains an account in which he or she has
beneficial ownership of any security. The first such annual report under this
amended Code of Ethics shall be made by January 30, 2001. An Access Person need
not make an Initial or Annual Report for Covered Securities held in any account
over which the Employee has no direct or indirect influence or control.
F. CONFIDENTIALITY & OBLIGATIONS OF EMPLOYEES
During the period of employment with the Firm an Employee will have access
to certain "confidential information" concerning the Firm and its clients. This
information is a valuable asset and the sole property of the Firm and may not be
misappropriated and used outside of the Firm by an Employee or former Employee.
"Confidential Information", defined as all information not publicly available
about the business of the Firm, may include, but is not limited to, Client and
prospect names and records, research, trading and portfolio information and
systems, information concerning externally managed entities or accounts which
have been considered or made on behalf of fee paying clients, and the financial
records of the Firm and/or its Employees. In order to protect the interests of
the Firm, an Employee or ex-Employee shall not, without the express written
consent of the Firm's Chief Executive Officer, disclose directly or indirectly
confidential information to anyone outside of the Firm. An Employee should be
extremely careful to avoid inadvertent disclosures and to exercise maximum
effort to keep confidential information confidential. Any questions concerning
the confidentiality of information should be directed to the Chief Executive
Officer or the General Counsel. An abuse of the Firm's policy of confidentiality
could subject an Employee to immediate disciplinary action that may include
dismissal from the Firm.
G. OUTSIDE EMPLOYMENT, ASSOCIATIONS AND BUSINESS ACTIVITIES
1) OUTSIDE EMPLOYMENT AND ASSOCIATIONS.
It is Harris's policy not to permit Advisory Persons to hold outside
positions of authority, including that of being an officer, partner, director or
employee of another business entity (except in the case of entities managed by
the Firm). Also, Harris requires that all Advisory Persons make their positions
with the Firm a full-time job. The approval of Harris, and in some cases the
approval of the NASD, is required before any Advisory Person may hold any
outside position for any business organization, regardless of whether such
position is compensated or not. Any exception to this policy must be approved in
writing by the Firm's Chief Executive Officer (or other person as he may
delegate) and the Access Person's Supervisor, and a copy of such approval shall
be provided by the Advisory Person to the Compliance Department. Any change in
the status of such approved position immediately must be reported in writing to
the Compliance Department and the Advisory Person's Supervisor. Any income or
compensation received by an Advisory Person for serving in such position must be
paid in full to the Firm. Under no circumstance may an Advisory Person represent
or suggest that Harris has approved or recommended the business activities of
the outside organization or any person associated with it.
2) OUTSIDE BUSINESS ACTIVITIES.
To further avoid actual or potential conflicts of interest and to maintain
impartial investment advice, and equally important, the appearance of impartial
investment advice, each Advisory Person must disclose in writing to the
Compliance Department any special relationships and/or investments or business
activities that they or their families have which could influence the investment
activities of the Firm. If an Employee has any questions about any activities
and the need for disclosure, the Employee should be cautious and direct any
questions to the Firm's General Counsel or Compliance Department.
H. CERTIFICATION OF COMPLIANCE BY ACCESS PERSONS.
Each Access Person is required to certify annually that (i) he or she has
read and understands the Code, (ii) recognizes that he or she is subject to the
Code, and (iii) he or she has disclosed or reported all Personal Securities
Transactions required to be disclosed or reported under the Code. The Firm shall
annually distribute a copy of the Code and request certification by all Persons
Subject to this Code and shall be responsible for ensuring that all personnel
comply with the certification requirement.
Each Access Person who has not engaged in any personal securities
transactions during the preceding year for which a report was required to be
filed pursuant to the Code shall include a certification to that effect in his
or her annual certification.
I. ANNUAL REPORT TO THE TRUST'S BOARD OF TRUSTEES.
The officers of the Trust shall prepare an annual report to the board of
trustees of the Trust that:
1. summarizes existing procedures concerning personal investing and any
changes in those procedures during the past year;
2. describes issues that arose during the previous year under the Code
or procedures concerning personal investing, including but not
limited to information about material violations of the Code and
sanctions imposed;
3. certifies to the board that the Trust has adopted procedures
reasonably necessary to prevent its Investment Personnel and Access
Persons from violating the Code; and
4. identifies any recommended changes in existing restrictions or
procedures based upon experience under the Code, evolving industry
practices, or developments in applicable laws or regulations.
III. POLICY STATEMENT ON INSIDER TRADING
A. BACKGROUND
Trading securities while in possession of material, nonpublic information
or improperly communicating that information to others may expose you to
stringent penalties. Criminal sanctions may include a fine of up to $1,000,000
and/or ten years imprisonment. The Securities and Exchange Commission (SEC) can
recover the profits gained or losses avoided through the violative trading,
obtain a penalty of up to three times the illicit windfall and issue an order
permanently barring you from the securities industry. Finally, you may be sued
by investors seeking to recover damages for insider trading violations.
Regardless of whether a government inquiry occurs, Harris views seriously
any violation of this Policy Statement. Such violations constitute grounds for
disciplinary sanctions, including dismissal.
The law of insider trading is unsettled; an individual legitimately may be
uncertain about the application of the Policy Statement in a particular
circumstance. Often, a single question can forestall disciplinary action or
complex legal problems. You should direct any questions relating to the Policy
Statement to the General Counsel, or, in her absence, a member of the Stock
Selection Group, or the Compliance Department. You also must notify the General
Counsel, or, in her absence, a member of the Stock Selection Group or the
Compliance Department immediately if you have any reason to believe that a
violation of the Policy Statement has occurred or is about to occur.
B. POLICY STATEMENT ON INSIDER TRADING
No person to whom this Policy Statement applies may trade, either
personally or on behalf of others (such as Clients), while in possession of
material, nonpublic information; nor may such persons communicate material,
nonpublic information to others in violation of the law. This Policy Statement
is drafted broadly; it will be applied and interpreted in a similar manner. This
Policy Statement applies to securities trading and information handling by all
Access Persons (including their spouses, minor children and adult members of
their households).
The section below reviews principles important to this Policy Statement.
1. WHAT IS MATERIAL INFORMATION?
Information is "material" when there is a substantial likelihood that a
reasonable investor would consider it important in making his or her investment
decisions. Generally, this is information whose disclosure will have a
substantial effect on the price of a company's securities. No simple "bright
line" test exists to determine when information is material; assessments of
materiality involve a highly fact-specific inquiry. For this reason, you should
direct any questions about whether information is material to the General
Counsel, or, in her absence, a member of the Stock Selection Group, or
Compliance Department.
Material information often relates to a company's results and operations
including, for example, dividend changes, earnings results, changes in
previously released earnings estimates, significant merger or acquisition
proposals or agreements, major litigation, liquidation problems, and
extraordinary management developments.
Material information also may relate to the market for a company's
securities. Information about a significant order to purchase or sell securities
may, in some contexts, be deemed material. Similarly, prepublication information
regarding reports in the financial press also may be deemed material.
2. WHAT IS NONPUBLIC INFORMATION?
Information is "nonpublic" until it has been disseminated broadly to
investors in the marketplace. Tangible evidence of such dissemination is the
best indication that the information is public. For example, information is
public after it has become available to the general public through a public
filing with the SEC or some other governmental agency, the Dow Jones "tape" or
the WALL STREET JOURNAL or some other publication of general circulation, and
after sufficient time has passed so that the information has been disseminated
widely.
3. IDENTIFYING INSIDE INFORMATION
Before executing any trade for yourself or others, including Clients, you
must determine whether you have access to material, nonpublic information. If
you think that you might have access to material, nonpublic information, you
should take the following steps:
i. Immediately alert the Trading Department to restrict trading in the
security by placing the security on the restricted list maintained
in the trading room. No reason or explanation should be given to the
Trading Department for the restriction.
ii. Report the information and proposed trade immediately to the General
Counsel, , or a member of the Stock Selection Group.
iii. Do not purchase or sell the securities on behalf of yourself or
others, including Clients.
iv. Do not communicate the information inside or outside Harris other
than to the above individuals.
v. After the above individuals have reviewed the issue, the Firm will
determine whether the information is material and nonpublic and, if
so, what action the Firm should take.
4. CONTACTS WITH PUBLIC COMPANIES
For Harris, contacts with public companies represent an important part of
our research efforts. Harris may make investment decisions on the basis of the
Firm's conclusions formed through such contacts and analysis of
publicly-available information. Difficult legal issues arise, however, when, in
the course of these contacts, an Access Person becomes aware of material,
nonpublic information. This could happen, for example, if a company's Chief
Financial Officer prematurely discloses quarterly results to an analyst or an
investor relations representative makes a selective disclosure of adverse news
to a handful of investors. In such situations, Harris must make a judgment as to
its further conduct. To protect yourself, Clients and the Firm, you should
contact the General Counsel, or in her absence, a member of the Stock Selection
Group, or Compliance Department immediately if you believe that you may have
received material, nonpublic information.
5. TENDER OFFERS
Tender offers represent a particular concern in the law of insider trading
for two reasons. First, tender offer activity often produces extraordinary
gyrations in the price of the target company's securities. Trading during this
time period is more likely to attract regulatory attention (and produces a
disproportionate percentage of insider trading cases). Second, the SEC has
adopted a rule which expressly forbids trading and "tipping" while in possession
of material, nonpublic information regarding a tender offer received from the
tender offeror, the target company or anyone acting on behalf of either.
Employees should exercise particular caution any time they become aware of
nonpublic information relating to a tender offer.
C. PROCEDURES TO IMPLEMENT THE POLICY STATEMENTON INSIDER TRADING
1. PERSONAL SECURITIES TRADING
The restrictions on Employee trading and procedures to implement those
restrictions and the Firm's reporting obligations, which are set forth in
Section II above, constitute the same procedures to implement this Policy
Statement. Review those procedures carefully and direct any questions about
their scope or applicability to the General Counsel or the Compliance
Department.
2. RESTRICTIONS ON DISCLOSURES
Harris Employees shall not disclose any nonpublic information (whether or
not it is material) relating to Harris or its securities transactions to any
person outside Harris (unless such disclosure has been authorized by Harris).
Material, nonpublic information may not be communicated to anyone, including
persons within Harris, except as provided in Section III(B)(3) above. Such
information must be secured. For example, access to files containing material,
nonpublic information and computer files containing such information should be
restricted, and conversations containing such information, if appropriate at
all, should be conducted in private.
IV. RETENTION OF RECORDS
The Compliance Department or the Secretary of the Trust will maintain the
records listed below for a period of five years. Such records shall be
maintained at the Firm's principal place of business in an easily accessible
place:
(i) a list of all persons subject to the Code during that period;
(ii) receipts signed by all persons subject to the Code acknowledging
receipt of copies of the Code and acknowledging that they are
subject to it;
(iii) a copy of each Code of Ethics that has been in effect at any time
during the period;
(iv) a copy of each report filed pursuant to the Code and a record of any
known violations and actions taken as a result thereof during the
period as well as a record of all persons responsible for reviewing
these reports; and
(v) a copy of any decision and the reasons supporting the decision, to
approve the acquisition by Investment Personnel of Limited
Offerings.
<PAGE>
ACKNOWLEDGMENT OF RECEIPT OF CODE OF ETHICS AND STATEMENT ON INSIDER TRADING
FOR ACCESS PERSONS
CODE OF ETHICS. Harris Associates L.P. ("HALP"), Harris Associates
Securities L.P. ("HASLP") and Harris Associates Investment Trust (the "Trust")
have adopted a written Code of Ethics and Statement on Insider Trading (the
"Code") to avoid potential conflicts of interest by HALP and HASLP personnel and
to govern the use and handling of material non-public information. A copy of the
Code is attached to this acknowledgement. As a condition of your continued
employment with HALP and HASLP, and/or the retention of your position, if any,
as an officer of the Trust, you are required to read, understand and abide by
the Code.
COMPLIANCE PROGRAM. The Code requires that all personnel furnish to the
Compliance Department information regarding any investment account in which you
have a "beneficial interest." You are also required to furnish to the Compliance
Department copies of your monthly or quarterly account statements, or other
documents, showing all purchases or sales of securities in any such account, or
which are effected by you or for your benefit, or the benefit of any member of
your household. Additionally, you are required to furnish a report of your
personal securities holdings within ten days of commencement of your employment
with HALP or HASLP and annually thereafter. These requirements apply to any
investment account, such as an account at a brokerage house, trust account at a
bank, custodial account or similar types of accounts.
This compliance program also requires that you report any contact with any
securities issuer, government or its personnel, or others, that, in the usual
course of business, might involve material non-public financial information. The
Code requires that you bring to the attention of the General Counsel any
information you receive from any source which might be material non-public
information.
Any questions concerning the Code should be directed to the General
Counsel or the Compliance Department.
I affirm that I have read and understand the Code. I agree to the terms
and conditions set forth in the Code.
- -------------------------------- ----------------
Signature Date
<PAGE>
ANNUAL AFFIRMATION OF COMPLIANCE
FOR ACCESS PERSONS
I affirm that:
1. I have again read and, during the past year to the best of my
knowledge, have complied with the Code of Ethics and Statement of
Insider Trading (the "Code").
2. I have provided to the Compliance Department the names and addresses
of each investment account that I have with any firm, including, but
not limited to, broker-dealers, banks and others. (List of known
accounts attached.)
3. I have provided to the Compliance Department copies of account
statements or other reports showing each and every transaction in
any security in which I have a beneficial interest, as defined in
the Code, during the most recently ended calendar year
or
During the most recent calendar year there were no transactions in
any security in which I had a beneficial interest required to be
reported pursuant to the Code.
4. I have provided to the Compliance Department a report of my personal
securities holdings as of the end of the most recent calendar year,
including all required information for each security in which I have
any direct or indirect beneficial ownership.
- -------------------------------- ----------------
Signature Date
<PAGE>
APPENDIX A
EXAMPLES OF BENEFICIAL INTEREST
For purposes of the Code, you will be deemed to have a beneficial interest
in a security if you have the opportunity, directly or indirectly, to profit or
share in any profit derived from a transaction in the security. Examples of
beneficial ownership under this definition include:
o securities you own, no matter how they are registered, and including
securities held for you by others (for example, by a custodian or
broker, or by a relative, executor or administrator) or that you have
pledged to another (as security for a loan, for example);
o securities held by a trust of which you are a beneficiary (except that,
if your interest is a remainder interest and you do not have or
participate in investment control of trust assets, you will not be
deemed to have a beneficial interest in securities held by the trust);
o securities held by you as trustee or co-trustee, where either you or any
member of your immediate family (i.e., spouse, children or descendants,
stepchildren, parents and their ancestors, and stepparents, in each case
treating a legal adoption as blood relationship) has a beneficial
interest (using these rules) in the trust.
o securities held by a trust of which you are the settlor, if you have the
power to revoke the trust without obtaining the consent of all the
beneficiaries and have or participate in investment control;
o securities held by any partnership in which you are a general partner,
to the extent of your interest in partnership capital or profits;
o securities held by a personal holding company controlled by you alone or
jointly with others;
o securities held by (i) your spouse, unless legally separated, or you and
your spouse jointly, or (ii) your minor children or any immediate family
member of you or your spouse (including an adult relative), directly or
through a trust, who is sharing your home, even if the securities were
not received from you and the income from the securities is not actually
used for the maintenance of your household; or
o securities you have the right to acquire (for example, through the
exercise of a derivative security), even if the right is not presently
exercisable, or securities as to which, through any other type of
arrangement, you obtain benefits substantially equivalent to those of
ownership.
You will NOT be deemed to have beneficial ownership of securities in the
following situations:
o securities held by a limited partnership in which you do not have a
controlling interest and do not have or share investment control over
the partnership's portfolio; and
o securities held by a foundation of which you are a trustee and donor,
provided that the beneficiaries are exclusively charitable and you have
no right to revoke the gift.
These examples are not exclusive. There are other circumstances in which you may
be deemed to have a beneficial interest in a security. Any questions about
whether you have a beneficial interest should be directed to the General Counsel
or Compliance Department.
<PAGE>
Exhibit (p)(8)
KOBRICK FUNDS LLC
CODE OF ETHICS UNDER RULE 17J-1
INTRODUCTION
Rule 17j-1 under the Investment Company Act of 1940 generally prohibits
persons associated with an investment company or its investment adviser from
engaging in any fraudulent, deceptive, manipulative or otherwise unlawful
practice in connection with the purchase or sale by such persons of securities
held or acquired by the investment company.
Set forth below is the Code of Ethics adopted by the Board of Directors of
Kobrick Funds LLC (the "Company"). This Code of Ethics is based on the principle
that the directors, officers and employees of the Company owe a fiduciary duty
to all of the Company's clients including the shareholders of the mutual funds
advised by the Company to conduct their affairs, including their personal
securities transactions, in such a manner as to avoid: (i) serving their own
personal interests ahead of the shareholders; (ii) taking advantage of their
position; and (iii) any actual or potential conflicts of interest.
Of course, no Code can address every circumstances that may give rise to a
conflict, a potential conflict or an appearance of a conflict of interest.
Therefore, every officer and employee is expected to be alert to actual,
potential or appearances of conflicts of interest with the Company's clients and
to conduct him/herself with good judgment. Failure to exercise good judgment, as
well as violations of this Code, may result in the imposition of sanctions on
the access person, including suspension or dismissal.
This Code became effective on January 1, 1998 for Kobrick-Cendant Funds,
Inc. and was adopted by Kobrick Funds LLC effective December 31, 1998. Please
direct any questions to Richard A. Goldman, Chief Operating Officer and
Compliance Officer.
CODE OF ETHICS
I. DEFINITIONS
1. "Funds" means any registered investment companies under the management
of the Company.
2. "Board of Directors" means the Board of Directors of the Company.
3. "Officer" means any officer of the Company other than one serving
solely as Secretary or Assistant Secretary.
4. "Employee" means any officer or employee of the Company
5. "Access person" means any officer or "advisory person" of the Company.
6. "Advisory person" means any employee of the Company or any company
controlling, controlled by or under common control with the Company, who, in
connection with his or her regular functions or duties, makes, participates in,
or obtains information regarding the purchase or sale of a security by the Fund,
or whose functions relate to the making of any recommendations with respect to
such purchases or sales or any natural person in a control relationship to the
Company who obtains information concerning recommendations to the Fund with
regard to the purchase or sale of a security.
7. A security is "being considered for purchase or sale" when a
recommendation by an advisory person is made (or, if no recommendation is made,
an order is made) to purchase or sell a security or prior thereto when, in the
opinion of an investment manager, a decision whether or not conditional, has
been made (even though not yet implemented) to recommend or make the purchase or
sale.
8. "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions of Section
16 of the Securities Exchange Act of 1934 and the rules and regulations
thereunder, except that the determination of direct or indirect beneficial
ownership shall apply to all securities which an access person or an advisory
person has or acquires. "Beneficial ownership" is generally understood to
include those securities from which a person enjoys some economic benefits which
are substantially equivalent to ownership regardless of who is the registered
owner.
9. "Purchase or sale of a security" includes, among other things, the
writing of an option to purchase or sell a security.
10. "Security" shall include all forms of debt and equity securities,
except that it shall not include shares of registered open end investment
companies, Government securities as defined in Section 2(a)(16) of the Act,
bankers' acceptances, bank certificates of deposit, commercial paper, and other
money market instruments.
II. PROHIBITED TRANSACTIONS-ALL ACCESS PERSONS
1. It is a basic policy that no access person of the Company should be
permitted to profit in his or her personal securities transactions from the
securities activities of the Funds or the Company. Accordingly, no such person
shall purchase or sell, directly or indirectly, any security in which he or she
has, or by reason of such transactions acquires, any direct or indirect
beneficial ownership under circumstances where he or she actually knows or
should have known at the time of such purchase or sale that such security:
(i) is being considered for purchase or sale by the Funds; or
(ii) is being purchased or sold by the Funds.
The Company's pre-clearance requirements are designed to keep this from
occurring and transactions which have been so pre-cleared will not violate this
policy.
2. No such access person shall disclose to other persons the securities
activities engaged in or contemplated for the Funds.
3. No such access person shall seek or accept anything of value, either
directly or indirectly, from broker-dealers or other persons providing services
to the Company in exchange for any action being taken by such person on behalf
of the Company. For the purposes of this provision, gifts from broker-dealers or
other persons providing services to the Company without regard to any specified
transaction or action(or if in connection with a transaction, is a gift also
provided to other participants) including but not limited to those in the
following categories, will not be considered to be in violation of this section:
(i) an occasional meal;
(ii) an occasional ticket to a sporting event, the theater or
comparable entertainment; and
(iii) a typical holiday gift or other gift of less than $100.00 in
value or a gift which it would be impractical to return or
refuse or the refusal of which in the recipient's judgment
adversely affect a relationship beneficial to the Company and
its clients.
If there are questions about a proposed gift or activity, each person is urged
to err on the side of caution and obtain prior written consent from Mr. Kobrick
or Mr. Goldman. In this Code of Ethics whenever prior consent or approval by one
of two or more individuals is required, it is understood that such individuals
shall not pass upon situations in which they have a personal interest.
III. PROHIBITED TRANSACTIONS-ADVISORY PERSONS
In addition to the prohibited transactions set forth in Section 2, no
advisory person shall for his or her own account or for an account as to which
he or she has direct or indirect beneficial ownership:
1. Acquire any securities in an initial public offering (other than an
acquisition by the Hedge Funds (as hereafter defined)) conducted in accordance
with the attached allocation procedures and made consistent with the National
Association of Securities Rule of Conduct 2110 and related interpretive
materials, in order to preclude any possibility of such person profiting from
his or her position with the Company.
2. Purchase or sell a security within seven calendar days after a Fund
trades in that security (including securities exchangeable or convertible into
such securities) or if, to the knowledge of such Advisory Person, a Fund expects
to trade in that security within seven days thereafter. Any profits improperly
realized on trades within the proscribed periods will be subject to
disgorgement. Simultaneous transactions by a Fund and a Hedge Fund carried out
in accordance with the attached Allocation Procedures and transactions by a
Hedge Fund occurring after a similar transaction by a Fund shall not be subject
to this restriction.
3. Purchase any securities in a private placement, without prior approval
of Mr. Kobrick or Mr. Goldman. Any person authorized to purchase securities in a
private placement shall disclose that investment when they play a part in a
Fund's subsequent consideration of an investment in the issuer. In such
circumstances, the Fund's decision to purchase securities of the issuer shall be
subject to independent review by a Company officer with no personal interest in
the issuer.
4. Profit in the purchase and sale, or sale and purchase, of the same (or
equivalent) securities within 60 calendar days. Any profits realized on such
short-term trades shall be subject to disgorgement. The Hedge Funds shall not be
subject to this restriction. Options used for hedging purposes or options on
indexes, which are held for less than 60 days, are not subject to the
prohibition on short-term trading profits. This policy applies to trading in all
types of securities and instruments, except in a particular case where Mr.
Kobrick or Mr. Goldman has made a specific finding of hardship and it can be
determined that no potential abuse or conflict is presented (for example, when
an advisory person's request to sell a security purchased within 60 days prior
to the request is prompted by a major corporate or market event, such as a
tender offer, and the security was not held in client accounts).
5. Serve on the board of directors of any publicly traded company without
prior authorization of the Board of Directors of the Company, which
authorization may be subject to certain terms and conditions concerning such
service. Any such authorization shall be based upon a determination that the
board service would be consistent with the interests of the Funds and their
shareholders.
IV. EXEMPTED TRANSACTIONS
The prohibitions of Sections II and III of this Code shall not apply to:
1. Purchases or sales effected in any account over which a person has no
direct or indirect influence or control.
2. Purchases or sales which are non-volitional on the part of a person,
including but not limited to receipt of securities pursuant to a stock dividend
or merger.
3. Purchases which are part of an automatic dividend reinvestment plan.
4. Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such rights were
acquired from such issuer, and sales of such rights so acquired.
5. Purchases or sales, or classes of purchases or sales, which receive the
prior approval of Mr. Kobrick or Mr. Goldman (in the case of transactions by a
Hedge Fund, Mr.Goldman) because:
(i) they are only remotely potentially harmful to a Fund;
(ii) they would be very unlikely to affect a highly institutional
market; or
(iii) they clearly are not related economically to be securities to
be purchased, sold or held by a Fund.
6. Purchases or sales which have been pre-cleared in accordance with
Section V.
V. PRIOR APPROVAL
All advisory persons shall receive prior approval from Mr. Kobrick or Mr.
Goldman before purchasing, selling or otherwise transferring securities in which
they have a beneficial interest. The following procedures will apply:
A. The advisory person must request approval by completing a
Preclearance Request Form.
B. If the advisory person is a portfolio manager, s/he must affirm on
the form that s/he is not taking away an investment opportunity from
a Fund and provide information pertinent to such conclusion.
C. The advisory person must submit the Form to the Company's traders to
check the Funds' trades during the previous 7 days and to determine
whether there is on the date of submission a pending buy or sell
order in the same security. The trader reviewing the Form must
sign-off on these matters.
D. The advisory person must then submit the Form to Mr. Kobrick or Mr.
Goldman who will either authorize or deny the advisory person's
personal securities transaction and return a copy of the Form to
him/her. If an advisory person submits the Form to Mr. Kobrick for
his authorization or denial, the advisory person shall be
responsible for delivering to Mr. Goldman a copy of the Form as
executed by Mr. Kobrick for inclusion in the Company's compliance
files.
E. If an advisory person receives permission to trade a security or
instrument, the trade must be executed before the end of the next
business day after permission has been received. If the trade is not
executed within that time frame and the advisory person still wishes
to effect the transaction, pre-clearance in the manner described
above must again be obtained.
These prior approval procedures shall not apply to Hedge Fund transactions.
VI. REPORTING
1. Every advisory person shall disclose to Mr. Goldman all personal
securities beneficially owned and directorships or similar positions in
for-profit and non-profit entities upon commencement of employment and
thereafter on an annual basis as of December 31.
2. Each advisory person shall direct their brokers to supply Mr. Goldman
duplicate copies of personal securities transactions confirmations and copies of
periodic statements for securities accounts.
3. In compliance with Rule 204-2(a)(12) under the Advisers Act and Rule
17j-1 under the Investment Company Act, each access person shall provide, or
cause a signed Quarterly Certification of Compliance with the Company Code of
Ethics to be provided to Mr. Goldman , not later than 10 days after the end of
each calendar quarter whether or not the employee entered into any personal
securities transactions during the quarter. Hedge Funds transactions shall be
separately reported, including identification of the person making the
investment decision for the Hedge Fund, and no other reporting by advisory
person, with respect to Hedge Fund transactions shall be required.
A. With respect to personal trades during such quarter, and to the
extent not provided in the foregoing periodic statements:
1. the date of each transaction, title and number of securities
and the principal amount of each security involved;
2. the nature of the transactions (i.e., purchase, sale or any
other type of acquisition or disposition);
3. the price at which the transaction was effected; and
4. the name of the broker, dealer or bank with or through which
the transaction was effected.
B. To the extent not included in the foregoing periodic statements, a
schedule listing:
1. all accounts in which the access person has a direct or
indirect beneficial ownership interest ("Covered Accounts");
and
2. all public and private securities and instruments directly or
indirectly held by any Covered Account of such access person
(other than exempt investments), with nonpublic securities
plainly indicated.
C. If no transaction were effected in Covered Accounts during the
calendar quarter, a statement to that effect.
D. With respect to nondiscretionary accounts, if any, certifications
that such access person does not discuss any investment decisions
with the person making investment decisions.
E. With respect to any nonpublic security owned by such access person,
a statement indicating whether the issuer has changed its name or
publicly issued securities during such calendar quarter.
A compliance report shall be provided on a quarterly basis to the Board of
Directors.
VII. SANCTIONS
Upon discovering a violation of this Code, the Board of Directors may
impose such sanctions as they deem appropriate, including, among other things, a
letter of censure or suspension or termination of the employment of the
violator.
VIII. RETENTION OF RECORDS
This Code of Ethics, a copy of each report filed by access persons, any
written report relating to the interpretation of such Codes, or violations
thereunder, and lists of all persons required to make reports, shall be
preserved with records of the Company for the period required by Rule 17j-1.
IX. ANNUAL CERTIFICATION
Each access person of the Company will be required to certify each year
that they have read and understood this Code of Ethics.
X. HEDGE FUND ACTIVITIES
It is recognized that certain advisory persons also make investment
decisions on behalf of Kobrick Fund, L.P. (the "Hedge Fund"), a privately held
investment company which may invest in some of the same securities held by the
Funds, and may in the future manage other similar accounts (the "Hedge Funds").
Such other accounts may be accounts in which advisory persons of the Company and
affiliates of the Company have a direct or indirect interest. Accordingly when a
security is under consideration for sale or purchase by such an account a
determination shall first be made by Mr. Goldman as to whether transactions in
such security meet the criteria set forth in Section IV.5 (ii) or (iii) of this
Code of Ethics. In the case of a transaction relying on a class of transactions
previously approved pursuant to Section IV, 5(ii) or (iii) by Mr. Goldman, the
determination that such transaction is within the class of exempted transactions
may be made by Mr. Kobrick or Mr. Carmen and will be periodically reviewed by
Mr. Goldman.
If such standard is not met, then (i) the purchase or sale may not be
conducted by the Hedge Funds if at the time of such purchase or sale the Hedge
Fund intends to engage in whole or in part in any offsetting transactions within
seven calendar days and (ii) any transactions in such securities for such
accounts will be grouped with securities transaction on behalf of the Funds in
accordance with the attached allocation procedures. The practice of grouping
orders of various accounts will be followed to get the benefit of best prices or
commission rates
Such grouping will be carried out in accordance with the following
principles and the attached allocation procedures:
1. Policies for the grouping of transactions will be disclosed in the
Company's Form ADV, a Fund's registration statement and a Hedge
Fund's offering memorandum and separately to all broker-dealers
through which such orders are placed.
2. Transactions will not be grouped unless it is believed that
aggregation is consistent with the duty to seek best execution
(which includes the duty to seek best price) for the accounts and is
consistent with the terms of any investment advisory agreement or
other agreements with each account for which trades are being
aggregated. In the event that the transactions are not grouped,
transactions on behalf of the Funds will be effected first in time.
3. No account will be favored over any other account; each account that
participates in an aggregated order will, to the extent practicable
participate at the average share price for all transactions in that
security on a given business day, with transaction costs shared pro
rata based on each account's participation in the transaction;
4. If an aggregated order is partially filled and allocated on a basis
different from that specified, no account that is benefited by such
different allocation may effect any purchase or sale, for a
reasonable period following the execution of the aggregated order,
that would result in it receiving or selling more shares than the
amount of shares it would have received or sold had the aggregated
order been completely filled;
5. The account books and records will separately reflect, for each
account the orders of which are aggregated, the securities held by,
and bought and sold for, that account;
6. Funds and securities of accounts whose orders are aggregated will be
deposited with one or more banks or broker-dealers, and neither the
cash nor securities of the accounts will be held collectively any
longer than is necessary to settle the purchase or sale in question
on a delivery versus payment basis; cash or securities held
collectively for accounts will be delivered out to the custodian
bank or broker-dealer as soon as practicable following the
settlement;
7. Neither the Company and any affiliate of the Company will receive
additional compensation or remuneration of any kind as a result of
the aggregation;
8. Individual investment account treatment will be accorded to each
account;
9. No Fund will be disadvantaged in the allocation of trades; and
10. The policies for the aggregation of transactions will be submitted
to approval and periodically reviewed by the Trustees of the Funds.
December 31, 1998
<PAGE>
Exhibit (p)(9)
VAUGHAN, NELSON, SCARBOROUGH & MCCULLOUGH, L.P.
VNSM TRUST COMPANY
CODE OF ETHICS AND TRADING POLICY
April 1, 1999
<PAGE>
VAUGHAN, NELSON, SCARBOROUGH & McCULLOUGH, L.P./
VNSM TRUST COMPANY
CODE OF ETHICS AND TRADING POLICY
FOREWORD
The primary goal of Vaughan, Nelson, Scarborough & McCullough, L.P. and VNSM
Trust Company (together known as Vaughan, Nelson, Scarborough & McCullough" or
"VNSM") since inception has been to be a highly professional investment counsel
firm which provides unbiased advice--that is, advice based solely on the merits
of the individual investment and undiluted by any conflicts of interest which
could prejudice the investment decision in any way. Thus, the very nature of our
business requires that the main thrust of our Code be the elimination of any
conflicts and the maintenance of a culture in which confidentiality and highest
standards of practice are paramount.
As a practical matter, we must eliminate conflicts throughout the entire
organization, so that no member who is making or who has access to investment
decisions will be influenced by the conflicting interests of anyone else in the
firm.
We are all obliged to put the interest of Vaughan, Nelson, Scarborough &
McCullough's clients before our own personal interest. The core of this Code is
the Principle of Reason, Conscience and Integrity. The firm puts the clients
first. While compliance with the Code is necessary, the best assurance of VNSM
always being a first-class investment counsel firm is for each of us to use our
own conscience as people of integrity.
<PAGE>
VAUGHAN, NELSON, SCARBOROUGH & McCULLOUGH, L.P./
VNSM TRUST COMPANY
CODE OF ETHICS AND TRADING POLICY
Vaughan, Nelson, Scarborough & McCullough, L.P., (VNSM) is an investment
management company registered under the Investment Advisers Act of 1940,
(Advisers Act). VNSM Trust Company, in addition to the Advisers Act, is also
subject to the Federal Reserve Act. It is the intention of VNSM to have created
and distributed this Code of Ethics and Trading Policy to inform and ensure all
are cognizant of and committed to the performance of their fiduciary duties
under the Advisers Act, the Federal Reserve Act and such other laws and
regulations which may be enacted from time to time.
Each Employee of Vaughan, Nelson, Scarborough & McCullough, L.P. and VNSM Trust
Company (together "VNSM Employees" or "Employees") has a fiduciary
responsibility to our Clients. This responsibility requires the maintenance by
all Employees of the highest standards of integrity and conduct both in fact and
in appearance. Employees should conduct themselves in an ethical manner at all
times when dealing with clients, the public at large and with fellow Employees
and avoid compromising or potentially compromising situations or conflicts of
interest.
VNSM Employees must at all times recognize, respect and act in the best
interests of VNSM clients. In doing so, all Employees must ensure they do not
take advantage of their position and/or engage in personal securities
transactions which might conflict with or adversely affect the interests and
welfare of VNSM clients. At no time should an Employee engage in activities
specifically prohibited by the Advisers or Federal Reserve Act, including but
not limited to, self-dealing, insider trading or other situations creating
conflicts of interest. Additionally, an Employee shall not commit a criminal act
or engage in conduct involving dishonesty, fraud, deceit or misrepresentation.
As all potential conflicts cannot be foreseen by this Code of Ethics, Employees
should adhere not only to the letter, but also to the spirit and principles
articulated in this Code of Ethics. If any legal or ethical question should
arise in the course of performing an Employee's responsibilities then advice
from counsel should be sought.
Inasmuch as VNSM chooses to conduct its business utilizing the guidelines
promulgated by the Association for Investment Management and Research (AIMR),
all Investment Principals of VNSM should be familiar with and conduct themselves
in a manner consistent with the AIMR Code of Ethics and Standards of
Professional Conduct, a copy of which is attached to this statement.
For purposes of the Code of Ethics and Trading Policy, the following definitions
shall apply:
Beneficial Ownership - as interpreted with regard to Section 16 of the
Securities and Exchange Act of 1934 and the rules and regulations
thereunder, except that the determination of direct or indirect beneficial
ownership shall apply to all securities which an Employee has or acquires.
Beneficial Ownership exists when one derives a direct or indirect economic
benefit from the purchase, sale or voting of a security. The following
are examples of common situations where Beneficial Ownership exists:
* Securities owned, whether or not registered in your name
* Securities held in a partnership, trust, estate or other
account in which one has a present or future interest in the
income or principal and has/shares investment control with
respect to transactions
* Securities owned by your spouse (including common law) or minor
children
* Securities owned by other relatives who share the same home
with you
* Securities in the name of another person where you have a right
to obtain title to the securities now or in the future.
Client - any entity, including but not limited to, individuals,
corporations, pensions, trusts, endowments, or foundations, for which VNSM
receives a fee for services or for which assets are managed, tracked or
maintained within VNSM portfolio systems.
Control - as defined in Section 202(a)(9) of the Investment Company Act of
1940, the power to exercise a controlling influence over the management or
policies of a company, unless such power is solely the result of an
official position with such company.
Employee(s) - Any individual or other entity employed by Vaughan, Nelson,
Scarborough & McCullough, L.P. or VNSM Trust Company.
Investment Principal(s) - Any individual or other entity employed by VNSM
for the purpose of investment research, analysis and/or the recommendation
of specific advice as to client portfolio investment strategies, including
but not limited to, buy and sell recommendations.
Purchase or Sale of a Security - shall include the writing of an option to
purchase or sell the security.
Reviewing Employee - individual designated by the president of VNSM with
the responsibility for the organization, implementation and compliance
aspects of this Code of Ethics and Trading Policy.
Security - Security shall mean any type of PUBLICLY-TRADED EQUITY OR DEBT
SECURITY and shall include related securities such as put and call
options, warrants, rights and convertible instruments, and financial
instruments such as futures, commodities, and derivatives. Security shall
not include direct obligations issued by the United States Government,
Bankers' Acceptances, Banks' Certificates of Deposit, Commercial Paper,
Repurchase Agreements, Money Market Instruments or shares of registered
open-end investment companies. Indirect obligations of the United States
Government such as GNMAs or FNMAs are included in the definition of
security. The term security shall also include restricted securities.
Security is being considered for Purchase or Sale - when a recommendation
to purchase or sell a security has been made and communicated or, when an
Investment Principal first indicates to the investment committee an intent
to recommend a security in an upcoming investment committee meeting.
Security is being Purchased or Sold - when, within the last three business
days, a transaction in such security has been effected for a Client, or
when a transaction in such security is pending or in progress for a
Client.
GENERAL RULE - PROHIBITED TRANSACTIONS
It is unlawful and a violation of the VNSM Code of Ethics for any Employee, in
connection with the purchase or sale, directly or indirectly, of any Security
which is being held, considered, or is in process of being purchased or sold on
behalf of VNSM Clients, to mislead, deceive, manipulate, scheme or engage in any
act or practice which would serve to defraud VNSM Clients.
Except as provided in the section entitled Exempted Transactions, no Employee
shall purchase or sell, directly or indirectly, any Security in which such
Employee has, or acquires by such contemplated transaction, any direct or
indirect Beneficial Ownership, if such Employee knows, or should have known, at
such time that the Security is being considered for, or is in process of being,
purchased or sold for VNSM Clients. This prohibition also includes a bond or
preferred stock which is convertible into such a security as well as an option
on the security.
As a practical matter, Employees will be prohibited from buying/selling a
Security:
* as part of an initial public offering (IPO)
* if the Security is actively being considered for recommendation
* if the Security has been traded for a client within three business days
before or after the expected personal trade date (see Advance Approval
of Transactions below)
* without first receiving written approval from the Trader, Asst. Trader
or the Reviewing Employee
EXEMPTED TRANSACTIONS
The restrictions and prohibitions heretofore outlined by this Code of Ethics and
Trading Policy shall not apply to:
* purchases or sales which are non-volitional on the part of the Employee;
* purchases which are part of a dividend reinvestment plan;
* purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of securities to the extent such rights
were acquired from the issuer, and sales of such rights so acquired;
* purchases or sales of securities effected in any account over which an
Employee has no direct or indirect influence or Control.
ADVANCE APPROVAL OF TRANSACTIONS
Given the nature of VNSM's advisory business, advance approval, or
"preclearance" of personal transactions will be required for all trades falling
within the definition of Security above.
A VNSM Personal Trade Sheet EXHIBIT A should be completed for each personal
trading transaction. Several securities may be included on the same Trade Sheet
if the transactions are to be executed on the same day. The Personal Trade Sheet
will incorporate (1) the date of the transaction, (2) the name or title of the
Security, (3) the number of shares or interests of the Security, (4) the type of
the transaction (e.g. purchase, sale, long or short position, etc.), (5) per
share or interest price (6) total cost or proceeds of the transaction and (7)
the name of the broker, dealer or bank.
The completed Personal Trade Sheet should be taken to the firm's Trader,
Assistant Trader or, if necessary, the Reviewing Employee for preclearance
approval prior to any execution. The approving individual will prepare a listing
of transactions for VNSM's clients during the previous three days (attaching
such listing to the Personal Trade Sheet), inquire as to current open trading
orders and make appropriate inquiry as to whether such security is actively
being considered for recommendation. If none of the above have or are taking
place, the personal trade will be approved. Approvals are valid only for the
date of approval. If an approved trade is unexecuted at the end of the day it
should be re-approved on such day as it will be executed. Once all information
and documentation for an approved personal trade is completed it will be
forwarded to the Reviewing Employee.
NOTE: Preclearance approval may also be given to personal trades by the
Reviewing Employee at his/her discretion including certain instances where 1)
transactions for VNSM's clients have been undertaken during the previous
three days, 2) there is no current open trading order and, 3) the security is
not actively being considered for recommendation. This will typically apply
to de minimus type transactions. However, in no event will approval be
granted to trade on the same day as a VNSM client.
Once approved, the Employee may execute the trade with the broker of their
choice (see Reporting Requirements below).
SUBSEQUENT REVIEW BY REVIEWING EMPLOYEE
Upon receipt of each approved Employee's Personal Trade Sheet, the Reviewing
Employee shall make a comparison of the personal trade to a listing of
transactions for VNSM's clients during the subsequent three days (attaching such
listing to the Personal Trade Sheet). The Reviewing Employee shall determine,
based upon such comparison and any other information provided by the Employee,
whether any conflict or violation of the Code of Ethics and Trading Policy has
occurred. If the Reviewing Employee believes a conflict has occurred, then the
Reviewing Employee shall provide all information to the president of VNSM, or
his designee, who will, in their sole discretion, given all the facts and
circumstances surrounding the transaction, determine whether the transaction
should be unwound and any profits disgorged. Any such profit disgorged will be
remitted to the firm for charitable distribution, as determined by the
President, or his designee.
INITIAL PUBLIC OFFERING
No Employee shall purchase, directly or indirectly, any Securities that are
offered in an initial public offering.
REPORTING REQUIREMENTS
In addition to obtaining preclearance approval on individual personal trades,
each Employee shall:
A) direct any broker effecting a transaction in any Security in which such
Employee, or member of Employee's household, has any direct or indirect
Beneficial Ownership to provide a duplicate copy of the transaction confirmation
to the Reviewing Employee.
B) on a quarterly basis, submit to the Reviewing Employee a statement that
all Security transactions entered into for which the Employee has or had a
direct or indirect Beneficial Ownership during such quarter were precleared by
the firm in accordance with this policy in such form as EXHIBIT B. If no
transactions requiring preclearance were made during a quarter, the Employee
should submit a report indicating no such transactions occurred.
C) on an annual basis, provide to the Reviewing Employee a written statement
that the Employee has read, understands and has complied with the requirements,
including reporting requirements, of this Code of Ethics and Trading Policy on a
form similar to that shown in EXHIBIT C.
The Reviewing Employee shall make available to the president of VNSM, or his
designee, all trades, information and reports submitted by Employees and a
summary of the Reviewing Employee's findings for the previous quarter as well as
details of any perceived violations. In addition, the Reviewing Employee will
recommend changes in restrictions or procedures based upon the experience of
VNSM under this Code of Ethics and Trading Policy, changes in laws or
regulations, or changes in industry practice. On at least an annual basis, the
reviewing employee/compliance officer will provide a summary report to the Board
of Directors describing the activity and results under the Code for the previous
year.
POTENTIAL CONFLICTS OF INTEREST
Trips & Gifts - Employees, or their family members, shall not give, seek or
accept any trip expense, gift, favor, or other item of value in excess of $150
to or from any broker, dealer, publicly-traded company or other entity having a
direct or indirect business and/or professional relationship with VNSM or VNSM
Clients which might in any way create or give an appearance of a conflict of
interest. This prohibition does not apply to "normal business entertainment".
Questions as to whether a particular instance constitutes "normal business
entertainment", particularly with regard to higher dollar amounts, should be
addressed to the President of VNSM.
Employees shall not directly, or indirectly, participate in any transaction
involving the payment or receipt of any bribe or kickback, or the payment or
receipt of any other amount with an understanding that part or all of such
amount will be refunded or delivered to a third party in violation of any law
applicable to the transaction.
Preferential Treatment - Employees shall not give, seek or accept any
preferential treatment in dealings with any broker, dealer, financial
institution, supplier or any other organization with which VNSM transacts or may
transact business in the future.
Investment Advice - All Employees should be extremely prudent and discreet when
discussing specific strategies and positions utilized by VNSM in the interest of
marketing, radiation and relationships with individuals or entities other than
Employees, Clients and prospective clients of VNSM. Employees are strictly
prohibited from acting jointly or individually in an investment advisory
capacity for an account other than a Client unless written approval is received
in advance from the Board of VNSM or its designee, in a form similar to that
shown as EXHIBIT D. An indication of direct or indirect compensation as a result
of such services provided should be included in any submission for written
approval. This section does not prohibit the general advice and management of
family member's personal assets, including capacities of executor, trustee,
guardian or conservator, so long as transactions are effected only after VNSM
client transactions.
Director of Publicly Traded Companies - No Employee shall serve on the board of
directors of a publicly traded company unless written authorization has been
obtained from the Board of VNSM or its designee, in a form similar to that shown
as EXHIBIT D. Such approval shall be based upon a determination that the service
is consistent with the interests of VNSM and its Clients. When such instances
are approved, the Employee shall refrain from any direct or indirect involvement
in any decision-making regarding the securities of such public company or any
affiliates thereto.
INVESTMENT CLUBS
Notwithstanding any other provisions of this Trading Policy to the contrary, an
Employee or an immediate family member of an Employee may participate in
investment clubs or similar organizations provided the Employee does not make
recommendations, directly or indirectly, to the club based upon information
obtained through employment at VNSM. Activity within such Investment Clubs is
subject to the Reporting Requirements of the Code of Ethics and Trading Policy.
RECORD RETENTION
VNSM shall retain and maintain for a five-year period all copies of, Codes of
Ethics and Trading Policy in effect during the period, all recaps submitted by
Employees, all summary reports submitted to the president and/or Board of
Directors of VNSM, or his designee, information regarding violations or
potential violations of this Code of Ethics and Trading Policy and a record of
the action(s) taken in each case.
INSIDE INFORMATION
It is unlawful under the Securities and Exchange Act of 1934 and SEC Rule 10b-5
thereunder for any person to trade or recommend trading in securities on the
basis of material, inside (non-public) information. In the case of VNSM this
includes all Employees.
Material inside information is any information about a company or the market for
a company's securities which has not been disclosed generally to the
marketplace, the dissemination of which would be likely to affect the market
price of any of the company's securities or would be likely to be considered
important by reasonable investors in determining whether or not to trade in such
securities. "Material" information would include, but is not limited to, areas
such as mergers, acquisitions, significant changes in financial condition,
changes in dividends or estimated earnings, new products, litigation, stock
buy-back programs, liquidity issues, and management changes. The determination
of whether information is "material" will be considered in light of all the
facts and circumstances surrounding the information.
"Inside" information is information that has not been publicly disclosed.
Information should be presumed to be "inside" unless one can point to some fact
or release to show that the information is public or generally available.
Any question by an Employee with regard to whether information is "inside" or
not should be resolved by discussion and in writing prior to any recommendation,
purchase or sale of the security on behalf of clients or any purchase or sale of
the security for the benefit of an Employee.
VIOLATIONS
Any Employee who becomes aware of a violation or apparent violation of the Code
of Ethics and Trading Policy shall advise the president of VNSM, or his
designee. The president of VNSM, or his designee, shall determine whether a
violation has occurred and, if so, will consult legal counsel, if necessary, and
take such course of action as he or she deems appropriate. Such actions could
include censure, suspension or termination of employment. Additionally, the
Employee involved in the violation may be required to either unwind the
transaction, if feasible, or disgorge all profits from the transaction with any
such profits remitted to the firm for charitable distribution.
CONFIDENTIALITY
The firm's relationship with clients is entirely confidential and no disclosure
of the name or of any detail of the personal circumstances of a client shall be
made to anyone not a member of the firm without the specific permission of the
client.
Each employee must agree that, both before and after the term of employment,
they will not attempt in any way, directly or indirectly, to solicit any of our
clients or otherwise disturb the firm's client relationships.
Each employee agrees that, upon the termination of employment, they will not
take with them any of our records, correspondence, files, forms, documents or
data of any nature whatsoever pertaining to the firm's clients, publications,
procedures, or research activities, and that they will not prepare or take with
them any copies of the same, and that they will not, before or after termination
of employment, make any of such records or other information or data available
to any other person or firm. All information in our files pertaining to the
clients of the firm or our publications, forms, procedures, research or
counseling activities, and all material and information contained in our
research files, including memoranda of research field work, is confidential
property of the firm.
<PAGE>
<TABLE>
VAUGHAN, NELSON, SCARBOROUGH & MCCULLOUGH, L.P. / VNSM TRUST COMPANY
PERSONAL TRADE SHEET
EXHIBIT A
<S> <C> <C> <C> <C> <C>
FOR THE ACCOUNT OF: DATE:
-------------------------------------------------------- -----------------
BUY
SECURITY EXECUTED TOTAL
NO. OF SHARES ------------------------------------ DATE PRICE COST /
OR CONTRACTS SYMBOL NAME EXECUTED PER SHARE PROCEEDS
- ------------ ------ ---- -------- --------- --------
- ---------------- ---------- ----------------------- ---------- -------------- --------------
- ---------------- ---------- ----------------------- ---------- -------------- --------------
- ---------------- ---------- ----------------------- ---------- -------------- --------------
- ---------------- ---------- ----------------------- ---------- -------------- --------------
SELL
- ---------------- ---------- ----------------------- ---------- -------------- --------------
- ---------------- ---------- ----------------------- ---------- -------------- --------------
- ---------------- ---------- ----------------------- ---------- -------------- --------------
- ---------------- ---------- ----------------------- ---------- -------------- --------------
</TABLE>
BROKERAGE FIRM:
---------------------------------------
TELEPHONE NUMBER:
---------------------------------------
REPRESENTATIVE:
---------------------------------------
This trade is in accordance with the following:
Officers, principals and employees of Vaughan, Nelson, Scarborough & McCullough,
L.P. or VNSM Trust Company (the "Company") may execute orders on behalf of the
Company, its subsidiaries, their own accounts or other accounts, however, it is
a policy of the Company that they must avoid security transactions and
activities for these accounts which might conflict with or be detrimental to the
interests of clients, or which are designed to profit by market effect of the
Company's advice to its clients. A specific policy for officers, principals and
employees has been established whereby all trades must be approved by authorized
individuals of the Company. No sales or purchases may be made by the Company or
an officer or employee in a security while it is being purchased or sold for a
client's account. Officers, principals and employes of the Company may own the
same securities as those held in clients' accounts; however, the client would
always receive preferential treatment on orders over those orders by officers,
principals and employees of Company.
EMPLOYEE SIGNATURE
-------------------------------------------------
APPROVED BY:
-------------------------------------------------
(Trader, Asst. Trader, Reviewing Employee)
<PAGE>
EXHIBIT B
Vaughan, Nelson, Scarborough & McCullough, L.P.
VNSM Trust Company
DATE:
----------------------
TO: Reviewing Employee
FROM:
----------------------
RE: PERSONAL TRADING
- ------------------------------------------------------------------------------
As required by the SEC and as part of the firm's Code of Ethics and Trading
Policy (the "Code"), I am confirming that all buy/sell transactions (equity or
fixed income) conducted during the previous calendar quarter for myself, my
spouse or any other account for which I have direct or indirect Beneficial
Ownership of, or control over, have been approved by an authorized individual in
advance the transaction in accordance with the Code's procedures.
___ No personal trading was undertaken during the proceeding quarter.
--------------------------------------
Employee Signature
<PAGE>
VAUGHAN, NELSON, SCARBOROUGH & MCCULLOUGH, L.P.
VNSM TRUST COMPANY
EXHIBIT C
CODE OF ETHICS AND TRADING POLICY
ANNUAL COMPLIANCE FORM
By signature below, I hereby acknowledge that I have read the Vaughan, Nelson,
Scarborough & McCullough, L.P. / VNSM Trust Company Code of Ethics and Trading
Policy and have understood and complied with all requirements as stipulated
therein including, but not limited to, the preclearance of all security
transactions in which I have/had a direct or indirect beneficial ownership.
EMPLOYEE NAME:
----------------------------------
DATE:
-------------------------------------------
<PAGE>
VAUGHAN, NELSON, SCARBOROUGH & MCCULLOUGH, L.P.
VNSM TRUST COMPANY
EXHIBIT D
APPROVAL OF INVESTMENT ADVISER CAPACITY OUTSIDE OF VNSM CLIENTS
OR DIRECTORSHIP OF PUBLICLY TRADED COMPANY
Please describe the entity or individual for which an investment adviser
capacity or directorship is requested.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Please describe your current relationship to the entity or individual.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Please describe any remuneration or payments to be received either directly or
indirectly based upon the proposed investment advisory or directorship
arrangement.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
APPROVED BY:
----------------------------------
DATE:
----------------------------------
<PAGE>
Exhibit (p)(10)
STATEMENT OF POLICY ON PERSONAL SECURITIES TRANSACTIONS AND GUIDELINES FOR
PERSONAL TRADING
(CODE OF ETHICS)
MONTGOMERY ASSET MANAGEMENT, LLC
MAM COLORADO, LLC
THE MONTGOMERY FUNDS
THE MONTGOMERY FUNDS II
THE MONTGOMERY FUNDS III
Revised October 1999
Introduction
As a registered investment company with substantial responsibility
to shareholders, each of The Montgomery Funds, The Montgomery Funds II and The
Montgomery Funds III (together, the "Trusts") has an obligation to implement and
maintain a meaningful policy governing the personal securities transactions of
its trustees, officers, and advisory persons (collectively, "access persons").
The purpose of the Code of Ethics is to minimize conflicts of interest
(including the appearance of such conflicts), as well as to comply with the
provisions of Section 17(j) of the Investment Company Act of 1940 (the "1940
Act") and Rule 17j-1 thereunder. In addition, this Code of Ethics is designed to
protect fiduciary relationships owed to Montgomery Asset Management, LLC and MAM
Colorado, LLC (collectively, "MAM") clients and each series of the Trusts and to
provide a program for detecting and preventing insider trading by the officers,
trustees and employees of MAM and the Trusts.
Section 17(j) of the 1940 Act makes it unlawful for an affiliated
person of a registered investment company to engage in transactions in
securities which are also held or are to be acquired by a registered investment
company if such transactions are in contravention of rules adopted by the
Securities and Exchange Commission to prevent fraudulent, deceptive, or
manipulative practices. Section 17(j) broadly prohibits any such affiliate from
engaging in any type of manipulative, deceptive, or fraudulent practice with
respect to the investment company and, furtherance of that prohibition, requires
each registered investment company to adopt a written code of ethics containing
provisions reasonably necessary to prevent "access persons" from engaging in
conduct prohibited by the Rule. The Rule also requires that reasonable diligence
be used and procedures instituted to prevent violations of such code of ethics.
This Code of Ethics is intended to comply with the requirements of
Section 17(j) and Rule 17j-1 and a copy of this Code of Ethics shall be
circulated to each access person by an officer of the relevant Trust together
with an acknowledgment of receipt which shall be signed and returned to a
designated compliance officer by each access person. The designated compliance
officer is charged with responsibility for ensuring that the requirements of
this Code of Ethics are adhered to by all access persons.
The Code recognizes that a fiduciary relationship exists with
respect to MAM's clients and each series of the Trusts (each, a "Fund"). This
Code of Ethics is intended to provide legal protection to the Trusts and their
shareholders and MAM accounts and account holders for which a fiduciary
relationship exists, and at the same time maintain an atmosphere within which
conscientious professionals can make responsible personal investment decisions.
As a matter of policy, this Code of Ethics should not and is not intended to
inhibit responsible personal investment within the boundaries reasonably
necessary to protect MAM's clients and the Trusts. To that end, this Code is
designed to encourage investment in a manner that is consistent with the
fiduciary relationships that exist between MAM and its clients and MAM and the
Trusts.
This Code of Ethics is not intended to cover all possible areas of
potential liability under the 1940 Act or under the federal securities law in
general. For example, other provisions of Section 17 of the 1940 Act prohibit
various transactions between a registered investment company on a principal
basis, and joint transactions (e.g., combining to achieve a substantial position
in a security or commingling of funds) between an investment company and an
affiliated person. Persons covered by this Code, therefore, are advised to seek
advice before engaging in any transactions involving securities held or under
consideration for purchase or sale by a Fund or if a transaction directly or
indirectly involves themselves and any Trust, other than the purchase and
redemption of shares of a Fund in the performance of their normal business
duties.
In addition, the Securities Exchange Act of 1934 may impose
fiduciary obligations and trading restrictions on access persons in certain
situations. It is expected that access persons will be sensitive to these areas
of potential conflict, even though this Code of Ethics does not address
specifically these other areas of fiduciary responsibility.
Definitions
1. "Access person" means any officer, trustee or advisory person of
a Fund or a Trust, including certain employees located in the San Francisco
office of the distributor of the Funds, Funds Distributor, Inc., who perform
sales activities for the Funds, and certain members of the Steering Committee
for MAM who have regular access to information about portfolio transactions of
the Funds or other clients of MAM. For purposes of this Code of Ethics, access
persons also include members of such person's immediate family (i.e., husband,
wife, children and who are directly or indirectly dependents of an access
person), accounts in which an access person or members of his or her family has
a beneficial interest or over which an access person has investment control or
exercises investment discretion (e.g., a trust account).
2. "Advisory person" means (i) any employee of the Trusts or its
investment adviser or any company in a control relationship to the Trusts, who
in connection with his, her or its regular functions or duties, makes,
participates in, or obtains information regarding the purchase or sale of a
security by a Fund, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and (ii) any natural
person in a control relationship to the Trusts or their investment adviser who
obtains information concerning the recommendations made to the Fund with regard
to the purchase or sale of a security.
Advisory persons include officers, members and control persons of
MAM, and the Trusts, as well as all persons involved in the advisory process,
including portfolio managers, traders, employees whose duties or functions
involve them in the investment process, and any employee (including employees of
MAM's affiliates) who obtains information concerning the investment decisions
that are being made for MAM clients and the Funds.
3. A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been communicated and, with
respect to the person making the recommendation, when such person seriously
considers making such a recommendation.
4. "Beneficial ownership" shall be interpreted in the same manner
as it would be in determining whether a person is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934 and the rules and regulations
thereunder, except that the determination of direct or indirect beneficial
ownership shall apply to all securities which an access person has or acquires.
5. "Cash compensation" means any discount, concession, fee, service
fee, commission, asset-based sales charge, loan, override or cash employee
benefit received in connection with the sale and distribution of the Funds or
the offering of MAM's services.
6. "Control" means the power to exercise a controlling influence
over the management or policies of any Trust, unless such power is solely the
result of an official position with such Trust as further defined in Section
2(a)(9) of the 1940 Act.
7. "Hot-issue" is defined as securities of a public offering which
trade at a premium in the secondary market whenever such secondary market
begins.
8. "Non-cash compensation" means any form of compensation received
in connection with the sale and distribution of the Funds or the offering of
MAM's services that is not cash compensation, including but not limited to
merchandise, gifts and prizes, travel expenses, meals and lodging.
9. "Securities" or "Security" shall have the meaning set forth in
Section 2(a)(36) of the 1940 Act except that it shall not include shares of
registered open end investment companies, securities issued by the Government of
the United States (including Government agencies), short-term debt securities
which are "government securities" within the meaning of Section 2(a)(16) of the
1940 Act ("Government Securities"), bankers acceptances, bank certificates of
deposit and commercial paper. Securities also shall include futures, options and
other derivatives.
Persons covered by this Code.
This Code applies to all officers, members and control persons of
MAM, and the Trusts. This Code also applies to all persons involved in the
advisory process, including portfolio managers, traders, employees whose duties
or functions involve them in the investment process, and any employee who
obtains information concerning the investment decisions that are being made for
MAM clients and the Funds, including such employees of MAM's affiliates. All
such persons shall be designated access persons for purposes of this Code. This
Code also applies to investments by members of an access person's immediate
family (as described above), accounts in which an access person or members of
his or her family has a beneficial interest or over which an access person has
investment control or exercises investment discretion. Access persons also
remain fully subject to the obligations imposed by MAM's trading policies as
contained in its Compliance Manual.
The disinterested trustees of the Trusts shall not be considered
access persons solely by reason of their trusteeship.
Persons Covered by Other Codes of Ethics
Each Access Person or Advisory Person who would otherwise be
covered by this Code of Ethics shall be excluded from the pre-approval,
reporting and other requirements of this Code of Ethics if that Access Person or
Advisory Person is subject to another organization's code of ethics satisfactory
to MAM and the Trustees of the Trusts.
Pre-Approval
All purchases and sales (including short sales) of individual
Securities (defined above to exclude Government Securities and other items) must
be pre-approved before an order is placed. Transactions involving options,
futures and other derivatives also require pre-approval. Approval must be given
by one of the persons on Exhibit A of this Code. Approval should be obtained in
writing using the form attached as Exhibit B (or, in unusual circumstances,
promptly confirmed in writing), initialed by one of the persons identified on
Exhibit A, and, once approved, orders must be executed within two business days
of the approval date. No exceptions will be given for the two business day
approval period for unfilled limit orders.
As necessary, before giving approval, the person providing approval
will consult (on a "no name" basis) with the appropriate portfolio managers to
determine whether the proposed sale or accusation in any way conflicts with an
investment decision being contemplated or carried out on behalf of a MAM client
or Fund. Access persons seeking approval to acquire or dispose of individual
securities should allow sufficient time for this review and approval process.
Prohibited Purchases and Sales
No approval will be given for proposed transactions that violate
the following rules, subject to the limited exception given below. No access
person shall purchase or sell (including short sales and options), directly or
indirectly, any security in which he or she has, or by such transaction
acquires, any direct or indirect beneficial ownership, which security at the
time of such purchase or sale:
(1) is being considered for purchase or sale by a Fund or a
MAM client account;
(2) is being purchased or sold by a Fund or a MAM client account;
or
(3) was purchased or sold by a Fund or a MAM client account
within the most recent 15 days.
Additionally, no access person shall engage in a transaction,
directly or indirectly, that involves an opportunity that a Fund could utilize,
unless one of the persons indicated in Exhibit A has confirmed, on behalf of the
Funds, that the Funds do not wish to take advantage of the opportunity and
approves such transaction.
These restrictions shall continue to apply until the recommendation
has been rejected or any authorization to buy or sell has been completed or
canceled. Knowledge of any such consideration, intention, recommendation or
purchase or sale is always a matter of strictest confidence.
These restrictions shall not apply to purchases or sales of
securities which receive the prior approval of a person indicated in Exhibit A
where that person, in his or her discretion, has determined that such purchases
or sales are only remotely potentially harmful to any Trust or its Funds or a
MAM client account, where they would be very unlikely to affect a highly
institutional market or where they are clearly not related economically to the
securities to be purchased, sold or held by a Fund or a MAM client account.
Additional Investment Policies
1. No Insider Trading. Access persons are prohibited from trading
in or recommending that others trade in securities on the basis of material
non-public information about the issuers of such securities. Access persons who
obtain confidential information about a security should contact MAM's General
Counsel or Chief Compliance Officer immediately. MAM will not provide any
assistance to any individual who has acted improperly with regard to
confidential information about securities. If you have any doubt as to whether
you may trade particular securities or recommend particular securities for
purchase or sale, ask before you trade or make such a recommendation.
2. Investment Through the Funds Encouraged. All access persons are
encouraged to make personal investments exclusively through the Funds or other
mutual funds, and to limit their investments in individual securities to mutual
funds or to Government Securities. No prior approval is needed to make such
investments.
3. No Trading. All individual security positions are expected to be
taken for investment purposes. Securities trading as distinct from investment is
discouraged. If an access person desires to sell a position he or she has held
for less than six months (or desires to re-acquire a recently liquidated
position), the approval request must include an explanation of the reason for
the transaction (mutual funds and Government Securities excepted).
4. Ownership Reports and New Employees. Access persons who are new
employees of MAM shall submit the form attached as Exhibit F disclosing a report
of current security holdings WITHIN 10 DAYS of their employment commencement and
shall subsequently follow this Code of Ethics in receiving approvals to
liquidate or add to their security positions.
5. Private Placements. Investments in private placements and other
individual securities that are not generally available to the public may present
conflicts of interest even though such securities may not be currently eligible
for acquisition by some or all of MAM's clients or Funds. Prior approval must be
obtained before buying or selling such investments, as with any other individual
security transaction. In addition, with respect to private placements, the
approval request must indicate that the investment is being purchased (or
liquidated) on terms that are substantially the same to the terms available to
other similarly situated private investors, and that the access person does not
have any specific knowledge of an imminent public offering or any material
nonpublic information about the issuer. It is expected that any investment in a
private placement or similar security will be held for at least six months. If
the security subsequently becomes eligible for investment by a MAM client and/or
a Fund and is, in fact, purchased by such client or Fund, any access person who
owns the security will be expected to continue to hold such security for at
least six months following its public offering.
6. Private Investment Partnerships. Just as investments through
mutual funds are encouraged and investments in individual securities are
discouraged in order to minimize potential conflicts of interest and/or the
appearance of any conflict of interest, MAM likewise encourages access persons
to effect their venture investments through venture limited partnerships rather
than individual private placements. Although venture limited partnerships are
preferred over individual private placements, venture limited partnerships
nevertheless can present potential conflicts. Accordingly, while pre-approval is
not required to participate in a venture limited partnership, an access person
will be expected to report any transaction involving a venture limited
partnership within 10 days of the investment to one of the persons on Exhibit A.
7. Trade Through Charles Schwab & Co., Inc. All access persons are
strongly encouraged to execute all of their securities transactions through
Charles Schwab & Co., Inc. ("Schwab") (unless Schwab cannot execute the trade
and/or custody the securities). Accounts with other brokerage firms should not
be maintained unless specific written approval regarding the maintenance of such
accounts has been given by one of the persons on Exhibit A. All brokers other
than Schwab maintaining accounts for MAM access persons shall be instructed to
provide duplicate confirmations of all transactions to MAM and it shall be the
responsibility of the access person to ensure that MAM receives such duplicate
confirmations.
8. No Directorships. No access person may serve on the board of
directors for any private or public operating company without prior written
approval from one of the persons on Exhibit A. Such directorships are generally
discouraged because of their potential for creating conflicts of interest.
Access persons should also restrict their activities on committees (e.g.,
advisory committees or shareholder/creditor committees). This restriction is
necessary because of the potential conflict of interest involved and the
potential impediment created for MAM's clients and the Funds. Access persons
serving on boards or committees of operating companies may obtain material
non-public information in connection with their directorship or position on a
committee that would effectively preclude the investment freedom that would
otherwise be available to MAM's clients and the Funds.
9. No Special Favors. It goes without saying that no access person
may purchase or sell securities on the basis of material non-public information
or in reciprocity for allocating brokerage, buying securities in MAM's client
and Fund accounts, or any other business dealings with a third party.
Information on or access to personal investments as a favor for doing business
on behalf of MAM's clients or Funds - - regardless of what form the favor takes
- - - is strictly prohibited. The appearance of a "special favor" is also
sufficient to make a personal transaction prohibited under this Code.
10. Non-Cash Compensation. Every six months, access persons shall
complete and sign a Non-Cash Compensation Acknowledgement and Certification form
attached as Exhibit E. No access person shall directly or indirectly accept or
make payments or offers of payments of any non-cash compensation except as
provided below:
(a) gifts that do not exceed an annual amount per access
person or other person of $100 and are not
preconditioned on achievement of a sales target or
volume of trades;
(b) an occasional meal, a ticket to a sporting event or
theater or comparable entertainment which is neither so
frequent nor so extensive as to raise any question of
propriety and is not preconditioned on achievement of a
sales target or volume of trades;
(c) payment or reimbursement in connection with meetings
held for the purpose of training or education of access
persons or other persons provided that:
(i) (in the case of access persons only) access
persons obtain MAM's written approval using
the form attached as Exhibit C to attend the
meeting and (in the case of access persons and
other persons) attendance by access persons or
other persons is not preconditioned on the
achievement of a sales target or any other
incentives pursuant to a non-cash compensation
arrangement;
(ii) the location is appropriate for the purpose of
the meeting;
(iii) the payment or reimbursement is not applied to
the expenses of guests of the access person or
other person; and
(iv) the payment or reimbursement is not
preconditioned on the achievement of a sales
target or volume of trades.
11. No Hot-Issues. No access person may purchase or receive a hot
issue in any of his or her accounts, including any accounts in which the access
person has a beneficial interest.
Reporting
1. Subject to the exceptions set forth below, every access person
shall report to the Trusts the information described in subsection 2 below with
respect to transactions in any security in which such access person has, or by
reason of such transaction acquires, any direct or indirect beneficial ownership
in the securities.
2. Every report shall be made not later than 10 days after the end
of the calendar quarter in which the transaction to which the report relates was
effected and shall be on the Form attached hereto as Exhibit D or on a form that
contains substantially the same information (i.e., a brokerage confirmation
statement) and shall contain the following information:
(a) the date of the transaction, the title and the number
of shares, and the principal amount of each security
involved;
(b) the nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);
(c) the price at which the transaction was effected; and
(d) the name of the broker, dealer or bank with or through
which the transaction was effected.
3. Any such report may contain a statement that making such report
should not be construed as an admission that an access person has any direct or
indirect beneficial ownership in the security to which the report relates.
4. Copies of bank statements or broker's advice containing the
information specified in subsection 2 above may be attached to the report
instead of listing the transactions.
Exceptions to Reporting Requirements and Prohibited Sales and Purchases
Notwithstanding any other provision of this Code, an access person
need not make a report:
(a) with respect to transactions effected for any account
over which such person does not have any direct or
indirect influence;
(b) where the purchase or sale of securities involves a
trustee of any Trust who is not an "interested
person" (as defined in Section 2(a)(19) of the 1940
Act) of the Trust, provided such trustee neither
knew nor, in the ordinary course of fulfilling his
or her duties as a trustee, should have known that
during the 15-day period immediately preceding or
after the date of the transaction such security was
under consideration for purchase or sale (or was
purchased or sold) by any Fund of the Trust; and
The reporting provisions and prohibitions on sales and purchases
contained in this Code also shall not apply to:
(a) purchases or sales of securities which are
non-volitional on the part of either the access person
or the relevant Trust (e.g., receipt of gifts);
(b) purchases of securities which are part of an automatic
dividend reinvestment plan; and
(c) purchases of securities effected upon the exercise of
rights issued by an issuer pro rata to all holders of a
class of its securities, to the extent such rights were
acquired from such issuer, and the sales of such rights
so acquired.
Compliance Review
A designated compliance associate shall compare all reports of
personal securities transactions with completed and contemplated portfolio
transactions of each Fund to determine whether a violation of the Code of Ethics
may have occurred. No person shall review his or her own report. Before making
any determination that a violation has been committed by any person, the
designated compliance associate shall give such person an opportunity to supply
additional explanatory material.
If the designated compliance associate determines that a violation
of the Code of Ethics has or may have occurred, he or she shall, following
consultation with counsel to the Trusts, submit his or her written
determination, together with the transaction report, if any, and any additional
explanatory material provided by the individual, to the Compliance Director or
to the President who shall make an independent determination of whether a
violation has occurred.
If it is determined that a material violation has occurred, a
report of the violation shall be made to the Board of Trustees, and the trustees
shall determine the appropriate course of action. If a securities transaction of
the designated compliance associate is under consideration, the Chairman shall
act in all respects in the manner prescribed herein for the designated
compliance associate.
Confidentiality
All reports of securities transactions and any other information
filed pursuant to this Code of Ethics shall be treated as confidential, but are
subject to review as provided herein and by personnel of the Securities and
Exchange Commission.
Interpretation of Provisions
An annual written report will be provided to the Board of
Trustees by MAM, describing any material issues that arose during the previous
year under the Code. In addition, the Board of Trustees will certify that the
Trusts have adopted procedures reasonably necessary to prevent access persons
from violating the Code.
Any material changes to the Code must be approved by the Board of
Trustees within six months of such changes.
Exceptions
Exceptions to the requirements contained in this Code will be
permitted only in highly unusual circumstances. Any exception must be documented
and approved by one of the persons listed in Exhibit A.
Annual Certification and Ownership Statement
Each access person shall re-certify his or her familiarity with
this Code of Ethics and report all security holdings annually by using the form
attached as Exhibit F.
<PAGE>
EXHIBIT A
Persons Designated to Give Approval of Transactions:
Mark B. Geist
Dana E. Schmidt
<PAGE>
EXHIBIT B
MONTGOMERY ASSET MANAGEMENT
EMPLOYEE TRADING AUTHORIZATION
Please complete the information below to obtain authorization to purchase or
sell securities in your personal brokerage accounts. AUTHORIZATION, IF GRANTED,
WILL ONLY BE VALID FOR A PERIOD OF TWO BUSINESS DAYS FROM THE DATE BELOW.
EMPLOYEE TO COMPLETE THIS SECTION.
- -------------------------------------------------------------------------------
Name __________________________________________ Ext. ____________
- -------------------------------------------------------------------------------
Security ______________________________________________________
(if an option, is it covered?)
- -------------------------------------------------------------------------------
Symbol & Exchange ______________________________________________________
(NYSE, NASDAQ, ASE, Pink Sheets, Private or other?)
Account # Schwab ______________________ DST _________________________
(If new DST account, attach
fund application)
Buy/Sell __________________ If sell, date of purchase ________________
# of Shares or $ Amount of Fund _____________________________________
Reason for trade: ____________________________________________________________
(If "Buy" you are expected to hold the position for at least
6 months, in compliance with MAM's Code of Ethics.)
I have read and understood sections of the Code of Ethics related to insider
trading. This trade is not based on insider information as defined in the
policy.
Employee Signature ________________________________________________
Date __________________________________
- -------------------------------------------------------------------------------
COMPLIANCE TO COMPLETE THIS SECTION.
- -------------------------------------------------------------------------------
Is this security currently owned or under consideration for purchase or sale in
MAM advisory accounts?
Yes _______ No _______ Date of Last Trade _____________________
If yes, attach trading details.
Portfolio Manager(s) contacted: ______________________________________________
Approval Granted? Yes _______ Date _____________________
If no, provide details.
Compliance Signature* _____________________________________________________
Name
- -------------------------------------------------------------------------------
* This Form may only be signed by Dana Schmidt or Mark Geist.
TRADES MUST BE EXECUTED WITHIN TWO BUSINESS DAYS OF THE APPROVAL DATE!
(No exceptions will be given for unfilled limit orders.)
<PAGE>
EXHIBIT C
Name ____________________________________________________
Name of meeting or event ________________________________
Location ________________________________________________
Sponsor _________________________________________________
I certify that attendance at this meeting or event is in compliance with the
following rules:
1. Attendance is not preconditioned on achievement of sales targets or
a certain volume of trades, or any other incentives pursuant to a
non-cash compensation arrangement.
2. The location of this event is appropriate (e.g., a resort or other
location suitable for corporate events) for the purpose of the
meeting.
3. No payment or reimbursement will be applied to the expenses of
spouses or guests of the access person.
4. No payment or reimbursement is preconditioned on the achievement of
sales targets or a certain volume of trades.
5. Approximate value of payment or reimbursement to access person: $
Employee Signature: _______________________ Date: ___________________
Approved: Yes _____________ No _______________
Compliance Officer: ___________________________________
<PAGE>
EXHIBIT D
PERSONAL SECURITY TRANSACTION REPORT
(A brokerage statement containing the same information may be submitted in lieu
of this Report.)
Person for whom
Report is being made: ____________________ Quarter Ending ___________, 19__
There were NO securities transactions reportable by me during the above quarter,
except those listed below. Note: All transactions are reportable (regardless of
size) except purchases and sales of shares of registered open-end investment
companies, securities issued by the Government of the United States, short term
debt securities which are "government securities" within the meaning of Section
2(a)(16) of the Act, bankers acceptances, bank certificates of deposit and
commercial paper. Bank or brokers statements may be attached if desired instead
of listing the transactions. If necessary, continue on the reverse side. If the
transaction is not a sale or purchase, mark it with a cross and explain the
nature of each account in which the transaction took place, i.e., personal,
wife, children, charitable trust, etc.
PURCHASES
Reviewing
Amount/No. Nature of Officers
Date Security of Shares Price Broker Account Initials
- -------------------------------------------------------------------------------
SALES
Date:
Signature:
EXPLANATORY NOTES
This report must be filled quarterly by the 10th day of the month following the
end of the quarter and cover all accounts in which you have an interest, direct
or indirect. This includes any account in which you have "beneficial ownership"
(unless you have no interest or control over it) and non-client accounts over
which you act in an advisory or supervisory capacity.
( ) Tick if you wish to claim that the reporting of the account of the
securities transaction shall not be construed as an admission that you have any
direct or indirect beneficial ownership in such account or securities.
<PAGE>
EXHIBIT E
MONTGOMERY ASSET MANAGEMENT
SEMI-ANNUAL NON-CASH COMPENSATION
ACKNOWLEDGEMENT AND CERTIFICATION
I hereby acknowledge and certify that I understand the rules and procedures
under the Montgomery Asset Management Code of Ethics regarding Non-Cash
Compensation.
I further certify that during the last six months I have not directly or
indirectly accepted or made payments or offers of payments of any non-cash
compensation, except for:
(a) gifts that do not exceed an annual amount per access person or other
person of $100 and are not preconditioned on achievement of a sales
target or volume of trades;
(b) an occasional meal, a ticket to a sporting event or theater or comparable
entertainment which is neither so frequent nor so extensive as to raise
any question of propriety and is not preconditioned on achievement of a
sales target or volume of trades;
(c) payment or reimbursement in connection with meetings held for the purpose
of training or education of access persons or other persons provided
that:
(i) the access person has obtained MAM's written approval to attend the
meeting and (in the case of access persons and other persons)
attendance by access persons or other persons is not preconditioned
on the achievement of a sales target or any other incentives
pursuant to a non-cash compensation arrangement;
(ii) the location is appropriate for the purpose of the meeting;
(iii) the payment or reimbursement is not applied to the expenses of
guests of the access person or other person; and
(iv) the payment or reimbursement is not preconditioned on the
achievement of a sales target or volume of trades.
Date
-------------------
- -------------------------
Print Name
- --------------------------
Signature
<PAGE>
EXHIBIT F
MONTGOMERY ASSET MANAGEMENT, LLC
- ------------------------------------------------------------------------------
ANNUAL EMPLOYEE CERTIFICATION & OWNERSHIP STATEMENT
INSTRUCTIONS: COMPLETE ALL SECTIONS OF FORM, IF NOT APPLICABLE, PLEASE INDICATE
N/A OR NONE. SIGN YOUR NAME & DATE. NEW MAM EMPLOYEES: ATTACH A COPY OF YOUR
MOST RECENT ACCOUNT STATEMENT FOR EACH OF THE ACCOUNTS LISTED BELOW*
- -------------------------------------------------------------------------------
CHARLES SCHWAB ACCOUNTS
1. Account Name ________________________________________________
Account Number ________________________________________________
2. Account Name ________________________________________________
Account Number ________________________________________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
OUTSIDE ACCOUNTS (All other brokerage accounts holding securities or mutual
funds)
1. Account Name ________________________________________________
Account Number ________________________________________________
Firm Name ________________________________________________
Are statements with confirms being sent to Compliance? ________________
2. Account Name ________________________________________________
Account Number ________________________________________________
Firm Name ________________________________________________
Are statements with confirms being sent to Compliance? ________________
- ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ACCOUNTS MANAGED BY INVESTMENT ADVISORS
Name of Advisor ________________________________________________
Account Name/Number ________________________________________________
Are statements with confirms being sent to Compliance? ________________
PARTNERSHIPS (Limited and General)
Account Name ________________________________________________
Are you a limited or general partner? ________________________________
Can you make or influence securities investments ______________________
by the partnership? ________________________
Are statements with confirms being sent to Compliance? ________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PRIVATE PLACEMENTS OR STOCK CERTIFICATES HELD AT HOME
Name of Security ________________________________________________
Private Placement or Stock Certificate? _______________________________
Acquisition Date ________________________________________________
- -------------------------------------------------------------------------------
Employee Name: _________________ Signature: ___________________ Date: ________
* NEW MAM EMPLOYEES MUST SUBMIT A LIST OF ALL SECURITY HOLDINGS WITHIN 10 DAYS
OF THEIR EMPLOYMENT COMMENCEMENT.
<PAGE>
Exhibit (p)(11)
BACK BAY ADVISORS, L.P.
CODE OF ETHICS
Adopted April 1, 2000
This is the Code of Ethics of Back Bay Advisors, L.P. (the "Firm").
THINGS YOU NEED TO KNOW TO USE THIS CODE
1. Terms in BOLDFACE TYPE have special meanings as used in this Code.
To understand the Code, you need to read the definitions of these terms. The
definitions are at the end of the Code.
2. To understand what parts of this Code apply to you, you need to know
whether you fall into one of these categories:
o ACCESS PERSON
o INVESTMENT PERSON
If you don't know, ask the Compliance Officer.
Currently all employees of the Firm are designated as INVESTMENT
PERSONS. If you have any questions regarding this policy, ask the COMPLIANCE
OFFICER. With respect to the provisions detailed below, the Code Officer has the
authority to act on behalf of the Compliance Officer.
This Code has three sections:
Part I-- Applies to All Personnel
Part II-- Applies to ACCESS PERSONS and INVESTMENT PERSONS
Part III--Definitions
There are also three Reporting Forms that ACCESS PERSONS have to fill
out under this Code. You can get copies of the Reporting Forms from the
COMPLIANCE OFFICER.
NOTE: If you are an INVESTMENT PERSON, you are automatically an ACCESS
PERSON too, so you must comply with both the ACCESS PERSON provisions and the
INVESTMENT PERSON provisions.
By SEC rule, all the members of the board of directors of the Firm's
general partner, Back Bay Advisors, Inc. ("BBA Inc.") are ACCESS PERSONS, even
those who aren't employees of the Firm. So all board members are subject to both
Part I and Part II of this Code.
3. The Compliance Officer has the authority to grant written waivers of
the provisions of this Code in appropriate instances. However:
o the Firm expects that waivers will be granted only in rare instances,
and
o some provisions of the Code are mandated by SEC rule and cannot be
waived.
<PAGE>
PART I--APPLIES TO ALL PERSONNEL (INCLUDING ALL MEMBERS OF THE BBA INC. BOARD)
A. GENERAL PRINCIPLES--THESE APPLY TO ALL PERSONNEL (INCLUDING ALL BBA INC.
BOARD MEMBERS)
The Firm is a fiduciary for its investment advisory and sub-advisory
clients. Because of this fiduciary relationship, it is generally improper for
the Firm or its personnel to
o use for their own benefit (or the benefit of anyone other
than the client) information about the Firm's trading or
recommendations for client accounts; or
o take advantage of investment opportunities that would
otherwise be available for the Firm's clients.
Also, as a matter of business policy, the Firm wants to avoid even the
appearance that the Firm, its personnel or others receive any improper benefit
from information about client trading or accounts, or from our relationships
with our clients or with the brokerage community.
The Firm expects all personnel to comply with the spirit of the Code,
as well as the specific rules contained in the Code.
The Firm treats violations of this Code (including violations of the
spirit of the Code) very seriously. If you violate either the letter or the
spirit of this Code, the Firm might impose penalties or fines, cut your
compensation, demote you, require disgorgement of trading gains, impose a ban on
one's personal trading, suspend or terminate your employment.
Improper trading activity can constitute a violation of this Code. But
you can also violate this Code by failing to file required reports in a timely
manner, or by making inaccurate or misleading reports or statements concerning
trading activity or securities accounts. Your conduct can violate this Code even
if no clients are harmed by your conduct.
If you have any doubt or uncertainty about what this Code requires or
permits, you should ask the COMPLIANCE OFFICER. Don't just guess at the answer.
B. GIFTS TO OR FROM BROKERS, CLIENTS OR OTHERS--THIS APPLIES TO ALL PERSONNEL
(INCLUDING ALL BBA INC. BOARD MEMBERS)
No personnel may accept or receive on their own behalf or on behalf of
the Firm any gift or other accommodations from a vendor, broker, securities
salesman, client or prospective client (a "business contact") that might create
a conflict of interest or interfere with the impartial discharge of such
personnel's responsibilities to the Firm or its clients or place the recipient
or the Firm in a difficult or embarrassing position. This prohibition applies
equally to gifts to members of the FAMILY/HOUSEHOLD of firm personnel.
No personnel may give or receive on their own behalf or on behalf of
the Firm any gift or other accommodation to a business contact that may be
construed as an improper attempt to influence the recipient.
In no event should gifts to or from any one business contact have a
value that exceeds the annual limitation on the dollar value of gifts
established by the Compliance Officer from time to time (currently $100).
These policies are not intended to prohibit normal business
entertainment such as meals or tickets to sporting events or the theatre. Please
note that business entertainment is different than giving or receiving gifts. If
you are unsure whether something is a gift or business entertainment, ask the
Compliance Officer.
C. SERVICE ON THE BOARD OR AS AN OFFICER OF ANOTHER COMPANY--THIS APPLIES TO ALL
PERSONNEL (INCLUDING ALL BOARD MEMBERS)
To avoid conflicts of interest, inside information and other compliance
and business issues, the Firm prohibits all its employees from serving as
officers or members of the board of any other entity, except with the advance
written approval of the Firm. Approval must be obtained through the COMPLIANCE
OFFICER, and will ordinarily require consideration by senior officers or the
board of the Firm. The Firm can deny approval for any reason. This prohibition
does not apply to service as an officer or board member of any parent or
subsidiary of the Firm nor does it apply to members of the Firm's board who are
not employees of the Firm.
PART II--APPLIES TO ACCESS PERSONS AND INVESTMENT PERSONS
A. REPORTING REQUIREMENTS--THESE APPLY TO ALL ACCESS PERSONS (INCLUDING ALL
INVESTMENT PERSONS AND ALL MEMBERS OF THE FIRM'S BOARD)
NOTE: One of the most complicated parts of complying with this Code is
understanding what holdings, transactions and accounts you must report and what
accounts are subject to trading restrictions. For example, accounts of certain
members of your family and household are covered, as are certain categories of
trust accounts, certain investment pools in which you might participate, and
certain accounts that others may be managing for you. To be sure you understand
what holdings, transactions and accounts are covered, it is essential that you
carefully review the definitions of COVERED SECURITY, FAMILY/HOUSEHOLD and
BENEFICIAL OWNERSHIP in the "Definitions" section at the end of this Code.
ALSO: YOU MUST FILE THE REPORTS DESCRIBED BELOW, EVEN IF YOU HAVE NO HOLDINGS,
TRANSACTIONS OR ACCOUNTS TO LIST IN THE REPORTS.
1. INITIAL HOLDINGS REPORTS. No later than 10 days after you become an
ACCESS PERSON, you must file with the COMPLIANCE OFFICER a Holdings Report on
Form A (copies of all reporting forms are available from the COMPLIANCE
OFFICER). However, for the initial conversion to the new code, personnel who are
ACCESS PERSONS as of the date this Code goes into effect (April 1, 2000) must
file an Initial Holdings Report as of March 31, 2000 on Form A with the
COMPLIANCE OFFICER by April 30, 2000.
Form A requires you to list all COVERED SECURITIES in which you (or
members of your FAMILY/HOUSEHOLD) have BENEFICIAL OWNERSHIP. It also requires
you to list all brokers, dealers and banks where you maintained an account in
which any securities (not just COVERED SECURITIES) were held for the direct or
indirect benefit of you or a member of your FAMILY/HOUSEHOLD on the date you
became an ACCESS PERSON. If you are an ACCESS PERSON on the date this Code goes
into effect, such list due by April 30, 2000 for the period ending March 31,
2000.
Form A also requires you to confirm that you have read and understand
this Code, that you understand that it applies to you and members of your
FAMILY/HOUSEHOLD and that you understand that you are an ACCESS PERSON and, if
applicable, an INVESTMENT PERSON under the Code.
2. QUARTERLY TRANSACTION REPORTS. No later than 10 days after the end
of March, June, September and December each year, you must file with the
COMPLIANCE OFFICER a Quarterly Transactions Report on Form B.
Form B requires you to report all transactions during the most recent
calendar quarter in COVERED SECURITIES, where you (or a member of your
FAMILY/HOUSEHOLD) had BENEFICIAL OWNERSHIP. It also requires you to either
confirm or amend your complete list of all brokers, dealers and banks where you
or a member of your FAMILY/HOUSEHOLD established an account in which any
securities (not just COVERED SECURITIES) were held during the quarter for the
direct or indirect benefit of you or a member of your FAMILY/HOUSEHOLD.
3. ANNUAL HOLDINGS REPORTS. By January 31 of each year, you must file
with the COMPLIANCE OFFICER an Annual Holdings Report on Form C as of December
31.
Form C requires you to list all COVERED SECURITIES in which you (or a
member of your FAMILY/HOUSEHOLD) had BENEFICIAL OWNERSHIP as of December 31. It
also requires you to list all brokers, dealers and banks where you or a member
of your FAMILY/HOUSEHOLD maintained an account in which any securities (not just
COVERED SECURITIES) were held for the direct or indirect benefit of you or a
member of your FAMILY/HOUSEHOLD on December 31.
Form C also includes requires you to confirm that you have read and
understand this Code, that you understand that it applies to you and members of
your FAMILY/HOUSEHOLD and that you understand that you are an ACCESS PERSON and,
if applicable, an INVESTMENT PERSON under the Code.
4. DUPLICATE CONFIRMATION STATEMENTS. If you or any member of your
FAMILY/HOUSEHOLD have a securities account with any broker, dealer or bank, you
or your FAMILY/HOUSEHOLD member must direct that broker, dealer or bank to send,
directly to the Firm's COMPLIANCE OFFICER, contemporaneous duplicate copies of
all transaction confirmation statements and all account statements relating to
that account.
B. TRANSACTION RESTRICTIONS--THESE APPLY TO ALL ACCESS PERSONS (INCLUDING ALL
INVESTMENT PERSONS), EXCEPT MEMBERS OF THE FIRM'S BOARD WHO ARE NOT EMPLOYEES OF
THE FIRM
1. PRECLEARANCE. You and members of your FAMILY/HOUSEHOLD are
prohibited from engaging in any transaction in a COVERED SECURITY for any
account in which you or a member of your FAMILY/HOUSEHOLD has any BENEFICIAL
OWNERSHIP, unless you obtain, in advance of the transaction, written
preclearance for that transaction from the COMPLIANCE OFFICER.
Once obtained, a preclearance is only valid for the day it is granted.
The COMPLIANCE OFFICER may revoke a preclearance any time after it is granted
and before you execute the transaction. The COMPLIANCE OFFICER may deny or
revoke preclearance for any reason. In no event will preclearance be granted for
any COVERED SECURITY if, to the knowledge of the COMPLIANCE OFFICER, the Firm
has a buy or sell order pending for that same security or a closely related
security (such as an option relating to that security, or a related convertible
or exchangeable security).
2. INITIAL PUBLIC OFFERINGS AND PRIVATE PLACEMENTS. Neither you nor any
member of your FAMILY/HOUSEHOLD may acquire any BENEFICIAL OWNERSHIP in any
COVERED SECURITY in an initial public offering. However, private placements may
be acquired with the specific, advance written approval of the COMPLIANCE
Officer, which the COMPLIANCE OFFICER may deny for any reason.
3. PROHIBITION ON SHORT-TERM TRADING. Neither you nor any member of
your FAMILY/HOUSEHOLD may purchase and sell at a profit, or sell and purchase, a
COVERED SECURITY (or any closely related security, such as an option or a
related convertible or exchangeable security) within any period of 60 calendar
days. If any such transactions occur, the Firm will require any profits from the
transactions to be disgorged for donation by the Firm to charity.
C. 15-DAY BLACKOUT PERIOD--THIS APPLIES TO ALL ACCESS PERSONS (INCLUDING ALL
INVESTMENT PERSONS), EXCEPT MEMBERS OF THE FIRM'S BOARD WHO ARE NOT EMPLOYEES OF
THE FIRM
No ACCESS PERSON (including any member of the FAMILY/HOUSEHOLD of such
ACCESS PERSON) may purchase or sell any COVERED SECURITY within the seven
calendar days immediately before or after a calendar day on which any client
account managed by the Firm purchases or sells that COVERED SECURITY (or any
closely related security, such as an option or a related convertible or
exchangeable security), unless the ACCESS PERSON had no actual knowledge that
the COVERED SECURITY (or any closely related security) was being considered for
purchase or sale for any client account. If any such transactions occur, the
Firm will generally require any profits from the transactions to be disgorged
for donation by the Firm to charity. Note that the total blackout period is 15
days (the day of the client trade, plus seven days before and seven days after).
NOTE: It sometimes happens that an INVESTMENT PERSON who is responsible for
making investment recommendations or decisions for client accounts (such as a
portfolio manager or analyst) determines--within the seven calendar days after
the day he or she (or a member of his or her FAMILY/HOUSEHOLD) has purchased or
sold for his or her own account a COVERED SECURITY that was not, to the
INVESTMENT PERSON'S knowledge, then under consideration for purchase by any
client account--that it would be desirable for client accounts as to which the
INVESTMENT PERSON is responsible for making investment recommendations or
decisions to purchase or sell the same COVERED SECURITY (or a closely related
security). In this situation, the INVESTMENT PERSON MUST put the clients'
interests first, and promptly make the investment recommendation or decision in
the clients' interest, rather than delaying the recommendation or decision for
clients until after the seventh day following the day of the transaction for the
INVESTMENT PERSON'S (or FAMILY/HOUSEHOLD member's) own account to avoid conflict
with the blackout provisions of this Code. The Firm recognizes that this
situation may occur in entire good faith, and will not require disgorgement of
profits in such instances if it appears that the INVESTMENT PERSON acted in good
faith and in the best interests of the Firm's clients.
D. EXEMPT TRANSACTIONS
The preclearance requirements, prohibitions on short term trading and
the 15 day blackout period do not apply to the following categories of
transactions:
o Transactions in securities guaranteed by the United States Government, or any
securities issued or guaranteed by its agencies or instrumentalities thereof.
o Transactions in any registered open-end mutual fund.
o Transactions in common or preferred stocks of a class that is publicly-traded,
issued by a company with a stock market capitalization of at least $10 billion
U.S. dollars (or the equivalent in foreign currency).
o Transactions in futures and options contracts on interest rate instruments or
indexes, and options on such contracts.
o Transactions that occur by operation of law or under any other circumstance in
which neither the ACCESS PERSON nor any member of his or her FAMILY/HOUSEHOLD
exercises any discretion to buy or sell or makes recommendations to a person
who exercises such discretion.
o Purchases pursuant to the exercise of rights issued pro rata to all holders of
the class of COVERED SECURITIES held by the ACCESS PERSON (or FAMILY/HOUSEHOLD
member) and received by the ACCESS PERSON (or FAMILY/HOUSEHOLD member) from
the issuer.
o Purchases of COVERED SECURITIES pursuant to an automatic dividend reinvestment
plan.
DEFINITIONS
These terms have special meanings in this Code of Ethics:
ACCESS PERSON
BENEFICIAL OWNERSHIP
COMPLIANCE OFFICER
COVERED SECURITY
FAMILY/HOUSEHOLD
INITIAL PUBLIC OFFERING
INVESTMENT PERSON
PRIVATE PLACEMENT
The special meanings of these terms as used in this Code of Ethics are
explained below. Some of these terms (such as "beneficial ownership") are
sometimes used in other contexts, not related to Codes of Ethics, where they
have different meanings. For example, "beneficial ownership" has a different
meaning in this Code of Ethics than it does in the SEC's rules for proxy
statement disclosure of corporate directors' and officers' stockholdings, or in
determining whether an investor has to file 13D or 13G reports with the SEC.
IMPORTANT: IF YOU HAVE ANY DOUBT OR QUESTION ABOUT WHETHER AN
INVESTMENT, ACCOUNT OR PERSON IS COVERED BY ANY OF THESE
DEFINITIONS, ASK THE COMPLIANCE OFFICER. DON'T JUST GUESS AT THE
ANSWER.
ACCESS PERSON means access person as defined in Rule 17j-1 under the Investment
Company Act, as amended from time to time. Currently this includes:
o Every member of the board of directors of the Firm's general partner, BBA
Inc., even those board members that are not employees of the Firm
o Every officer of the Firm
o Every employee of the Firm (or of any company that directly or indirectly has
a 25% or greater interest in the Firm) who, in connection with his or her
regular functions or duties, makes, participates in or obtains information
regarding the purchase or sale of a COVERED SECURITY for any client account,
or whose functions relate to the making of any recommendations with respect to
such purchases and sales.
BENEFICIAL OWNERSHIP means beneficial ownership as defined in Rule 17j-1 under
the Investment Company Act, as amended from time to time. Currently this means:
any opportunity, directly or indirectly, to profit or share in the profit from
any transaction in securities. BENEFICIAL OWNERSHIP is a very broad concept.
Some examples of forms of BENEFICIAL OWNERSHIP include:
o securities held in a person's own name, or that are held for the
person's benefit in nominee, custodial or "street name" accounts.
o securities owned by or for a partnership in which the person is a
general partner (whether the ownership is under the name of that
partner, another partner or the partnership or through a nominee,
custodial or "street name" account).
o securities that are being managed for a person's benefit on a
discretionary basis by an investment adviser, broker, bank, trust
company or other manager, unless the securities are held in a "blind
trust" or ------ similar arrangement under which the person is
prohibited by contract from communicating with the manager of the
account and the manager is prohibited from disclosing to the person what
investments are held in the account. (Just putting securities into a
discretionary account is not enough to remove them from a person's
BENEFICIAL OWNERSHIP. This is because, unless the arrangement is a
"blind trust," the owner of the account can still communicate with the
manager about the account and potentially influence the manager's
investment decisions.)
o securities in a person's individual retirement account.
o securities in a person's account in a 401(k) or similar retirement plan,
even if the person has chosen to give someone else investment discretion
over the account.
o securities owned by a trust of which the person is either a trustee or a
beneficiary.
o securities owned by a corporation, partnership or other entity that the
person controls (whether the ownership is under the name of that person,
under the name of the entity or through a nominee, custodial or "street
name" account).
o securities that are traded on behalf of an investment club of which an
ACCESS PERSON is a club member or which a member of your
FAMILY/HOUSEHOLD is a member.
This is not a complete list of the forms of ownership that could constitute
BENEFICIAL OWNERSHIP for purposes of this Code. You should ask the COMPLIANCE
OFFICER if you have any questions or doubts at all about whether you or a member
of your FAMILY/HOUSEHOLD would be considered to have BENEFICIAL OWNERSHIP in any
particular situation.
COMPLIANCE OFFICER means the compliance officer of the Firm or another person
that he or she has designated to perform the functions of Compliance Officer.
For purposes of reviewing the Compliance Officer's own transactions and reports
under this Code, the functions of the Compliance Officer are performed by an
appropriate designee.
COVERED SECURITY means a covered security as defined in Rule 17j-1 under the
Investment Company Act, as amended from time to time. Currently this means:
anything that is considered a "security" under the Investment Company Act of
1940, except:
o Direct obligations of the U.S. Government.
o Bankers' acceptances, bank certificates of deposit, commercial paper and high
quality short-term debt obligations, including repurchase agreements.
o Shares of open-end investment companies that are registered under the
Investment Company Act (mutual funds).
COVERED SECURITY is a very broad definition of security. It includes most kinds
of investment instruments, including things that you might not ordinarily think
of as "securities," such as:
o options on securities, on indexes and on currencies.
o investments in all kinds of limited partnerships.
o investments in foreign unit trusts and foreign mutual funds.
o investments in private investment funds, hedge funds and investment
clubs.
If you have any question or doubt about whether an investment is a considered a
security or a COVERED SECURITY under this Code, ask the COMPLIANCE OFFICER.
Members of your FAMILY/HOUSEHOLD include:
o Your spouse or domestic partner (unless he or she does not live in the same
household as you and you do not contribute in any way to his or her support).
o Your children under the age of 18.
o Your children who are 18 or older (if they live in the same household as you
and you contribute in any way to their support).
o Any of these people who live in your household: your stepchildren,
grandchildren, parents, stepparents, grandparents, brothers, sisters,
parents-in-law, sons-in-law, daughters-in-law, brothers-in-law and
sisters-in-law, including adoptive relationships.
o Any individuals for which you are exercising investment control or are doing
so on one's behalf.
Comment--There are a number of reasons why this Code covers transactions in
which members of your FAMILY/HOUSEHOLD have BENEFICIAL OWNERSHIP. First, the SEC
regards any benefit to a person that you help support financially as indirectly
benefiting you, because it could reduce the amount that you might otherwise need
to contribute to that person's support. Second, members of your household could,
in some circumstances, learn of information regarding the Firm's trading or
recommendations for client accounts, and must not be allowed to benefit from
that information.
INITIAL PUBLIC OFFERING ("IPO") means an offering of securities registered under
the Securities Act of 1933, the issuer of which, immediately before the
registration, was not subject to the reporting requirements of sections 13 or
15(d) of the Securities Exchange Act of 1934.
INVESTMENT PERSON means any employee of the Firm (or of any company that
directly or indirectly has a 25% or greater interest in the Firm) who, in
connection with his or her regular functions or duties, makes, participates in
or obtains information regarding the purchase or sale of any securities (even if
they're not COVERED SECURITIES) for any client account, or whose functions
relate to the making of any recommendations with respect to purchases and sales;
and any natural person who directly or indirectly has a 25% or greater interest
in the Firm and obtains information concerning recommendations made to any
client of the Firm regarding the purchase or sale of any securities (even if
they're not COVERED SECURITIES) by the client.
PRIVATE PLACEMENT means a stock or bond that is not registered with the
Securities & Exchange Commission and therefore cannot be sold in the public
market.
<PAGE>
FORM A - INITIAL HOLDINGS REPORT
NOTE: THIS FORM MUST BE COMPLETED BY ALL ACCESS PERSONS AND FILED WITH THE CODE
OFFICER NO LATER THAN 10 DAYS AFTER BECOMING AN ACCESS PERSON UNDER XYZ
ADVISERS' CODE OF ETHICS (the "CODE"). (PERSONNEL WHO WERE ACCESS PERSONS ON THE
DATE THE CODE WENT INTO EFFECT MUST FILE A COMPLETED FORM A WITH THE CODE
OFFICER BY _____________, 2000.) TERMS IN BOLDFACE TYPE HAVE THE MEANINGS SET
FORTH IN THE CODE.
Name of ACCESS PERSON: ____________________________________________
Date I Became an ACCESS PERSON (the "Reporting Date"): ________________
(for personnel who were ACCESS PERSONS on the date the Code went into
effect, the Reporting Date is _________, 2000)
Date received by CODE OFFICER: ______________________________________
Initial Certification:
I understand that for purposes of the Code I am classified as:
[Drafter's Note: The Investment Personnel box below should be checked
by the Code Officer before providing this Form A to Investment
Personnel, if applicable.]:
____ AN ACCESS PERSON
____ INVESTMENT PERSONNEL
Initial Holdings Report (check ONE of the following two boxes):
____ Neither I, nor any member of my FAMILY/HOUSEHOLD, has BENEFICIAL
OWNERSHIP of any COVERED SECURITIES.
Attached as APPENDIX A is a complete list of all COVERED SECURITIES in
which I, and/or a member of my FAMILY/HOUSEHOLD, had BENEFICIAL
OWNERSHIP on the Reporting Date.
Accounts with Brokers, Dealers and/or Banks (check ONE of the following two
boxes):
____ Neither I, nor any member of my FAMILY/HOUSEHOLD, had, as of the
Reporting Date, any accounts with brokers, dealers or banks in which
any securities (including securities which are not COVERED Securities)
are held, and with respect to which I, or any member of my
FAMILY/HOUSEHOLD, has BENEFICIAL OWNERSHIP.
____ All accounts that I, and/or any member of my FAMILY/HOUSEHOLD, maintain
with brokers, dealers or banks in which securities (including
securities which are not COVERED SECURITIES) are held, and with respect
to which I, and/or a member of my FAMILY/HOUSEHOLD, had BENEFICIAL
OWNERSHIP as of the Reporting Date are set forth below:
Name(s) of Institution(s)
All information provided in this Form A is true and complete to the
best of my knowledge.
I have read the Code, and will keep a copy for future reference. I
understand my responsibilities under the Code and agree to comply with
all of its terms and conditions. In particular, I understand that the
Code applies to me and to all investments in which I have BENEFICIAL
OWNERSHIP, as well as investments in which members of my
FAMILY/HOUSEHOLD have BENEFICIAL OWNERSHIP.
Signed: _________________________
Date: ___________________________
<PAGE>
Appendix A - Initial Report of all COVERED SECURITIES
Name of ACCESS PERSON: ___________________________________
- --------------------------------------------------------------------------------
Title/Description of COVERED SECURITIES Number of Shares (or Principal
Amount, if not a stock)
- ------------------------------------------- --------------------------------
- ------------------------------------------- --------------------------------
- ------------------------------------------- --------------------------------
- ------------------------------------------- --------------------------------
- ------------------------------------------- --------------------------------
- ------------------------------------------- --------------------------------
- ------------------------------------------- --------------------------------
- ------------------------------------------- --------------------------------
- ------------------------------------------- --------------------------------
- ------------------------------------------- --------------------------------
- ------------------------------------------- --------------------------------
- ------------------------------------------- --------------------------------
- ------------------------------------------- --------------------------------
- ------------------------------------------- --------------------------------
- --------------------------------------------------------------------------------
Note: Please use additional sheets as needed.
<PAGE>
FORM B - QUARTERLY TRANSACTION REPORT
NOTE: THIS FORM MUST BE COMPLETED BY ALL ACCESS PERSONS AND FILED WITH THE CODE
OFFICER NO LATER THAN 10 DAYS AFTER THE END OF MARCH, JUNE, SEPTEMBER AND
DECEMBER OF EACH YEAR. TERMS IN BOLDFACE TYPE HAVE THE MEANINGS SET FORTH IN THE
CODE.
Name of ACCESS PERSON: ___________________________________________
Reporting Period/Calendar Quarter End Date: _______________________
Date received by CODE OFFICER: _____________________________________
Transactions Report (check ONE of the following three boxes):
____ There were no transactions in COVERED SECURITIES during the most
recently completed calendar quarter in which I, or any member of my
FAMILY/HOUSEHOLD, had BENEFICIAL OWNERSHIP.
____ Attached as APPENDIX B is a complete list of all transactions in
COVERED SECURITIES during the most recently completed calendar quarter
in which I, and/or any member of my FAMILY/HOUSEHOLD, had BENEFICIAL
OWNERSHIP.
____ Attached are duplicate broker confirmations of all transactions in
COVERED SECURITIES during the most recently completed calendar quarter
in which I, and/or any member of my FAMILY/HOUSEHOLD, had BENEFICIAL
OWNERSHIP.
New Securities Accounts (check ONE of the following two boxes):
____ Neither I, nor any member of my FAMILY/HOUSEHOLD, established any new
accounts during the most recent calendar quarter with brokers, dealers
or banks in which securities (including securities which are not
COVERED SECURITIES) are held, and with respect to which I, and/or any
member of my FAMILY/HOUSEHOLD, had BENEFICIAL OWNERSHIP.
____ During the most recent calendar quarter, I and/or a member of my
FAMILY/HOUSEHOLD established the following account(s) with brokers,
dealers or banks in which securities are held, and with respect to
which I, and/or any member of my FAMILY/HOUSEHOLD, had BENEFICIAL
OWNERSHIP:
Name(s) of Institution(s) Date Account Established
<PAGE>
All information provided in this Form B is true and complete to the
best of my knowledge.
Signed: _________________________
Date: ___________________________
<PAGE>
Appendix B - Complete List of Transactions in COVERED SECURITIES During Most
Recent Calendar Quarter
Name of ACCESS PERSON: ___________________________________
Reporting Period/Calendar Quarter: ________________________
Date received by CODE OFFICER: _____________________________
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TYPE INSTITUTION
(E.G., RATE/MATURITY THROUGH WHICH
TRANSACTION PURCHASE, TITLE OF NUMBER PRINCIPAL DATE TRANSACTION
DATE SALE) SECURITIES OF SHARES AMOUNT (IF APPLICABLE PRICE EFFECTED
---- ----- ---------- --------- ------ -------------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Note: Please use additional sheets as needed.
</TABLE>
YOU DON=T HAVE TO COMPLETE APPENDIX B IF YOU ATTACH DUPLICATE BROKER
CONFIRMATION STATEMENTS FOR ALL TRANSACTIONS THAT WOULD OTHERWISE HAVE TO BE
LISTED ON APPENDIX B.
<PAGE>
FORM C - ANNUAL CODE OF ETHICS CERTIFICATION; ANNUAL HOLDINGS REPORT
NOTE: THIS FORM MUST BE COMPLETED BY ALL ACCESS PERSONS AND FILED WITH THE CODE
OFFICER NO LATER THAN JANUARY 31 OF EACH YEAR. TERMS IN BOLDFACE TYPE HAVE THE
MEANINGS SET FORTH IN THE CODE.
Name of ACCESS PERSON: ______________________________________
Calendar Year Covered by this Report: ________________________
Date received by CODE OFFICER: ________________________________
Annual Certification
____ I hereby certify that during the year covered by this report I complied
with all applicable requirements of the Code, and have reported to the
CODE OFFICER all transactions required to be reported under the Code.
Annual Holdings Report (check ONE of the following two boxes):
____ As of January 1 of the current year, neither I, nor any member of my
FAMILY/HOUSEHOLD, had BENEFICIAL OWNERSHIP of any COVERED SECURITIES.
____ Attached as APPENDIX C is a complete list of all COVERED SECURITIES in
which I, and/or any member of my FAMILY/HOUSEHOLD, had BENEFICIAL
OWNERSHIP as of January 1 of the current year.
<PAGE>
Accounts with Brokers, Dealers and/or Banks (check ONE of the following two
boxes):
____ Neither I, nor any member of my FAMILY/HOUSEHOLD, as of January 1 of
the current year, had any accounts with brokers, dealers or banks in
which any securities (including securities which are not COVERED
SECURITIES) were held and with respect to which I, or a member of my
FAMILY/HOUSEHOLD, had BENEFICIAL OWNERSHIP.
____ All accounts that I and/or any member of my FAMILY/HOUSEHOLD
maintained, as of January 1 of the current year, with brokers, dealers
or banks in which securities (including securities which are not
COVERED SECURITIES) were held and with respect to which I, and/or any
member of my FAMILY/HOUSEHOLD, had BENEFICIAL OWNERSHIP are listed
below:
Name(s) of Institution(s)
All information provided in this Form C is true and complete to the
best of my knowledge.
Signed: _________________________
Date: ___________________________
<PAGE>
Appendix C - Annual Report of all COVERED SECURITIES
Name of ACCESS PERSON: ___________________________________
Date received by CODE OFFICER: _____________________________
- --------------------------------------------------------------------------------
Title/Description of COVERED SECURITIES Number of Shares Principal Amount
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Note: All information should be reported as of January 1 of the current year.
Please use additional sheets as needed.
<PAGE>
Exhibit (p)(12)
APPENDIX II
February 1, 2000
RS INVESTMENT MANAGEMENT CO. LLC
RS INVESTMENT MANAGEMENT, L.P.
RS INVESTMENT MANAGEMENT, INC.
RS GROWTH GROUP LLC
RS VALUE GROUP LLC
RS INVESTMENT TRUST
---------------------------
CODE OF ETHICS
including
RSIM POLICY ON PERSONAL TRADING
---------------------------
I. SCOPE AND SUMMARY
(a) Rule 17j-1 under the Investment Company Act of 1940, as amended (the "1940
Act"), requires every investment company, as well as every investment adviser to
and principal underwriter of an investment company, to have a written Code of
Ethics which specifically deals with trading practices by "Access Persons."
Access Persons are defined to include (1) officers, directors and general
partners of the two mutual fund advisers (RS Investment Management, Inc. and RS
Investment Management, L.P. -- collectively "RSIM"), as well as (2) employees of
RSIM and officers, directors, partners who have substantial responsibility for
or knowledge of the investments of the mutual funds constituting series of the
RS (each, a "Fund"), and (3) each member of the Funds' Board of Trustees. The
Rule also requires that reasonable diligence is used and procedures instituted
to prevent violations of this Code of Ethics.
(b) Sections 21A and 15(f) of the Securities Exchange Act and Section 204A of
the Investment Advisers Act further require all broker-dealers and investment
advisers to establish, maintain and enforce written policies and procedures to
prevent the misuse of material nonpublic information.
(c) Common law fiduciary principles require that an investment adviser (like
RSIM) avoid placing itself in a position of conflict of interest with its
clients. Likewise, RSIM as a general partner to various partnerships, stands in
a fiduciary relationship to the limited partners investing in those
partnerships.
(d) The "Blue Ribbon" Advisory Group on Personal Investing in its report to the
Investment Company Institute also articulated the following three general
fiduciary principles which the Group believes should govern the personal
investment activities of mutual fund advisory and distributor personnel:
(i) the duty at all times to place the interests of Fund
shareholders first;
(ii) the requirement that all personal securities transactions be
conducted consistent with the Code of Ethics and in such a
manner as to avoid any actual or potential conflict of
interest or any abuse of an individual's position of trust and
responsibility; and
(iii) the fundamental standard that mutual fund advisory and
distributor personnel should not take inappropriate advantage
of their positions.
(e) This Code of Ethics is designed to satisfy the above-referenced legal
requirements and ethical principles as applicable to RSIM in their roles as
adviser to and distributor for the RSIM Funds. It is important that all
partners, officers, directors and employees of RSIM to whom this Code of Ethics
applies observe the ethical standards set forth in the Code.
(f) This Code of Ethics is not intended to cover all possible areas of potential
liability under the 1940 Act or under the federal securities laws in general.
For example, other provisions of Section 17 of the 1940 Act prohibit various
transactions between a registered investment company and affiliated persons,
including the knowing sale or purchase of property to or from a registered
investment company on a principal basis, and joint transactions (e.g., combining
to achieve a substantial position in a security, concerted market activity, or
commingling of funds) between an investment company and an affiliated person.
(g) It is expected that Access Persons will be sensitive to all areas of
potential conflict, even if this Code of Ethics does not address specifically an
area of fiduciary responsibility.
(h) Exceptions to specific provisions of this Code of Ethics may be granted by
the compliance officer or an alternate if warranted by circumstances and if the
exception is requested in a timely manner.
(i) SUMMARY. Under the Code of Ethics, all Access Persons, except independent
Trustees of the Funds, are required to:
(i) Pre-clear all trades in individual securities. [Note: certain
securities are excepted: mutual funds, stock index options,
SPDR's and money market instruments are "excepted
securities."]
(ii) Reverse trades that involve securities subsequently purchased
or sold by a Fund within the applicable blackout period.
(iii) Observe a minimum 60 day holding period for all securities
(except "excepted securities"). This policy only applies to
profitable trades.
(iv) Avoid IPO's.
(v) Receive special clearance for private placements.
(vi) Avoid directorships of companies in which Fund assets may be
invested. (Unless permission is obtained from the CEO.)
(vii) Promptly disclose all security transactions and file
quarterly transaction reports and annual ownership reports.
(viii) Avoid security transactions in which they possess material
non-public information with regard to the particular
security.
II. DEFINITIONS
(a) "ACCESS PERSON" means: (i) officers, directors and general partners of the
four mutual fund advisers (RS Investment Management, Inc. and RS Investment
Management, L.P., RS Growth Group LLC and RS Value Group LLC -- collectively
"RSIM"), as well as (ii) employees of RSIM and officers, directors, partners who
have substantial responsibility for or knowledge of the investments of the
mutual funds constituting series of the RS Trust (each, a "Fund"), hedge funds
managed by RSIM, institutional accounts where RSIM acts as a sub-adviser,
separate accounts managed by RSIM and (iii) each member of the Funds' Board of
Trustees. Members of the immediate family of an Access Person living in the same
household are covered by this Code of Ethics to the same extent as the Access
Person.
(b) "ADVISORY PERSON" means with respect to (i) the Funds, (ii) an investment
adviser to a Fund or (iii) any company in a control relationship to the Funds or
the investment adviser (i.e., RSIM), (A) any employee who, in connection with
his regular functions or duties, makes, participates in, or obtains information
regarding, the purchase or sale of a security by a Fund, or whose functions
relate to the making of any recommendations with respect to such purchases or
sales; and (B) any natural person in a control relationship to the Funds or an
investment adviser who obtains information concerning recommendations made to a
Fund with regard to the purchase or sale of a security.
(c) A security is "BEING CONSIDERED FOR PURCHASE OR SALE" when a recommendation
to purchase or sell a security has been made and communicated, and, with respect
to a person making a recommendation, when such person seriously considers making
such a recommendation.
(d) "BENEFICIAL OWNERSHIP" shall be interpreted in the same manner as it would
be in determining whether a person is subject to the provisions of Section 16 of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder, with the exception that the determination of direct or indirect
beneficial ownership shall apply to all securities which an Access Person has or
acquires.
(e) "CONTROL" means the power to exercise a controlling influence over the
management or policies of a company, unless such power is solely the result of
an official position, as further defined in Section 2(a)(9) of the 1940 Act.
(f) "PURCHASE OR SALE OF A SECURITY" includes the writing of an option to
purchase or sell a security.
(g) "SECURITY" shall have the meaning set forth in Section 2(a)(36) of the 1940
Act, and shall include options and warrants, except that it shall not include
excepted securities (as defined below).
(h) "EXCEPTED SECURITIES" include shares of registered open-end investment
companies (except the RSIM Funds), securities issued by the Government of the
United States (including Government agencies), short term debt securities which
are "government securities" within the meaning of Section 2(a)(16) of the 1940
Act, bankers' acceptances, bank certificates of deposit, commercial paper and
other money market instruments. Stock Index Options and SPDR's are also
considered "excepted securities" for all purposes except the quarterly and
annual reporting obligations.
(i) "MATERIAL NON-PUBLIC INFORMATION" is information relating to dividend
increases or decreases, earnings estimates, changes in previously released
earnings estimates, significant expansion or curtailment of operations, a
significant increase or decline of orders, significant merger or acquisition
proposals or agreements, significant new products or discoveries, extraordinary
borrowing, major litigation, liquidity problems, extraordinary management
developments, purchase or sale of substantial assets or any information a
reasonable investor might consider to be of importance in making an investment
decision to buy, sell or hold. Information should be deemed non-public if it has
not been widely disseminated by wire service, in one or more newspapers of
general circulation, or by communication from the company involved to its
shareholders or in a press release.
III. PROHIBITED TRADING PRACTICES
(a) GENERAL ANTI-FRAUD PROHIBITION. If a security:
(i) is being considered for purchase or sale by a Fund;
(ii) is in the process of being purchased or sold by a Fund; or
(iii) is or has been held by a Fund within the most recent 15 day
period;
no Access Person shall knowingly purchase, sell or otherwise directly or
indirectly acquire or dispose of any direct or indirect beneficial ownership
interest in that security if such action by such Access Person would defraud a
Fund, operate as a fraud or deceit upon a Fund, or constitute a manipulative
practice with respect to a Fund.
(b) PRE-CLEARANCE. No Access Person shall purchase or sell any individual
security (i.e., any security except an "excepted security") without
pre-clearance. Once pre-clearance has been obtained, the trade must be executed
by the end of the business day or new clearance must be obtained. (See attached
Pre-clearance Form).
(c) BLACKOUT PERIOD. An Access Person may not execute a securities transaction
(other than an "excepted security") on any day during which any Fund in the RSIM
Funds complex has a pending "buy" or "sell" order in that same security or a
related security of the same issuer (e.g., common stock is a related security to
an option on common stock). However, it is not always possible to determine
which orders were executed until the following day. The fact of pre-clearance
does not mean that a trade will not end up being unwound if it is later
ascertained that one of the Funds traded in that security on the same day.
Blackout periods may be extended for certain securities. This policy applies to
all Access people.
Additionally, portfolio managers and others who make investment decisions with
respect to a Fund are prohibited for seven (7) calendar days preceding and
following any Fund purchase or sale of that security and will include the entire
business day on which the last Fund purchase or sale activity occurs. Any
profits realized on a trade effected during the blackout period by a portfolio
manager or other individual with investment decision-making authority will be
disgorged to the appropriate Fund. The blackout period only applies to
securities traded by a Fund or Funds over which the individual exercises
investment decision-making authority. It does not apply to all Funds in the
complex. The fact of pre-clearance and execution within the same day of
pre-clearance is not relevant. Blackout periods may be extended for certain
securities
(d) TRADES IN SHARES OF RSIM FUNDS. Please note that purchases and sales of
shares of an RS Fund do not need pre-clearance, but the possibility of
appearance of conflict of interest in such transactions is high. Accordingly,
all purchases and sales of shares of an RS Fund:
(i) should be made well in advance of the closing price
calculation each day, and
(ii) should not be made when in possession of material nonpublic
information.
(e) NO IPO'S. No Access Person shall acquire any securities offered in an
initial public offering.
(f) PRIVATE PLACEMENTS. No Access Person shall acquire any securities in a
private placement without both pre-clearance and special approval by the CEO.
(g) OTHER RESTRICTIONS. No Access Person shall engage in short term trading or
make other investments in contravention of the general policies that may be
established from time to time as set forth. An Access Person must hold a
security (other than an "excepted security") for a minimum of 60 days. This
policy only applies to profitable trades.
IV. EXEMPTED TRANSACTIONS/SECURITIES
The prohibitions of Section IV of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the Access Person has
no direct or indirect influence or control.
(b) Purchases or sales of securities which are not eligible for purchase or sale
by any Fund.
(c) Purchases or sales which are non-volitional on the part of either the Access
Person or the Trust (e.g., receipt of gifts).
(d) Purchases that are part of an automatic dividend reinvestment plan.
(e) Purchases effected upon the exercise of rights issued by an issuer pro rata
to all holders of a class of its securities, to the extent such rights were
acquired from such issuer, and sales of such rights so acquired.
(f) Purchases and sales which have received the prior approval of the Compliance
Officer.
(g) Purchases and sales of securities, which are not included in the definition
of "Security" in Section II.g or are "excepted securities" as defined in Section
II.h. -- i.e., mutual fund shares (but not RS Fund shares), stock index options,
SPDR's, government securities and money market instruments.
V. REPORTING
(a) PRE-CLEARANCE AND IMMEDIATE REPORTING. All RSIM employees are currently
required to report all individual security transactions (and purchase/sales of
RSIM Funds) under rules specifically applicable to advisory and broker-dealer
organizations. Access persons must also seek pre-clearance of individual
security transactions and are required to have a duplicate confirmation of the
transaction sent to the RSIM compliance officer promptly following the
transaction. The only securities for which such pre-clearance and immediate
reporting is not required are "excepted securities" and shares of the RSIM
Funds.
(b) QUARTERLY REPORTS. In addition to contemporaneous reporting, all Access
Persons are required to review, and if necessary, correct or make additions to
quarterly reports generated within 10 days of the end of each calendar quarter,
listing all securities transactions except transactions in "excepted
securities." See subsection (c) below. Please note that purchases and sales of
shares of an RSIM Fund, which are not subject to pre-clearance and
contemporaneous reporting, are subject to quarterly reporting.
(c) Every quarterly report shall be made not later than ten (10) days after the
end of each calendar quarter and shall contain the following information:
(i) The date of the transaction, the title and the number of
shares, and the principal amount of each security involved;
(ii) The nature of the transaction (i.e., purchase, sale, or any
other type of acquisition or disposition);
(iii) The price at which the transaction was effected; and
(iv) The name of the broker, dealer, or bank with or through whom
the transaction was effected.
(d) Copies of statements or confirmations containing the information specified
in paragraph (c) above may be submitted in lieu of listing the transactions.
Persons submitting statements will be deemed to have satisfied this reporting
requirement, and need only sign off quarterly on having complied.
(e) For periods in which no reportable transactions were effected, the quarterly
report shall contain a representation that no transactions subject to the
reporting requirements were effected during the relevant time period.
(f) ANNUAL REPORT. Annually, in conjunction with the quarterly report for the
quarter ending June 30, each Access Person shall be required to review, and if
necessary, correct or make additions to, an annual report, which lists all
security positions in which such Access Person has a direct or indirect
beneficial interest.
(g) Any quarterly or annual report may contain a statement that the report shall
not be construed as an admission by the person making such report that he has
any direct or indirect beneficial ownership in the security to which the report
relates.
(h) An initial holdings report of all securities beneficially owned by such
person and the name of the broker with whom the Access Person maintained a
securities account must be submitted to Scott Smith or Marianne Clark for review
no later than 10 days after an employee of RSIM becomes an Access Person.
VI. EXCEPTIONS TO REPORTING REQUIREMENTS
(a) An independent Trustee, i.e., a Trustee of the RS Investment Trust who is
not an "interested person" (as defined in Section 2(a)(19) of the 1940 Act) of
the Funds, is not required to file a report on a transaction in a security
provided such Trustee neither knew nor, in the ordinary course of fulfilling his
or her official duties as a trustee of the Funds, should have known that, during
the 15-day period immediately preceding or after the date of the transaction by
the Trustee, such security is or was purchased or sold by a Fund or is or was
being considered for purchase or sale by a Fund by its investment adviser.
(b) Although an independent Trustee is exempt from the reporting requirements of
this Code, such Trustee may nevertheless voluntarily file a report representing
that he or she did not engage in any securities transactions which, to his or
her knowledge, involved securities that were being purchased or sold or
considered for purchase by any Fund during the 15-day period preceding or after
the date(s) of any transaction(s) by such Trustee. The failure to file such a
report, however, shall not be considered a violation of this Code of Ethics.
(c) Access Persons are not required to make a report with respect to an exempted
transactions/securities as described in Section V of this Code.
(d) Access Persons do not need to file multiple reports. Copies of a single
report can be used to satisfy the personal trading reports required by RSIM.
VII. IMPLEMENTATION
(a) In order to implement this Code of Ethics, a compliance officer and three
alternates have been designated for RSIM and the Funds. These individuals are:
Scott R. Smith
Marianne E. Clark (alternate)
Steven M. Cohen (alternate)
G. Randy Hecht -President and CEO (alternate)
(b) The compliance officer shall create a list of all "Access Persons" and
update the list with reasonable frequency.
(c) The compliance officer shall circulate a copy of this Code of Ethics to each
Access Person, together with an acknowledgment of receipt, which shall be signed
and returned to the Compliance Officer by each Access Person at least once each
year.
(d) The compliance officer or a compliance officer delegate is charged with
responsibility for ensuring that the pre-clearance and reporting requirements of
this Code of Ethics are adhered to by all Access Persons. The compliance officer
or compliance officer delegate shall be responsible for ensuring that the review
requirements of this Code of Ethics (see Section VIII) are performed in a prompt
manner. The compliance officer shall be responsible for enforcing the policies
set forth herein.
VIII. REVIEW
(a) The compliance officer shall review all reports of personal securities
transactions and compare such reports with pre-clearance forms and with
completed and contemplated portfolio transactions of each Fund to determine
whether noncompliance with the Code of Ethics and/or other applicable trading
procedures may have occurred. The compliance officer may delegate this function
to one or more persons.
(b) No person shall review his or her own reports. Before making any
determination that a non-compliant transaction may have been made by any person,
the compliance officer shall give such person an opportunity to supply
additional explanatory material. If a securities transaction of the compliance
officer is under consideration, an alternate shall act in all respects in the
manner prescribed herein for the designated compliance officer.
(c) If the compliance officer determines that noncompliance with the Code of
Ethics has or may have occurred, he or she shall, following consultation with
counsel, submit his or her written determination, together with the transaction
report, if any, and any additional explanatory material provided by the
individual, to G. Randall Hecht, who shall make an independent determination of
whether a violation has occurred.
(d) The compliance officer shall be responsible for maintaining a current list
of all Access Persons (including all Fund Trustees) and for identifying all
reporting Access Persons on such list, and shall take steps to ensure that all
reporting Access Persons have submitted reports in a timely manner. The
compliance officer may delegate the compilation of this information to
appropriate persons. Failure to submit timely reports will be communicated to G.
Randall Hecht and to the Funds' Board of Trustees.
IX. SANCTIONS
(a) If a material violation of this Code occurs or a preliminary determination
is made that a violation may have occurred, a report of the alleged violation
shall be made to the Board of Trustees.
(b) The Board of Trustees may impose such sanctions as it deems appropriate,
including, a letter of censure, suspension, or termination of employment, and/or
a disgorging of any profits made.
<PAGE>
Please sign and date the attached form.
Detach and return to RSIM Compliance.
===============================================================================
I FULLY UNDERSTAND AND HEREBY SUBSCRIBE TO THIS CODE OF ETHICS.
-----------------------------------
NAME
-----------------------------------
SIGNATURE
-----------------------------------
DATE
===============================================================================
<PAGE>
APPENDIX III
February 1, 2000
RS INVESTMENT MANAGEMENT CO. LLC
RS INVESTMENT MANAGEMENT, L.P.
RS INVESTMENT MANAGEMENT, INC.
RS GROWTH GROUP LLC
RS VALUE GROUP LLC
RS INVESTMENT TRUST
------------------------
POLICY ON PERSONAL TRADING
------------------------
SUMMARY
The following policy on personal trading, together with the enclosed Code of
Ethics, outlines all existing restrictions on personal securities transactions
for Access Persons of RS Mutual Funds. While it is our belief that personal
investing can lead an individual to be a better, more knowledgeable investor,
these guidelines have been written not only to ensure compliance with relevant
securities laws, but also to protect our investors and prevent any perception of
a potential conflict of interest.
Access Persons are defined as (i) officers, directors and general partners of
the two mutual fund advisers (RS Investment Management, Inc. and RS Investment
Management, L.P. -- collectively "RSIM"), as well as (ii) employees of RSIM and
officers, directors, partners who have substantial responsibility for or
knowledge of the investments of the mutual funds constituting series of the RS
(each, a "Fund"), and (iii) each member of the Funds' Board of Trustees. Members
of the immediate family of an Access Person living in the same household are
covered by this policy to the same extent as the Access Person. The policy also
applies to the immediate families living in the same household of all Access
Persons. The highlights of the policy are as follows:
1) PERSONAL ACCOUNTS
All personal brokerage accounts must be maintained at BancBoston Robertson
Stephens, Charles Schwab or Fidelity Investments. Any exceptions to this policy
must be approved by the Compliance Department.
2) PRE-CLEARANCE
All personal trades for individual securities for all Access Persons must be
pre-cleared by the Compliance Department using the attached form. After
pre-clearance has been granted, the trade must be completed by the end of the
business day, or the approval is void and the form must be resubmitted. Trades
for which pre-clearance is required include all securities except, open-end
mutual funds, stock index options, SPDR's, government securities and money
market securities. Obtaining pre-clearance for a trade does not guarantee that
the trade will not be later reversed should a Fund effect a subsequent trade in
the same security.
3) BLACKOUT PERIODS
An Access Person may not execute a securities transaction (other than an
"excepted securities") on any day during which any Fund in the RSIM Funds
complex has a pending "buy" or "sell" order in that same security or a related
security of the same issuer (e.g., common stock is a related security to an
option on common stock). However, it is not always possible to determine which
orders were executed until the following day. The fact of pre-clearance does not
mean that a trade will not end up being unwound if it is later ascertained that
one of the Funds traded in that security on the same day. Blackout periods may
be extended for certain securities. This policy applies to all Access people.
Additionally, portfolio managers and others who make investment decisions with
respect to a Fund are prohibited for seven (7) calendar days preceding and
following any Fund purchase or sale of that security and will include the entire
business day on which the last Fund purchase or sale activity occurs. Any
profits realized on a trade effected during the blackout period by a portfolio
manager or other individual with investment decision-making authority will be
disgorged to the Fund. The blackout period only applies to securities traded by
a Fund or Funds over which the individual exercises investment-making authority.
It does not apply to all Funds in the complex. The fact of pre-clearance and
execution within the same day of pre-clearance is not relevant. Blackout periods
may be extended for certain securities.
4) RESTRICTIONS ON SHORT-TERM TRADING
Access Persons are strongly discouraged from entering into securities
transactions for the purpose of achieving short-term gains. In addition to the
general prohibition against acquiring securities in the blackout period before
and immediately following Fund transactions, an Access Person must hold a
security (other than an excepted security, e.g., a stock index option) for a
minimum of 60 days. This policy only applies to profitable trades. Exceptions
may be made in the case of a medical or other emergency, provided that relevant
details are communicated at the time of pre-clearance.
5) INITIAL PUBLIC OFFERINGS
All Access Persons are strictly prohibited from acquiring securities in any
initial public offering.
6) PRIVATE PLACEMENTS
Investments by Access Persons in private placements require both pre-clearance
and special approval from the CEO.
7) SERVICE AS A DIRECTOR
Portfolio Managers and Access Persons will be permitted to serve as directors of
publicly traded companies and private companies in which the Funds may invest
only if the CEO determines that doing so would be in the best interest and would
not present a conflict of interest. All Fund investment decisions made or
participated in by such Director/Access Persons require pre-clearance from the
CEO.
8) DISCLOSURE
To the extent an Access Person maintains permitted brokerage accounts at
broker/dealers other than BancBoston Robertson Stephens, Charles Schwab & Co.,
or Fidelity Investments that Access Person must ensure that copies of trade
confirmations for their brokerage accounts and accounts of immediate family
living in the same household, are forwarded to the Compliance Department. Trade
confirmations will be cross-referenced against pre-clearance forms to ensure
that approval had been granted. In addition, Access Persons must make required
quarterly reports of securities transactions (or furnish brokerage statements)
and must sign off, at least annually, on receipt of and compliance with the Code
of Ethics.
<PAGE>
-------------
RS INVESTMENT
MANAGEMENT
-------------
PRE-AUTHORIZATION FOR PERSONAL TRADES
To: RSIM Compliance
Phone: (415) 591-2779
(415) 591-2728
Fax: (415) 591-2851
From: ______________________________ Date: __________________
- --------------------------------------------------------------------------------
I wish to effect the following trade for my personal account, an account in
which I have a beneficial interest, or an account belonging to one of my
immediate relatives living in the same household.
NAME of Security _________________________________ TICKER ____________
# OF SHARES _____________ BUY SELL (CIRCLE ONE) PRICE _______
BROKERAGE FIRM ___________________________ & ACCOUNT # ____________________
THE PURCHASE/SALE IS BASED ON PERSONAL RESEARCH YES [ ] NO [ ]
(You may be required to provide documentation should there be a potential
conflict).
I AM AWARE OF AN INTENDED OR POSSIBLE MUTUAL FUND TRADE IN THIS SECURITY
YES [ ] NO [ ]
I AGREE THAT IF I DO NOT EFFECT THE ABOVE TRADE ON THE DAY INDICATED BELOW, THE
APPROVAL IS NULL AND VOID AND THE REQUEST MUST BE RESUBMITTED. I REALIZE THAT IF
I AM AN EMPLOYEE WITH INVESTMENT DECISION MAKING AUTHORITY, AND ANY RS FUNDS
TRANSACTIONS OCCUR WITHIN 7 DAYS OF MY TRANSACTION THAT INVOLVE A FUND OVER
WHICH I HAVE AUTHORITY AND THE ABOVE SECURITY, THE TRADE WILL BE BROKEN AT MY
EXPENSE. I REALIZE THAT IF I DO NOT HAVE SUCH AUTHORITY, AND ANY FUND
TRANSACTIONS OCCUR ON THE SAME DAY AS MY TRANSACTION, THE TRADE WILL BE BROKEN
AT MY EXPENSE. FURTHERMORE, I AFFIRM THAT IF THIS IS A SALE OF STOCK, I HAVE
EITHER HELD IT FOR AT LEAST 60 DAYS OR I AM SELLING THE STOCK AT A LOSS.
------------------------------
AUTHORIZED
- -------------------------------- ------------------------------
SIGNED DATE
