<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. 41 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ ]
Amendment No. 42 [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
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[X] on May 1, 2000 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 International Equity Fund
Loomis, Sayles & Company, L.P.
Nvest Equity Income Fund
Vaughan, Nelson, Scarborough & McCullough, 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 2
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Fund Fees & Expenses
[GRAPHIC OMITTED] Page 15
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Management Team
[GRAPHIC OMITTED] Page 18
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Fund Services
[GRAPHIC OMITTED] Page 21
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Fund Performance
[GRAPHIC OMITTED] Page 33
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Nvest Funds
399 Boylston Street, Boston, Massachusetts 02116
800-225-5478
<PAGE>
TABLE OF CONTENTS
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GOALS, STRATEGIES & RISKS
- --------------------------------------------------------------------------------
Nvest Capital Growth Fund ............................................... 2
Nvest Growth Fund ....................................................... 4
Nvest Growth and Income Fund ............................................ 6
Nvest Balanced Fund ..................................................... 8
Nvest International Equity Fund ......................................... 11
Nvest Equity Income Fund ................................................ 13
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FUND FEES & EXPENSES
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Fund Fees & Expenses .................................................... 15
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MORE ABOUT RISK
- --------------------------------------------------------------------------------
More About Risk ......................................................... 17
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MANAGEMENT TEAM
- --------------------------------------------------------------------------------
Meet the Funds' Investment Advisers and Subadvisers ..................... 18
Meet the Funds' Portfolio Managers ...................................... 19
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FUND SERVICES
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Investing in the Funds .................................................. 21
How Sales Charges Are Calculated ........................................ 22
Ways to Reduce or Eliminate Sales Charges ............................... 23
It's Easy to Open an Account ............................................ 24
Buying Shares ........................................................... 25
Selling Shares .......................................................... 26
Selling Shares in Writing ............................................... 27
Exchanging Shares ....................................................... 28
Restrictions on Buying, Selling and Exchanging Shares ................... 28
How Fund Shares Are Priced .............................................. 29
Dividends and Distributions ............................................. 30
Tax Consequences ........................................................ 30
Compensation to Securities Dealers ...................................... 31
Additional Investor Services ............................................ 32
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FUND PERFORMANCE
- --------------------------------------------------------------------------------
Nvest Capital Growth Fund ............................................... 33
Nvest Growth Fund ....................................................... 34
Nvest Growth and Income Fund ............................................ 35
Nvest Balanced Fund ..................................................... 36
Nvest International Equity Fund ......................................... 37
Nvest Equity 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>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
-------------------------- Stability Income Growth
NVEST CAPITAL GROWTH FUND -----------------------
High X
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Mangement") Mod. X
--------- ------ ------
SUBADVISER: Westpeak Investment Advisors, L.P. Low X
("Westpeak")
MANAGER: Gerald H. Scriver TICKER SYMBOL: CLASS A CLASS B CLASS C
---------------------------
CATEGORY: Large-Cap Equity NEFCX NECBX NECGX
INVESTMENT GOAL
The Fund seeks long-term capital growth.
The Fund's investment goal may be changed without shareholder approval.
INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all of its
assets in common stock of U.S. medium and large capitalization companies in any
industry.
Westpeak constructs a portfolio of reasonably-priced growth stocks by combining
its experience and judgment with a dynamic weighting process known as "portfolio
profiling." The portfolio emphasizes the characteristics that Westpeak believes
are most likely to be rewarded by the market in the period ahead. Using
proprietary research based on economic, market and company specific information,
Westpeak analyzes each stock and ranks them based on characteristics such as:
x earnings-to-price ratios
x earnings growth rates
x positive earnings surprises
x book-to-price ratios
In selecting investments for the Fund's portfolio, Westpeak employs the
following strategy:
o It starts with the Russell 3000 Growth Index of about 1,800 stocks and
generally eliminates stocks of companies below a $500 million market
capitalization threshold. This creates an overall valuation universe of about
1,200 stocks, with approximately 90% 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 and value
characteristics.
o All of the stocks are then screened using Wall Street analysts' projected
earnings estimates for the company and each is assigned an "expectations
rank." This rank accounts for the company's potential earnings revisions and
"positive earnings surprises"(whether its business has the potential to
improve in the near future).
o The final step is to calculate a "composite rank" for each stock by combining
their fundamental and expectation ranks and to evaluate whether to buy, sell
or hold a stock by comparing its composite rank to those of other stocks on a
stock valuation matrix.
o The desired result is a portfolio of 75 to 125 stocks that Westpeak believes
will produce the highest long-term returns consistent with the Fund's risk
parameters.
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).
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 could adversely affect the value of the portfolio.
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. 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 7.9%
1994 -1.6%
1995 30.7%
1996 17.1%
1997 17.2%
1998 29.0%
1999
/\ Highest Quarterly Return: , %
\/ Lowest Quarterly Return: , %
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 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 Lipper Multi-Cap Growth Fund and
Morningstar Large 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 Lipper, Inc. and Morningstar, 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 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
Lipper Multi-Cap Growth Fund and Morningstar Large 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 SINCE
31, 1999) PAST 1 YEAR PAST 5 YEARS INCEPTION
- -------------------------------------------------------------------------------
Nvest Capital Growth Fund: Class A
(inception 8/3/92) % % %
Russell 1000 Growth Index % % %
Lipper Multi-Cap Growth Fund Average
(calculated from 8/6/92) % % %
Morningstar Large Growth Average
(calculated from 7/31/92) % % %
Nvest Capital Growth Fund: Class B
(inception 9/13/93) % % %
Russell 1000 Growth Index % % %
Lipper Multi-Cap Growth Fund Average
(calculated from 9/30/93) % % %
Morningstar Large Growth Average
(calculated from 9/30/93) % % %
Nvest Capital Growth Fund: Class C
(inception 12/30/94) % %
Russell 1000 Growth Index % %
Lipper Multi-Cap Growth Fund Average % %
Morningstar Large Growth Average % %
- --------------------------------------------------------------------------------
For actual past expenses of Class A, B and C shares, see the section entitled
"Fund Fees & Expenses."
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
--------------------------- Stability Income Growth
NVEST GROWTH FUND -----------------------
High X
--------- ------ ------
Mod.
--------- ------ ------
ADVISER: Capital Growth Management Limited Low X X
Partnership ("CGM")
MANAGER: G. Kenneth Heebner TICKER SYMBOL: CLASS A CLASS B CLASS C
---------------------------
CATEGORY: Large-Cap Equity NEFGX NEBGX NEGCX
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.
INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest
substantially all of its assets in 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 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 will generally employ 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).
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.
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.
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. 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 year.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 5.1%
1991 56.7%
1992 -6.6%
1993 11.3%
1994 -7.1%
1995 38.1%
1996 20.9%
1997 23.5%
1998 33.4%
1999
/\ Highest Quarterly Return: , %
\/ Lowest Quarterly Return: , %
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 Lipper Large-Cap Core Fund and
Morningstar Large Blend 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 Lipper, Inc. and Morningstar, 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 S&P 500 returns have
not been adjusted for ongoing management, distribution and operating expenses
and sales charges applicable to mutual fund investments. The Lipper Large-Cap
Core Fund and Morningstar Large Blend 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 inception
<S> <C> <C> <C>
Nvest Growth Fund: Class A
(inception 11/27/68) % % %
S&P 500 % % %
Lipper Large-Cap Core Fund Average % % %
Morningstar Large Blend Average % % %
Nvest Growth Fund: Class B
(inception 2/28/97) % %*
S&P 500 % %*
Lipper Large-Cap Core Fund Average % %*
Morningstar Large Blend Average % %*
Nvest Growth Fund: Class C
(inception 9/1/98) %*
S&P 500 %*
Lipper Large-Cap Core Fund Average
(calculated from 8/31/98) %*
Morningstar Large Blend Average
(calculated from 8/31/98) %*
- --------------------------------------------------------------------------------
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 FUND FOCUS
-------------------------- Stability Income Growth
NVEST GROWTH -----------------------
AND INCOME FUND High X
--------- ------ ------
ADVISER: Nvest Funds Management, L.P. Mod. X
("Nvest Mangement") --------- ------ ------
Low X
SUBADVISER: Westpeak Investment Advisors, L.P.
("Westpeak")
MANAGER: Gerald H. Scriver TICKER SYMBOL: CLASS A CLASS B CLASS C
---------------------------
CATEGORY: Large-Cap Equity NEFOX NEGBX NECOX
INVESTMENT GOAL
The Fund seeks opportunities for long-term capital growth and income. The Fund's
investment goal may be changed without shareholder approval.
INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all its
assets in common stock of large capitalization companies in any industry.
Westpeak constructs a portfolio of recognizable, reasonably-priced growth stocks
by combining its experience and judgment with a dynamic weighting process known
as "portfolio profiling." The portfolio emphasizes the characteristics that
Westpeak feels are most likely to be rewarded by the market in the period ahead.
Using proprietary research based on economic, market and company specific
information, Westpeak analyzes each stock and ranks them based on
characteristics such as:
x earnings-to-price ratios
x earnings growth rates
x positive earnings surprises
x book-to-price ratios
x dividend yield
In selecting investments for the Fund, Westpeak employs the following strategy:
o It starts with an initial universe of approximately 1,300 stocks of large
capitalization companies and generally eliminates stocks of companies below a
$1.4 billion market capitalization threshold. This creates an overall universe
of about 900 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 and value
characteristics.
o All of the stocks are then screened using Wall Street analysts' projected
earnings estimates for the company and each is assigned an "expectations
rank." This rank accounts for the company's potential earnings revisions and
"positive earnings surprises" (whether its business has the potential to
improve in the near future).
o The final step is to calculate a "composite rank" for each stock by combining
their fundamental and expectation ranks and to evaluate whether to buy, sell
or hold a stock by comparing its composite rank to those of other stocks on a
stock valuation matrix;
o The desired result is a portfolio of 75 to 150 stocks, with a dividend yield
that approximates that of the Standard & Poor's Composite Rank of 500 stocks
("S&P 500"), 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
Depository 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).
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.
FOREIGN SECURITIES: ADRs may be more volatile than U.S. securities and carry
political, economic and information risks that are associated with foreign
securities.
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. 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 -4.3%
1991 30.6%
1992 9.3%
1993 8.0%
1994 1.0%
1995 35.1%
1996 17.2%
1997 33.4%
1998 23.9%
1999
/\ Highest Quarterly Return: , %
\/ Lowest Quarterly Return: , %
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 Lipper
Multi-Cap Core Fund and Morningstar Large 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 Lipper, Inc. and Morningstar, 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 S&P 500 returns have not been adjusted for ongoing management, distribution
and operating expenses and sales charges applicable to mutual fund investments.
The Lipper Multi-Cap Core Fund Average and Morningstar Large Value 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 inception
<S> <C> <C> <C>
Nvest Growth and Income Fund: Class A
(inception 5/6/31) % % %
S&P 500 % % %
Lipper Multi-Cap Core Fund Average % % %
Morningstar Large Value Average % % %
Nvest Growth and Income Fund: Class B
(inception 9/13/93) % % %*
S&P 500 % % %*
Lipper Multi-Cap Core Fund Average
(calculated from 9/30/93) % % %*
Morningstar Large Value Average
(calculated from 9/30/93) % % %*
Nvest Growth and Income Fund: Class C
(inception 5/1/95) % %*
S&P 500 % %*
Lipper Multi-Cap Core Fund Average
(calculated from 4/30/95) % %*
Morningstar Large Value Average
(calculated from 4/30/95) % %*
- --------------------------------------------------------------------------------
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 FUND FOCUS
------------------------- Stability Income Growth
NVEST BALANCED FUND -----------------------
High
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Mangement") Mod. X X X
--------- ------ ------
SUBADVISER: Loomis, Sayles & Company, L.P. Low
("Loomis Sayles")
MANAGERS: Equity (Value Component):
Jeff Wardlow and
Gregg Watkins TICKER SYMBOL: CLASS A CLASS B CLASS C
Equity (Growth Component): --------------------------
Mark Baribeau, NEFBX NEBBX NEBCX
Pamela Czekanski,
Richard Skaggs
Fixed Income: John Hyll
CATEGORY: Large-Cap Equity
INVESTMENT GOAL
The Fund seeks a reasonable long-term investment return from a combination of
long-term capital appreciation and moderate current income.
INVESTMENT STRATEGIES
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. The Fund principally invests in common
stocks of quality, large capitalization companies of any industry and investment
grade bonds. Loomis Sayles uses a flexible approach to seek investments with the
following characteristics, although not all of the companies selected will have
these attributes:
EQUITY SECURITIES - VALUE COMPONENT:
x discounted price compared to its current value
x below-average price-to-earnings ratios
x competitive current and estimated dividend yield
x attractive 5-year estimated earnings growth
EQUITY SECURITIES - GROWTH COMPONENT
x large to mid-market capitalization
x leading position within industry
x superior earnings growth potential
x undervalued relative to future growth prospects
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, primarily those with a market capitalization in excess of $2
billion. 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, primarily those with a large to mid-market
capitalization (currently in excess of $5 billion.) 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.
o Rule 144A Securities
o Mortgage- and asset-backed securities.
o 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).
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 may react differently to issuer, political, market and economic
developments than other types of stocks and the market as a whole. Growth
stocks tend to be more expensive relative to their underlying earnings or
assets compared to other types of stocks and as a result, tend to be sensitive
to changes in their earnings and more volatile than other types of stocks.
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. Credit risk relates to the ability of an issuer to make
payments of principal and interest when due and includes the risk of default.
Interest rate risk relates to changes in a security's value as a result of
changes in interest rates. 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.
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. 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 -10.6%
1991 29.2%
1992 13.9%
1993 14.2%
1994 -2.7%
1995 26.3%
1996 17.1%
1997 17.5%
1998 8.2%
1999
/\ Highest Quarterly Return: , %
\/ Lowest Quarterly Return: , %
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 Lipper Balanced Fund and
Morningstar Domestic Hybrid 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 Lipper, Inc. and Morningstar, 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 Lipper Balanced Fund Average and Morningstar Domestic Hybrid
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 inception
<S> <C> <C> <C>
Nvest Balanced Fund: Class A
(inception 11/27/68) % % %
S&P/Lehman G/C Blend % % %
Lipper Balanced Fund Average % % %
Morningstar Domestic Hybrid Average % % %
Nvest Balanced Fund: Class B
(inception 9/13/93) % % %*
S&P/Lehman G/C Blend
(Lehman calculated from 9/30/93) % % %*
Lipper Balanced Fund Average
(calculated from 9/30/93) % % %*
Morningstar Domestic Hybrid Average
(calculated from 9/30/93) % % %*
Nvest Balanced Fund: Class C
(inception 12/30/94) % %*
S&P/Lehman G/C Blend % %*
Lipper Balanced Fund Average % %*
Morningstar Domestic Hybrid Average % %*
- --------------------------------------------------------------------------------
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 FUND FOCUS
------------------------- Stability Income Growth
NVEST INTERNATIONAL EQUITY -------- ------ -------
FUND High X
--------- ------ ------
ADVISER: Nvest Funds Management, L.P. Mod.
("Nvest Management") --------- ------ ------
Low X X
SUBADVISER: Loomis, Sayles & TICKER SYMBOL: CLASS A CLASS B CLASS C
Company, L.P. ---------------------------
("Loomis Sayles") NEFIX NEIBX NECIX
MANAGERS: Alexander Muromcew, John
Tribolet and Eswar Menon
CATEGORY: Large-Cap Equity
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.
INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest primarily in equity
securities of companies 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. 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.
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).
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.
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.
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. 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 29.4%
1994 8.1%
1995 5.8%
1996 3.3%
1997 -7.6%
1998 6.7%
1999
/\ Highest Quarterly Return: , %
\/ Lowest Quarterly Return: , %
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 Lipper International Fund and Morningstar Foreign Stock
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 Lipper, Inc. and
Morningstar, 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 Lipper International Fund
Average and Morningstar Foreign Stock 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 PAST 5 YEARS SINCE
INCEPTIOn
- --------------------------------------------------------------------------------
Nvest International Equity Fund:
Class A (inception 5/21/92) % % %
MSCI EAFE % % %
Lipper International Fund Average
(calculated from 5/28/92) % % %
Morningstar Foreign Stock Average
(calculated from 5/31/92) % % %
Nvest International Equity Fund:
Class B (inception 9/13/93) % % %
MSCI EAFE % % %
Lipper International Fund Average
(calculated from 9/30/93) % % %
Morningstar Foreign Stock Average
(calculated from 9/30/93) % % %
Nvest International Equity Fund:
Class C (inception 12/30/94) % %
MSCI EAFE % %
Lipper International Fund Average % %
Morningstar Foreign Stock Average % %
- -------------------------------------------------------------------------------
For actual past expenses of Class A, B and C shares, see the section entitled
"Fund Fees & Expenses."
<PAGE>
FUND FOCUS
Stability Income Growth
------------------------
[graphic omitted] GOALS, STRATEGIES & RISKS High X
------------------------- --------- ------ -------
NVEST EQUITY INCOME FUND Med. X X
--------- ------ -------
Low
TICKER SYMBOL: CLASS A CLASS B CLASS C
-------------------------
NEEIX NEBIX NECEX
ADVISER: Nvest Funds Management, L.P.
("Nvest Management")
SUBADVISER: Vaughan, Nelson, Scarborough
& McCullough, L.P. ("VNSM")
MANAGERS: Margaret M. Buescher and Jean Malo
INVESTMENT GOAL
The Fund seeks current income and capital growth.
The Fund's investment goal may be changed without shareholder approval.
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. 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 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 Depository 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).
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.
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Credit risk relates to the ability of an issuer to make
payments of principal and interest when due and includes the risk of default.
Interest rate risk relates to changes in a security's value as a result of
changes in interest rates. 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.
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. 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 26.6%
1997 22.6%
1998 2.7%
1999
/\ Highest Quarterly Return: , %
\/ Lowest Quarterly Return: , %
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 Lipper
Equity Income Fund and Morningstar Large 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 Lipper, Inc. and Morningstar, 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 Lipper Equity Income Fund Average and Morningstar Large Value
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) % %
Class B (inception 9/15/97) % %
Class C (inception 9/15/97) % %
Russell 1000 Value Index % % %
Lipper Equity Income Fund Average % %* %*
Morningstar Large Value Average % %* %*
- ------------------------------------------------------------------------------------------------------
* The 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>
[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 Charges."
(2) Does not apply to reinvested distributions.
(3) A 1.00% contingent deferred sales charge applies with respect to certain
purchases of Class A shares greater than $1,000,000 redeemed within 1 year
after purchase, but not to any other purchases or redemptions of Class A
shares. See "How Sales Charges are Calculated."
* Generally, a transaction fee will be charged for expedited payment of
redemption proceeds such as by wire or overnight delivery.
<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 % % % % % % % % %
Distribution and/or service (12b-1) fees % %* %* % %* %* % %* %*
Other expenses % % % % % % % % %
Total annual fund operating expenses % % % % % % % % %
<CAPTION>
BLANCED 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 % % % % % %
Distribution and/or service (12b-1) fees % %* %* % %* %*
Other expenses % % % % % %
Total annual fund operating expenses % % % % % %
<CAPTION>
EQUITY INCOME FUND
CLASS A CLASS B CLASS C
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees % % %
Distribution and/or service (12b-1) fees % %* %*
Other expenses % % %
Total annual fund operating expenses % % %
Fee Waiver and/or expense reimbursement %** %** %**
Net expenses % % %
* Because of the higher 12b-1 fees, long-term shareholders may pay more than the economic equivalent of the maximum front-end sales
charge permitted by rules of the National Association of Securities Dealers, Inc.
** 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 will be in effect for the life of this Prospectus.
</TABLE>
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 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
3 years $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
5 years $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
10 years* $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCED FUND INTERNATIONAL EQUITY FUND EQUITY 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 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
3 years $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
5 years $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
10 years* $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
(1) Assumes redemption at end of period
(2) Assumes no redemption at end of period
* Class B shares automatically convert to Class A shares after 8 years; therefore, Class B amounts are calculated using Class A
expenses in years 9 and 10.
</TABLE>
<PAGE>
MORE ABOUT RISK
The Funds have principal investment strategies that come with inherent risks.
The following is a list of risks to which each Fund may be subject by investing
in various types of securities or engaging in various practices.
MARKET RISK (All Funds) The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably based upon change in a company's
financial condition as well as overall market and economic conditions.
RISK OF SMALL CAPITALIZATION COMPANIES (Capital Growth, International Equity and
Equity Income 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 Fund) 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 derivative security is not used as a hedge, a 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 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 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 Fund) 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 $-- billion
in assets under management as of March 31, 2000. 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. Nvest Companies'
14 principal subsidiary or affiliated asset management firms, collectively, had
more than $-- billion in assets under management as of March 31, 2000. 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 --%
for Capital Growth Fund, --% for Growth and Income Fund, --% for Balanced Fund,
- --% for International Equity Fund and --% for Equity Income 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 and largest investment advisory firms with over $-- billion in
assets under management. 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 manages over $6 billion
in assets for mutual funds and other institutional clients, including accounts
of New England Financial.
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 March 31, 2000,
VNSM had approximately $-- billion in assets under management.
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 six additional mutual funds and various institutional
investors. CGM is an affiliate of Nvest Companies and has grown to manage over
$-- billion in assets. In 1999, Growth Fund paid --% 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
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 34 year
veteran of the investment industry.
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 founder, President and
Chief Executive Officer of Westpeak Investment Advisors. 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 33 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 15 years of
investment experience.
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 received both his B.B.A.
and his M.B.A. from Michigan State University and has over 16 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 14 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 24 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 21 years of
investment experience.
ALEXANDER MUROMCEW
Alexander Muromcew serves as co-portfolio manager for INTERNATIONAL EQUITY FUND.
Mr Muromoew, 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 and his B.A. from Dartmouth College.
JOHN TRIBOLET
John Tribolet serves as co-portfolio manager for INTERNATIONAL EQUITY FUND. 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.
ESWAR MENON
Eswar Menon serves as co-portfolio manager for INTERNATIONAL EQUITY FUND. 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 and an M.S. from the
University of California. He received his B.S. from Indian Institute of
Technology, Madras, India.
MARK B. BARIBEAU
Mark B. Baribeau has 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. He is also a Chartered Financial Analyst. He
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 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. She is also a Chartered Financial Analyst. She
received a B.A. from Middlebury College and has 16 years of investment
experience.
RICHARD D. SKAGGS
Richard D. Skaggs has 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. He is also a Chartered Financial Analyst. He received a
M.S.M. and a B.S. from Oakland University and has 13 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 and Expenses" in this Prospectus.
CERTIFICATES
Certificates will not be automatically issued for any class of shares. Upon
written request, you may receive certificates for Class A shares only.
<PAGE>
[graphic omitted] FUND SERVICES
-------------
HOW SALES CHARGES ARE CALCULATED
CLASS A SHARES
The price that you pay when you buy Class A shares ("offering price") is their
net asset value plus a sales charge (sometimes called a "front-end sales
charge") which varies depending upon the size of your purchase.
- --------------------------------------------------------------------------------
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 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>
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, 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 members (one-year
CDSC may apply);
o Non-discretionary and non-retirement accounts of bank trust departments or
trust companies only if they principally engage in banking or trust
activities; and
o Investments of $25,000 or more in 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
will generally be eliminated in the following cases:
o to make distributions from a retirement plan (a plan termination or total plan
redemption may incur a CDSC);
o to make payments through a systematic withdrawal plan; or
o due to shareholder death or disability.
If you think you may be eligible for a sales charge elimination or reduction,
contact your financial representative or Nvest Funds.
<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 $2,000 $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 401(k), SARSEP,
SEP, SIMPLE, 403(b)(7) and
certain other retirement
plans $ 25 N/A $ 25
- --------------------------------------------------------------------------------
3. Complete the appropriate parts of the account application, carefully
following the instructions. If you have any questions, please call your
financial representative or Nvest Funds at 800-225-5478. For more information
on Nvest Funds' investment programs, refer to the section entitled
"Additional Investor Services" in this Prospectus.
4. Use the following sections as your guide for purchasing shares.
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 checks "Nvest Funds." Third party checks
will generally not be accepted. will generally not be accepted.
o Mail the check with your completed o Fill out the detachable investment
application to 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."
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 Instruct your bank to transfer funds
obtain an account number and wire to State Street Bank & Trust
transfer instructions. Your bank may Company, ABA# 011000028, DDA#
charge you for such a transfer. 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 to
whether it is a member of the ACH add shares to your account through
system. 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 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 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 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 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>
[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"). 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 Trustees)
qualified 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 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
New York Stock Exchange (the "Exchange") on the days the Exchange is open for
trading. This is normally 4:00 p.m. Eastern time.
o The price you pay for purchasing, redeeming or exchanging a share will be
based upon the net asset value next calculated after your order is received
"in good order" by State Street Bank and Trust Company, the Fund's custodian
(plus or minus applicable sales charges as described earlier in this
Prospectus).
o Requests received by the Distributor after the Exchange closes will be
processed based upon the net asset value determined at the close of regular
trading on the next day that the Exchange is open, with the exception that
those orders received by your investment dealer before the close of the
Exchange and received by the Distributor before 5:00 p.m. Eastern time* on the
same day will be based on the net asset value determined on that day.
o A Fund heavily invested in foreign securities may have net asset value changes
on days when you cannot buy or sell its shares.
*Under limited circumstances, the Distributor may enter into
a contractual agreement where it may accept orders after 5:00 pm, but not later
than 8:00 pm
Generally, during times of substantial economic or market change,
it may be difficult to place your order by phone. During these times, you may
deliver your order in person to the Distributor or send your order by mail as
described in "Buying Shares" and "Selling Shares."
Generally, Fund securities are valued as follows:
o EQUITY SECURITIES -- most recent sales or quoted bid price as provided by a
pricing service.
o DEBT SECURITIES (OTHER THAN SHORT-TERM OBLIGATIONS) -- based upon pricing
service valuations.
o SHORT-TERM OBLIGATIONS (REMAINING MATURITY OF LESS THAN 60 DAYS) -- amortized
cost (which approximates market value).
o SECURITIES TRADED ON FOREIGN EXCHANGES -- most recent sale/bid price on the
non-U.S. exchange, unless an occurrence after the close of the exchange will
materially affect its value. In that case, it is given fair value as
determined by or under the direction of the Fund's Board of Trustees at the
close of regular trading on the Exchange.
o OPTIONS -- last sale price, or if not available, last offering price.
o FUTURES -- unrealized gain or loss on the contract using current settlement
price. When a settlement price is not used, futures contracts will be valued
at their fair value as determined by or under the direction of the Fund's
Board of Trustees.
o ALL OTHER SECURITIES -- fair market value as determined by the adviser 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 priced by another method that the Fund's Board of
Trustees believes actually 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. 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.
<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 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>
[graphic omitted] Fund Services
-------------
ADDITIONAL INVESTOR SERVICES
RETIREMENT PLANS
Nvest Funds offers a range of retirement plans, including IRAs, SEPs, SARSEPs,
SIMPLEs, 401(k) plans, 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 has an automatic exchange plan under which shares of a class of a
Fund are automatically exchanged each month for shares of the same class of
other 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.
<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 included in the SAI, 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 $15.24 $18.09 $18.74 $19.10
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) (0.11)(b) (0.14)(c) (0.18)(c) (0.13)(c) (0.16)(b) (0.28)(c) (0.32)(c) (0.27)(c)
Net Realized and
Unrealized Gain
(Loss) on
Investments 4.74 3.22 3.43 5.18 4.60 3.15 3.25 4.87
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment
Operations 4.63 3.08 3.25 5.05 4.44 2.87 2.93 4.60
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From
Net Realized Capital
Gains (1.24) (2.22) (2.57) (4.33) (1.24) (2.22) (2.57) (4.33)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (1.24) (2.22) (2.57) (4.33) (0.00) (2.22) (2.57) (4.33)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End
of the Year $18.41 $19.27 $19.95 $20.67 $18.09 $18.74 $19.10 $19.37
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) (a) 30.7 17.1 17.2 29.0 29.7 16.2 15.9 28.2
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to Average
Net Assets (%) 1.61 1.50 1.45 1.46 2.36 2.25 2.20 2.21
Ratio of Net
Investment Income
(Loss) to Average
Net Assets (%) (0.67) (0.71) (0.87) (0.62) (1.42) (1.46) (1.62) (1.37)
Portfolio Turnover
Rate (%) 69 74 48 136 69 74 48 136
Net Assets, End of
Year (000) $123,504 $141,326 $149,734 $175,511 $26,234 $37,439 $45,546 $57,796
<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
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.09)(b) (0.28(C) (0.34)(c) (0.27)(C)
Net Realized and Unrealized Gain (Loss)
on Investments 4.52 3.16 3.28 4.86
------ ------ ------ ------ ------
Total From Investment Operations 4.43 2.88 2.94 4.59
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net Realized Capital
Gains (1.24) (2.22) (2.57) (4.33)
------ ------ ------ ------ ------
Total Distributions (1.24) (2.22) (2.57) (4.33)
------ ------ ------ ------ ------
Net Asset Value, End of the Year $18.08 $18.74 $19.11 $19.37
====== ====== ====== ====== ======
TOTAL RETURN (%) (a) 29.7 16.2 15.9 28.1
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average
Net Assets (%) 2.36 2.25 2.20 2.21
Ratio of Net Investment Income (Loss) to
Average Net Assets (%) (1.42) (1.46) (1.62) (1.37)
Portfolio Turnover Rate (%) 69 74 48 136
Net Assets, End of Year (000) $354 $504 $979 $1,609
(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>
<CAPTION>
[graphic omitted] Fund Performance
----------------
NVEST GROWTH FUND
CLASS A
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $ 8.87 $10.55 $11.63 $10.41
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.05 0.04 0.01 0.08(c)
Net Realized and Unrealized Gain (Loss)
on Investments 3.30 2.07 2.79 3.00
------ ------ ------ ------ ------
Total From Investment Operations 3.35 2.11 2.80 3.08
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net Investment
Income (0.05) (0.04) 0.00 (0.10)
Distributions From Net Realized Gain
on Investments (1.62) (0.99) (4.02) (1.32)
Distributions in Excess of Realized
Gain on Investments 0.00 0.00 0.00 (0.35)
Distributions from Return of Capital 0.00 0.00 0.00 (0.36)
------ ------ ------ ------ ------
Total Distributions (1.67) (1.03) (4.02) (2.13)
------ ------ ------ ------ ------
Net Asset Value, End of the Year $10.55 $11.63 $10.41 $11.36
====== ====== ====== ====== ======
TOTAL RETURN (b) 38.1 20.9 23.5 33.4
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 1.20 1.18 1.12 1.12
Ratio of Net Investment Income
to Average Net Assets (%) 0.42 0.33 0.08 0.74
Portfolio Turnover Rate (%) 235 199 214 202
Net Assets, End of Year (000,000) $1,201 $1,297 $1,460 $1,825
<CAPTION>
CLASS B CLASS C
FEBRUARY 28(A) SEPTEMBER 1(A)
THROUGH YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999 1998 1999
<C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $12.47 $10.32 $11.18
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.07) 0.00(c) 0.00(c)
Net Realized and Unrealized Gain (Loss)
on Investments 1.94 2.95 2.09
------ ------ ------ ------ ------
Total From Investment Operations 1.87 2.95 2.09
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net Investment
Income 0.00 (0.06) (0.06)
Distributions From Net Realized Gain
on Investments (4.02) (1.32) (1.32)
Distributions in Excess of Realized
Gain on Investments 0.00 (0.35) (0.35)
Distributions from Return of Capital 0.00 (0.39) (0.39)
------ ------ ------ ------ ------
Total Distributions (4.02) (2.12) (2.12)
------ ------ ------ ------ ------
Net Asset Value, End of the Year $10.32 $11.15 $11.15
====== ====== ====== ====== ======
TOTAL RETURN (b) 14.4 32.4 22.2
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 1.87(d) 1.87 1.87(d)
Ratio of Net Investment Income
to Average Net Assets (%) (0.67)(d) (0.01) (0.01)(d)
Portfolio Turnover Rate (%) 214(d) 202 202
Net Assets, End of Year (000,000) $18 $75 $2
(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>
<CAPTION>
[GRAPHIC OMITTED] Fund Performance
----------------
NVEST GROWTH AND 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 $12.41 $14.39 $13.87 $15.35 $12.42 $14.40 $13.87 $15.28
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) 0.18 0.13 0.07(c) 0.04 0.10 0.03 (0.05)(c) (0.05)
Net Realized and
Unrealized Gain
(Loss) on
Investments 4.01 2.07 4.40 3.29 4.01 2.07 4.40 3.24
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment
Operations 4.19 2.20 4.47 3.33 4.11 2.10 4.35 3.19
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From
Net Investment
Income (0.18) (0.13) (0.06) (0.01) (0.10) (0.04) (0.01) 0.00
Distributions From
Net Realized Capital
Gains (2.03) (2.59) (2.93) (2.10) (2.03) (2.59) (2.93) (2.10)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (2.21) (2.72) (2.99) (2.11) (2.13) (2.63) (2.94) (2.10)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End
of the Year $14.39 $13.87 $15.35 $16.57 $14.40 $13.87 $15.28 $16.37
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)(B) 35.1 17.2 33.4 23.9 34.3 16.3 32.4 23.1
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets (%) 1.38 1.30 1.25 1.23 2.11 2.05 2.00 1.98
Ratio of Net
Investment Income to
Average Net
Assets (%) 1.31 0.92 0.46 0.33 0.56 0.17 (0.29) (0.42)
Portfolio Turnover
Rate (%) 69 127 103 114 69 127 103 114
Net Assets, End of
Period (000) $150,693 $166,963 $220,912 $304,139 $29,026 $46,856 $81,066 $153,369
<CAPTION>
MAY 1(a)
THROUGH CLASS C
DEC. 31, YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $13.84 $14.39 $13.85 $15.28
------ ------ ------ ------ ------
INCOME FROM INVESTMEN OPERATIONS
Net Investment Income (Loss) 0.06 0.04 (0.05)(c) (0.04)
Net Realized and Unrealized Gain (Loss)
on Investments 2.58 2.05 4.42 3.21
------ ------ ------ ------ ------
Total From Investment Operations 2.64 2.09 4.37 3.17
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net Realized Capital
Income (0.06) (0.04) (0.01) 0.00
Distributions From Net Realized Capital
Gains (2.03) (2.59) (2.93) (2.10)
------ ------ ------ ------ ------
Total Distributions (2.09) (2.63) (2.94) (2.10)
------ ------ ------ ------ ------
Net Asset Value, End of the Year $14.39 $13.85 $15.28 $16.35
====== ====== ====== ====== ======
TOTAL RETURN (%) (a) 20.2 16.3 32.6 22.9
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) 2.11(d) 2.05 2.00 1.98
Ratio of Net Investment Income (Loss) to
Average Net Assets (%) 0.56(d) 0.17 (0.29) (0.42)
Portfolio Turnover Rate (%) 69 127 103 114
Net Assets, End of Period (000) $4,707 $3,912 $6,735 $ 18,288
(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) Per share net investment income (loss) has been calculated using the average shares outstanding during the year.
(d) 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>
<CAPTION>
[graphic omitted] Fund Performance
----------------
NVEST BALANCED 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 $11.27 $13.14 $13.94 $14.25 $11.24 $13.08 $13.86 $14.15
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.42 0.38 0.33 0.33 0.34 0.29 0.23 0.21
Net Realized and
Unrealized
Gain (Loss) on
Investments 2.49 1.76 2.05 0.74 2.46 1.74 2.03 0.74
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment
Operations 2.91 2.14 2.38 1.07 2.80 2.03 2.26 0.95
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net
Investment Income (0.40) (0.39) (0.33) (0.32) (0.32) (0.30) (0.23) (0.22)
Distributions From
Net Realized Capital
Gains (0.64) (0.95) (1.74) (1.48) (0.64) (0.95) (1.74) (1.48)
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (1.04) (1.34) (2.07) (1.80) (0.96) (1.25) (1.97) (1.70)
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of the Year $13.14 $13.94 $14.25 $13.52 $13.08 $13.86 $14.15 $13.40
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return (%)(a) 26.3 17.1 17.5 8.2 25.3 16.3 16.7 7.3
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to Average
Net Assets (%) 1.36 1.33 1.29 1.30 2.11 2.08 2.04 2.05
Ratio of Net
Investment Income to
Average Net
Assets (%) 3.37 2.79 2.25 2.25 2.62 2.04 1.50 1.50
Portfolio Turnover
Rate (%) 54 70 69 81 54 70 69 81
Net Assets, End of
the Year (000) $196,514 $219,626 $233,421 $222,866 $40,361 $58,367 $76,558 $84,255
<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
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.35 0.29 0.23 0.21
Net Realized and Unrealized Gain (Loss) on
Investments 2.44 1.73 2.02 0.74
------ ------ ------ ------ ------
Total From Investment Operations 2.79 2.02 2.25 0.95
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.34) (0.30) (0.23) (0.22)
Distributions From Net Realized Capital Gains (0.64) (0.95) (1.74) (1.48)
------ ------ ------ ------ ------
Total Distributions (0.98) (1.25) (1.97) (1.70)
------ ------ ------ ------ ------
Net Asset Value, End of the Year
$13.05 $13.82 $14.10 $13.35
====== ====== ====== ====== ======
TOTAL RETURN (%)(A) 25.2 16.2 16.6 7.3
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating Expenses to Average Net
Assets (%) 2.11 2.08 2.04 2.05
Ratio of Net Investment Income to Average Net
Assets (%) 2.62 2.04 1.50 1.50
Portfolio Turnover Rate (%) 54 70 69 81
Net Assets, End of the Year (000) $718 $2,538 $4,596 $5,480
(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>
<CAPTION>
NVEST INTERNATIONAL EQUITY FUND
CLASS A
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $15.50 $16.13 $16.31 $14.06
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.27 0.02(c) 0.09(c) 0.15(c)
Net Realized and Unrealized Gain (Loss) on
Investments 0.63 0.51 (1.25) 0.77
------ ------ ------ ------ ------
Total From Investment Operations 0.90 0.53 (1.16) 0.92
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.27) (0.02) 0.00 (0.23)
Distributions in Excess of Net Investment
Income 0.00 0.00 0.00 (0.21)
Distributions From Net Realized Capital
Gains 0.00 (0.33) (1.05) (0.19)
Distributions in Excess of Net Realized
Gains 0.00 0.00 (0.04) (0.09)
Distributions From Paid-In Capital 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
Total Distributions (0.27) (0.35) (1.09) (0.72)
------ ------ ------ ------ ------
Net Asset Value, End of the Year $16.13 $16.31 $14.06 $14.26
====== ====== ====== ====== ======
TOTAL RETURN (%)(A) 5.8 3.3 (7.6) 6.7
Ratios/Supplemental Data
Ratio of Operating Expenses to Average
Net Assets (%)(b) 1.75 1.75 1.75 1.91
Ratio of Net Investment Income (Loss)
to Average Net Assets (%) 1.24 0.14 0.62 1.04
Portfolio Turnover Rate (%) 119 59 154 105
Net Assets, End of the Year (000) $136,848 $109,773 $57,845 $47,444
(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 the voluntary expense limitations would
have been (%):
---------------------------Class A-------------------------
1995 1996 1997 1998 1999
1.83 1.79 2.14 2.25
(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 15, 1997. The highlights prior to this date reflect results
achieved by the previous subadviser under different investment policies.
<CAPTION>
CLASS B CLASS C
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>
Net Asset Value,
Beginning of the
Year $15.35 $15.93 $16.00 $13.71 $15.35 $15.96 $16.03 $13.74
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) 0.19 (0.10)(c) (0.03)(c) 0.04(c) 0.19 (0.10)(c) (0.03)(c) (0.05)(c)
Net Realized and
Unrealized Gain
(Loss) on
Investments 0.58 0.50 (1.17) 0.75 0.61 0.50 (1.17) 0.75
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment
Operations 0.77 0.40 (1.20) 0.79 0.80 0.40 (1.20) 0.80
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net
Investment Income (0.19) 0.00 0.00 (0.12) (0.19) 0.00 0.00 (0.12)
Distributions in
Excess of Net
Investment Income 0.00 0.00 0.00 (0.12) 0.00 0.00 0.00 (0.12)
Distributions From Net
Realized Capital
Gains 0.00 (0.33) (1.05) (0.19) 0.00 (0.33) (1.05) (0.19)
Distributions in
Excess of Net
Realized Gains 0.00 0.00 (0.04) (0.09) 0.00 0.00 (0.04) (0.09)
Distributions From
Paid-In Capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (0.19) (0.33) (1.09) (0.52) (0.19) (0.33) (1.09) (0.52)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End
of the Year $15.93 $16.00 $13.71 $13.98 $15.96 $16.03 $13.74 $14.02
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)(a) 5.0 2.5 (8.0) 5.8 5.2 2.5 (8.0) 5.9
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to Average
Net Assets (%)(b) 2.50 2.50 2.50 2.66 2.50 2.50 2.50 2.66
Ratio of Net
Investment Income
(Loss) to Average
Net Assets (%) 0.49 (0.61) (0.13) 0.29 0.49 (0.61) (0.13) 0.29
Portfolio Turnover
Rate (%) 119 59 154 105 119 59 154 105
Net Assets, End of
the Year (000) $52,895 $45,974 $25,216 $19,797 $1,066 $850 $843 $860
(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 the voluntary expense limitations would
have been (%):
-------------------Class B-------------------- ----------------------Class C---------------------
1995 1996 1997 1998 1999 1995 1996 1997 1998 1999
2.58 2.54 2.89 3.00 2.58 2.54 2.89 3.00
(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 15, 1997. The highlights prior to this date reflect results
achieved by the previous subadviser under different investment policies.
</TABLE>
<PAGE>
NVEST EQUITY INCOME FUND
<TABLE>
<CAPTION>
CLASS A
NOV. 15(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
------ ------ ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.04 0.31 0.25 0.26(b)
Net Realized and Unrealized Gains on
Investments 0.36 3.11 3.15 0.20(c)
------ ------ ------- ------- ------
Total From Investment Operations 0.40 3.42 3.40 0.46
------ ------ ------- ------- ------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.04) (0.30) (0.26) (0.26)
Distributions From Net Realized Capital Gains 0.00 (0.83) (0.70) (0.17)
------ ------ ------- ------- ------
Total Distributions (0.04) (1.13) (0.96) (0.43)
------ ------ ------- ------- ------
Net Asset Value, End of Period $12.86 $15.15 $ 17.59 $ 17.62
====== ====== ======= ======= ======
TOTAL RETURN (%)(d) 3.2 26.6 22.6 2.7
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%)(e) 1.50(f) 1.50 1.50 1.50
Ratio of Net Investment Income
to Average Net Assets (%) 3.58(f) 2.06 1.76 1.48
Portfolio Turnover Rate (%) 0 45 33 61
Net Assets, End of Period (000) $2,064 $2,613 $14,681 $17,839
(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
(f) Computed on an annualized basis.
<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>
Net Asset Value, Beginning of the Period $17.06 $ 17.59 $17.06 $17.59
------ ------- ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.03 0.13(b) 0.03 0.13(b)
Net Realized and Unrealized Gains on
Investments 0.60 0.20(c) 0.60 0.21(c)
------ ------- ------ ------ ------ ------
Total From Investment Operations 0.63 0.33 0.63 0.34
------ ------- ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.04) (0.13) (0.04) (0.13)
Distributions From Net Realized Capital Gains (0.06) (0.17) (0.06) (0.17)
------ ------- ------ ------ ------ ------
Total Distributions (0.10) (0.30) (0.10) (0.30)
------ ------- ------ ------ ------ ------
Net Asset Value, End of Period $17.59 $ 17.62 $17.59 $17.63
====== ======= ====== ====== ====== ======
TOTAL RETURN (%)(d) 3.7 2.0 3.7 2.0
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%)(e) 2.25(f) 2.25 2.25(f) 2.25
Ratio of Net Investment Income
to Average Net Assets (%) 1.01(f) 0.73 1.01(f) 0.73
Portfolio Turnover Rate (%) 33 61 33 61
Net Assets, End of Period (000) $9,375 $16,623 $1,596 $2,101
(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 3.85(f) 2.67
(f) Computed on an annualized basis.
</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
Standard & Poor's Group or Moody's Investors Service, Inc. Bonds with a credit
rating of BBB or higher by S&P or Baa or higher by Moody's are generally
considered investment grade.
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
analysts consider 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, these analysts 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 a 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-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).
PRICE-TO-BOOK RATIO -- Current market price of a stock divided by its book
value, or net asset value of the stock.
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 Loomis Sayles has determined, under
guidelines established by Loomis Sayles Funds' 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>
NVEST FUNDS
STOCK FUNDS
Nvest Capital Growth Fund
Nvest Growth Fund
Nvest Growth and Income Fund
Nvest Balanced Fund
Nvest International Equity Fund
Nvest Equity Income 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 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.
Text-only copies are available free from
the Commission's Web site at:
www.sec.gov.
Copies of these publications are also
available for a fee by writing or
calling the Public Reference Room of the
SEC, Washington, D.C. 20549-6009
Telephone: 800-SEC-0330
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)
(Investment Company Act File No. 811-7345)
XS51-0200
<PAGE>
NVEST FUNDS(SM)
Where The Best Minds Meet(R)
- --------------------------------------------------------------------------------
Nvest
STAR FUNDS
[Graphic Omitted]
- --------------------------------------------------------------------------------
SMALL-CAP EQUITY
Nvest Star Small Cap Fund
LARGE-CAP EQUITY
Nvest Star Value Fund
ALL-CAP EQUITY
Nvest Star Advisers Fund
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
[GRAPHIC OMITTED] Goals, Strategies & Risks
Page 2
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] Fund Fees & Expenses
Page 18
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] Management Team
Page 21
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] Fund Services
Page 27
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] Fund Performance
Page 39
- --------------------------------------------------------------------------------
Nvest Funds
399 Boylston Street, Boston, Massachusetts 02116
800-225-5478
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GOALS, STRATEGIES & RISKS
- --------------------------------------------------------------------------------
Nvest Star Small Cap Fund ................................................. 2
Nvest Star Value Fund ..................................................... 6
Nvest Star Advisers Fund .................................................. 10
Nvest Star Worldwide Fund ................................................. 14
- --------------------------------------------------------------------------------
FUND FEES & EXPENSES
- --------------------------------------------------------------------------------
Fund Fees & Expenses ...................................................... 18
- --------------------------------------------------------------------------------
MORE ABOUT RISK
- --------------------------------------------------------------------------------
More About Risk ........................................................... 20
- --------------------------------------------------------------------------------
MANAGEMENT TEAM
- --------------------------------------------------------------------------------
Meet the Funds' Investment Adviser and Subadvisers ........................ 21
Meet the Funds' Portfolio Managers ........................................ 23
- --------------------------------------------------------------------------------
FUND SERVICES
- --------------------------------------------------------------------------------
Investing in the Funds .................................................... 27
How Sales Charges Are Calculated .......................................... 28
Ways to Reduce or Eliminate Sales Charges ................................. 29
It's Easy to Open an Account .............................................. 30
Buying Shares ............................................................. 31
Selling Shares ............................................................ 32
Selling Shares in Writing ................................................. 33
Exchanging Shares ......................................................... 34
Restrictions on Buying, Selling and Exchanging Shares ..................... 34
How Fund Shares Are Priced ................................................ 35
Dividends and Distributions ............................................... 36
Tax Consequences .......................................................... 36
Compensation to Securities Dealers ........................................ 37
Additional Investor Services .............................................. 38
- --------------------------------------------------------------------------------
FUND PERFORMANCE
- --------------------------------------------------------------------------------
Nvest Star Small Cap Fund ................................................. 39
Nvest Star Value Fund ..................................................... 40
Nvest Star Advisers Fund .................................................. 41
Nvest Star Worldwide Fund ................................................. 42
Glossary of Terms ......................................................... 43
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.
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- Stability Income Growth
NVEST STAR SMALL CAP FUND -----------------------
High X
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Management") Mod.
--------- ------ ------
SUBADVISERS: Harris Associates L.P. Low X X
("Harris Associates")
Loomis, Sayles & TICKER SYMBOL: CLASS A CLASS B CLASS C
Company, L.P. ---------------------------
("Loomis Sayles") NEFJX NEJBX NEJCX
RS Investment
Management, L.P.
("RS Investment
Management")
Montgomery Asset
Management, LLC
("Montgomery")
CATEGORY: Small-Cap Equity
INVESTMENT GOAL
The Fund seeks capital appreciation.
The Fund's investment goal may be changed without shareholder approval.
INVESTMENT STRATEGIES
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 own 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 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").
o Enter into options, futures and currency hedging transactions.
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 OF THE STAR SMALL CAP FUND
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.
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. Credit risk relates to the ability of an issuer to make
payments of principal and interest when due and includes the risk of default.
Interest rate risk relates to changes in a security's value as a result of
changes in interest rates. 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.
To learn more about the possible risks of investing in the Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Fund may engage. Please read this section carefully
before you invest.
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.
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 return 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 27.0%
1998 2.1%
1999
/\ Highest Quarterly Return: , %
\/ Lowest Quarterly Return: , %
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 Lipper Small Cap Growth Fund and Morningstar
Small 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 Lipper,
Inc. and Morningstar, 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 Russell 2000 Index returns have
not been adjusted for ongoing management, distribution and operating expenses
and sales charges applicable to mutual fund investments. Lipper Small Cap Growth
Fund and Morningstar Small Growth Average returns have been adjusted for these
expenses but do not reflect any sales charges.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS * The inception date of
(FOR THE PERIODS ENDED DECEMBER 31, 1999) PAST 1 YEAR SINCE INCEPTION* the Fund's Class A, B and
- -------------------------------------------------------------------------------- C shares is December 31, 1996.
<S> <C> <C>
Nvest Star Small Cap Fund: Class A % %
Nvest Star Small Cap Fund: Class B % %
Nvest Star Small Cap Fund: Class C % %
Russell 2000 Index % %
Lipper Small Cap Growth Fund Average % %
Morningstar Small Growth Average % %
- --------------------------------------------------------------------------------
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 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
Harris Associates uses a value-oriented investment philosophy to arrive at its
opinion of a company's "true business value." This philosophy is based upon its
belief that over time a stock's market price and value will converge. Harris
Associates believes that this philosophy provides the best opportunity to
achieve long-term capital growth and 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:
[] Discounted share price compared to "true business value"
[] Positive free cash flow
[] Competitive return on equity
[] High level of insider ownership
[] Favorable earnings growth potential
In making investment decisions for its segment of the Fund, Harris Associates
generally employs the following methods:
o Harris Associates uses a fundamental bottom-up investment approach. This
means that Harris 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' standards of quality and value.
o Harris Associates analysts typically look for companies that generate free
cash flow, review a company's market value compared to other companies, visit
companies and talk to various industry sources.
o Once Harris Associates determines that a stock sells at a significant
discount to its potential value, 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 a pricing
committee that sets specific "buy" and "sell" targets for each company. These
targets are repeatedly adjusted to reflect changes in a company's
fundamentals. Harris Associates will generally buy a stock for its segment of
the Fund when it sells for a price below 60% of its estimated worth, and will
generally sell a stock when it approaches 90% of its estimated worth.
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 which 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:
[] New and/or distinctive products, technologies or services
[] Expected growth of at least 20% per year driven by strong
sales and improving profitability
[] 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 they are no longer deemed to be small cap -- typically when the market
capitalization of the company exceeds $2 billion. Finally, stocks may be sold
if a better opportunity is identified by the portfolio managers.
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:
[] A new product launch
[] A new management team
[] Expansion into new markets
[] 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.
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:
[] Quantitative screen identifying growth-oriented companies with
improving business fundamentals
[] Fundamental analysis to determine the long-term sustainability of the
company's growth characteristics
[] Valuation to ensure that the company's growth prospects have not yet
been discovered 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 must be
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.
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- Stability Income Growth
NVEST STAR VALUE FUND -----------------------
High X
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Management") Mod. X
--------- ------ ------
SUBADVISERS: Harris Associates L.P. Low X
("Harris Associates")
Loomis, Sayles &
Company, L.P.
("Loomis Sayles")
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
INVESTMENT GOAL
The Fund seeks a reasonable long-term investment return from a combination of
market appreciation and dividend income from equity securities.
INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all of its
assets in equity securities. The Fund primarily invests in common stock of 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 earning 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 own 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.
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.
The Fund may:
o Invest in foreign securities.
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 OF THE STAR VALUE FUND
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.
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. 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 that function on February 28, 2000. This
chart and table reflect results achieved by the previous subadviser under
different investment policies and 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 -13.6%
1991 71.1%
1992 16.6%
1993 17.0%
1994 -1.4%
1995 32.3%
1996 26.3%
1997 21.0%
1998 7.1%
1999
/\ Highest Quarterly Return: , %
\/ Lowest Quarterly Return: , %
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 Lipper Multi-Cap Value Fund and
Morningstar Large 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 Lipper, Inc. and Morningstar, 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 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
Lipper Multi-Cap Value Fund Average and Morningstar Large Value 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 inception
<S> <C> <C> <C>
Nvest Value Fund: Class A (inception 6/5/70) % % %
Russell 1000 Value Index % % %
Lipper Multi-Cap Value Fund Average % % %
Morningstar Large Value Average % % %
Nvest Value Fund: Class B (inception 9/13/93) % % %*
Russell 1000 Value Index % % %*
Lipper Multi-Cap Value Fund Average
(calculated from 9/30/93) % % %*
Morningstar Large Value Average
(calculated from 9/30/93) % % %*
Nvest Value Fund: Class C (inception 12/30/94) % % %*
Russell 1000 Value Index % % %*
Lipper Multi-Cap Value Fund Average % % %*
Morningstar Large Value Average % % %*
- ---------------------------------------------------------------------------------------------
For actual past expensed 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 large capitalization companies which Harris Associates believes
are trading at a substantial discount to the company's "true business value."
Harris Associates uses a value-oriented investment philosophy to arrive at its
opinion of a company's "true business value." This philosophy is based on its
belief that over time a stock's market price and value will converge. Harris
Associates believes that this philosophy provides the best opportunity to
achieve long-term capital growth and 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:
[] Discounted share price compared to "true business value"
[] Positive free cash flow
[] Competitive return on equity
[] High level of insider ownership
[] Favorable earnings growth potential
In making investment decisions, Harris Associates generally employs the
following methods:
o Harris Associates uses a fundamental bottom-up approach. This means that
Harris 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' standards of quality and value.
o Harris Associates analysts typically look for companies that generate free
cash flow, review a company's market value compared to other companies, visit
companies and talk to various industry sources.
o Once Harris Associates determines that a stock sells at a significant
discount to its potential value, 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 a pricing
committee that sets specific "buy" and "sell" targets for each company. These
targets are adjusted periodically to reflect changes in a company's
fundamentals. Harris Associates will generally buy a stock for this segment
of the Fund when it sells for a price below 60% of its estimated worth, and
will generally sell a stock when it approaches 90% of its estimated worth.
LOOMIS SAYLES
Loomis Sayles uses non-technical, 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:
[] Low price-to-earnings ratios based on earnings estimates
[] Competitive return on equity
[] Competitive current and estimated dividend yield
[] High 5-year estimated earnings growth
In selecting investments for the Fund, 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 that rank in the top third of the valuation model become prime
candidates for purchase and receive a more intensive fundamental research
effort.
o The Fund's portfolio is constructed by choosing approximatly 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.
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 selcted will have the following attributes:
[] Higher dividend yields compared to the Russell 1000 Value Index
[] Higher profitability (return-on-equity) than the market
[] Strong and growing cash flows and dividends-to-cash flow ratio
[] Low price-to-sales ratio
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 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
or 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 Russell 1000 Value Index 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.
WESTPEAK
In managing its segment of the Fund, Westpeak will construct a portfolio of
recognizable, reasonably-priced stocks by combining its experience and judgement
with a dynamic weighting process known as "portfolio profiling." The portfolio
emphasizes the characteristics that Westpeak feels are most likely to be
rewarded by the market in the period ahead. Using proprietary research based on
economic, market and company specific information, Westpeak analyzes each stock
and ranks them based on characteristics such as:
[] Earnings-to-price ratios [] Earnings growth rates
[] Positive earnings surprises
[] Book-to-price ratios [] Dividend yield
In selecting investments, Westpeak will employ the following strategy:
o It starts with an initial universe of approximately 1,300 stocks of large
capitalization companies and generally eliminates stocks of companies below a
$1.4 billion market capitalization threshold. This creates an overall
universe of about 900 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 and value
characteristics.
o All of the stocks are the screened using Wall Street analysts' projected
earning estimatesfor the company and each is assigned an "expectations rank."
This rank accounts for the company's potential earnings revisions and
"positive earnings surprises" (whether its business has the potential to
improve in the near future).
o The final step is to calculate a "composite rank" for each stock by combining
their fundamental and expectation ranks and to evaluate whether to buy, sell
or hold a stock by comparing its composite rank to those of other stocks on a
stock valuation matrix.
o The desired result is a portfolio of 75 to 150 stocks, with a dividend yield
that approximates that of the Russell 1000 Value Index, which Westpeak
believes will produce the highest long -term returns consistent with the
porfolio's risk parameters.
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- Stability Income Growth
NVEST STAR ADVISERS FUND -----------------------
High X
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Management") Mod.
--------- ------ ------
Low X X
SUBADVISERS: Harris Associates L.P.
("Harris Associates")
TICKER SYMBOL: CLASS A CLASS B CLASS C
Loomis, Sayles & ---------------------------
Company, L.P. NEFSX NESBX NECCX
("Loomis Sayles")
Janus Capital Corporation
("Janus")
Kobrick Funds LLC
("Kobrick")
CATEGORY: All-Cap Equity
INVESTMENT GOAL
The Fund seeks long-term growth of capital.
The Fund's investment goal may be changed without shareholder approval.
INVESTMENT STRATEGIES
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 own 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.
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.
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 OF THE STAR ADVISERS FUND
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 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. With special situation companies, the primary risk
is that they may not achieve their expected value because events do not
materialize as anticipated.
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Credit risk relates to the ability of an issuer to make
payments of principal and interest when due and includes the risk of default.
Interest rate risk relates to changes in a security's value as a result of
changes in interest rates. 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.
To learn more about the possible risks of investing in the Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Fund may engage. Please read this section carefully
before you invest.
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. 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 34.4%
1996 19.0%
1997 20.2%
1998 19.3%
1999
/\ Highest Quarterly Return: , %
\/ Lowest Quarterly Return: , %
The table below shows the Fund's average annual total returns for the one-year
and since-inception periods 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. The returns are also compared to
the Lipper Multi-Cap Growth Fund and the Morningstar Midcap 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 Lipper, Inc. and Morningstar,
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 S&P 500 returns have not been adjusted for ongoing
management, distribution and operating expenses and sales charges applicable to
mutual fund investments. The Lipper Multi-Cap Growth Fund and Morningstar Midcap
Growth Average returns have been adjusted for these expenses but do not reflect
any sales charge.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS * The inception date of
(FOR THE PERIODS ENDED DECEMBER 31, 1999) PAST 1 YEAR PAST 5 YEARS SINCE INCEPTION* the Fund's Class A, B and
- ------------------------------------------------------------------------------------------------ C shares is July 7, 1994.
<S> <C> <C> <C>
Nvest Star Advisers Fund: Class A % % %
Nvest Star Advisers Fund: Class B % % %
Nvest Star Advisers Fund: Class C % % %
S&P 500 % % %
Lipper Multi-Cap Growth Fund Average % % %
Morningstar Midcap Growth Average % % %
- ------------------------------------------------------------------------------------------------
For the actual past expenses of Class A, B, and C shares, see the section entitled "Fund Fees &
Expenses." Ticker Symbol: Class A Class B Class C
</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 capitalization companies which Harris
Associates believes are trading at a substantial discount to the company's "true
business value."
Harris Associates uses a value-oriented investment philosophy to arrive at its
opinion of a company's "true business value." This philosophy is based upon its
belief that over time a stock's market price and value will converge. Harris
Associates believes that this philosophy provides the best opportunity to
achieve long-term capital growth and 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:
[] Discounted share price compared to "true business value"
[] Positive free cash flow
[] Competitive return on equity
[] High level of insider ownership
[] Favorable earnings growth potential
In making investment decisions, Harris Associates generally employs the
following methods:
o Harris Associates uses a fundamental bottom-up investment approach. This
means that Harris 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' standards of quality and value.
o Harris Associates analysts typically look for companies that generate free
cash flow, review a company's market value compared to other companies, visit
companies and talk to various industry sources.
o Once Harris Associates determines that a stock sells at a significant
discount to its potential value, 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 a pricing
committee that sets specific "buy" and "sell" targets for each company. These
targets are adjusted periodically to reflect changes in a company's
fundamentals. Harris Associates will generally buy a stock for this segment
of the Fund when it sells for a price below 60% of its estimated worth, and
will generally sell a stock when it approaches 90% of its estimated worth.
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 both
undervalued securities and securities with significant growth potential. 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:
[] Above average growth rates [] Higher than average cash flows
[] Low price-to-earnings ratio [] 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
the 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 earnings growth falls below the
market average, when the fundamental outlook is deteriorating or when other
more favorable opportunities arise.
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:
[] Strong competitive position in a particular industry
[] Secure current and expected financial position
[] Proven and capable management teams
[] Attractive valuations relative to growth prospects and peer group
[] High return on equity
[] 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 significant changes in a company's
allocation of existing capital, a restructuring of assets or a redirection of
free cash flows. Special situations may also exist where there is a change in
a company's management or business strategy.
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.
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 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:
[] The strength of a company's management team
[] Expected growth in earnings
[] Relative financial condition
[] Competitive position and business strategy
[] Entrepreneurial character
[] 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.
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- Stability Income Growth
NVEST STAR WORLDWIDE FUND -----------------------
High X
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Management") Mod.
--------- ------ ------
SUBADVISERS: Harris Associates L.P. Low X X
("Harris Associates")
Loomis, Sayles & TICKER SYMBOL: CLASS A CLASS B CLASS C
Company, Inc. ---------------------------
("Loomis Sayles") NEFDX NEDBX NEDCX
Montgomery Asset
Management LLC
("Montgomery")
CATEGORY: All-Cap Equity
INVESTMENT GOAL
The Fund seeks long-term growth of capital.
The Fund's investment goal may be changed without shareholder approval.
INVESTMENT STRATEGIES
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 own
investment style and strategy.
Aside from investing primarily in equity securities of foreign and domestic
companies, the Fund may:
o Enter into options, futures, swap contracts and currency hedging
transactions.
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 OF THE FUND
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.
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. Credit risk relates to the ability of an issuer to make
payments of principal and interest when due and includes the risk of default.
Interest rate risk relates to changes in a securities value as a result of
changes in interest rate. 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.
To learn more about the possible risks of investing in the Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Fund may engage. Please read this section carefully
before you invest.
<PAGE>
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. 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 16.7%
1997 12.7%
1998 4.0%
1999
/\ Highest Quarterly Return: , %
\/ Lowest Quarterly Return: , %
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 Lipper Global Fund
and Morningstar World Stock 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 Lipper, Inc. and Morningstar, 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 Lipper Global Fund
Average and Morningstar Worldstock Average returns have been adjusted for these
fees but do not reflect sales charges.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS * The inception date of
(FOR THE PERIODS ENDED DECEMBER 31, 1999) PAST 1 YEAR SINCE INCEPTION* the Fund's Class A, B and
- -------------------------------------------------------------------------------- C shares is December 29, 1995.
<S> <C> <C>
Nvest Star Worldwide Fund: Class A % %
Nvest Star Worldwide Fund: Class B % %
Nvest Star Worldwide Fund: Class C % %
MSCI World Index % %
Lipper Global Fund Average % %
Morningstar World Stock Average % %
- --------------------------------------------------------------------------------
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 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 capitalization companies which Harris
Associates believes are trading at a substantial discount to the company's "true
business value."
Harris Associates uses a value-oriented investment philosophy to arrive at its
opinion of a company's "true business value." This philosophy is based on its
belief that over time a stock's market price and value will converge. Harris
Associates believes that this philosophy provides the best opportunity to
achieve long-term capital growth and 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:
[] Discounted share price compared to "true business value"
[] Positive free cash flow
[] Competitive return on equity
[] High level of insider ownership
[] Favorable earnings growth potential
In making investment decisions, Harris Associates generally employs the
following methods:
o Harris Associates uses a fundamental bottom-up approach. This means that
Harris 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' standards of quality and value.
o Harris Associates analysts typically look for companies that generate free
cash flow, review a company's market value compared to other companies, visit
companies and talk to various industry sources.
o Once Harris Associates determines that a stock sells at a significant
discount to its potential value, 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 a pricing
committee that sets specific "buy" and "sell" targets for each company. These
targets are adjusted periodically to reflect changes in a company's
fundamentals. Harris Associates will generally buy a stock for this segment
of the fund when it sells for a price below 60% of its estimated worth, and
will generally sell a stock when it approaches 90% of its estimated worth.
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 evaluates:
[] The relative political and economic stability of the issuer's home country
[] The ownership structure of the company
[] 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.
LOOMIS SAYLES
The segment of the Star Worldwide Fund managed by Loomis Sayles will invest
primarily in equity securities of companies 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:
[] Strong, competitive position in a particular industry
[] Strong pricing power
[] Strong distribution channels
[] Improving business or financial fundamentals
In making investment decisions, Janus 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.
MONTGOMERY
Montgomery will invest at least 65% of its segment's assets in equity securities
of companies of any size located throughout the world. This 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.
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. Analysts' secondary responsibilities
are allocated on a country basis. Country research is a valuable complement
to its bottom-up sector and specific security work, and is focused on
macroeconomic and sociopolitical forces that impact markets, sectors and
companies that they follow. Roughly 85% of the analysts' time is spent on
specific security and sector research, 15% on country 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 valuation,
near-term earnings/business momentum, and long-term projected earnings
growth.
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/country 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 to expedited payment of
redemption proceeds such as by wire or overnight delivery.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, as a percentage of average daily net assets)
STAR SMALL CAP FUND STAR VALUE FUND
- --------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management fees % % % % % %
Distribution and/or service (12b-1) fees * * * *
Other expenses
Total annual fund operating expenses
STAR ADVISERS FUND STAR WORLDWIDE FUND
- --------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management fees % % % % % %
Distribution and/or service (12b-1) fees * * * *
Other expenses
Total annual fund operating expenses
* Because of the higher 12b-1 fees, long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charge permitted by rules of the National Association of Securities Dealers, Inc.
</TABLE>
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 SMALL CAP FUND STAR VALUE 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 $ $ $ $ $ $ $ $ $ $
3 years $ $ $ $ $ $ $ $ $ $
5 years $ $ $ $ $ $ $ $ $ $
10 years* $ $ $ $ $ $ $ $ $ $
STAR ADVISERS 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 $ $ $ $ $ $ $ $ $ $
3 years $ $ $ $ $ $ $ $ $ $
5 years $ $ $ $ $ $ $ $ $ $
10 years* $ $ $ $ $ $ $ $ $ $
(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 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 These companies carry special risks,
including narrower markets, limited financial and management resources, less
liquidity and greater volatility than large company stocks.
MANAGEMENT RISK The risk that a strategy used by a Fund's portfolio management
may fail to produce the intended result.
CREDIT RISK The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation 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 The risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment.
EMERGING MARKET RISK 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 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 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 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 The risk that key information about a security is inaccurate or
unavailable.
OPPORTUNITY RISK The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments.
LIQUIDITY RISK The risk that certain securities may be difficult or impossible
to sell at the time and at the price that the seller would like. This may result
in a loss or may 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 The risk that changes in the value of a hedging instrument will
not match those of the asset being hedged.
EXTENSION RISK 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 The risk that a Fund has valued certain securities at a higher
price than it can sell them for.
PREPAYMENT RISK The risk that unanticipated prepayments may occur, reducing the
value of mortgage- or asset-backed securities, or real estate investment trusts.
POLITICAL RISK The risk of losses directly attributable to government or
political actions.
EURO CONVERSION 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 $-- billion
in assets under management as of March 31, 2000. The Nvest Funds are distributed
through Nvest Funds Distribitor, 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' 14 principal subsidiary or
affiliated asset management firms, collectively, had $-- billion in assets under
management as of March 31, 2000. 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 Funds in 1999, as a percentage of each Fund's average daily
net assets was 1.05%. The combined advisory and subadvisory fees paid by Star
Value Fund in 1999, as a percentage of the fund's average daily net assets was
- --%.
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 $-- billion in assets, 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.
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 and largest investment advisory firms with over $-- billion in
assets under management. Loomis Sayles, a subsidiary of Nvest Companies, is well
known for its professional research staff, which is one of the largest in the
industry.
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.
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 --% of the outstanding voting stock
of Janus. Thomas H. Baily, President and Chairman of the Board of Janus, owns
approximately --% of its voting stock and, by agreement with KCSI, selects a
majority of Janus' Board.
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 555 California Street, San Francisco,
California 94104, (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.
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 March 31, 2000,
VNSM had approximately $-- 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 manages over $ -- billion in assets for mutual funds
and other institutional clients, including accounts of New England Financial.
<PAGE>
[Graphic Omitted] Management Team
---------------
MEET THE FUNDS' PORTFOLIO MANAGERS
STAR SMALL CAP FUND
CHRISTOPHER R. ELY
Mr. 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 20 years of
investment management experience.
PHILIP C. FINE
Dr. 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 11 years of investment management experience.
DAVID L. SMITH
Mr. 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 13
years of investment management experience.
JAMES P. BENSON
Mr. 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 18 years of investment experience.
STEVEN J. REID
Mr. 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 12 years of
investment experience.
KATHRYN PETERS
Ms. 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
12 years of investment management experience.
JOHN L. WALLACE
Mr. 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 Growth & Income 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 18 years of investment experience.
JOHN H. SEABERN
Mr. 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 8 years of investment management experience.
STAR ADVISERS FUND
ROBERT J. SANBORN
Mr. 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 has managed the Oakmark Fund
since its inception in August 1991. 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 15 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). He has been in the investment business for more than 28 years.
For the 12 year period immediately prior to becoming President of the
predecessor to Kobrick Funds LLC in 1997, he was an equity portfolio manager at
State Street Research & Management Company, where he had served as Senior Vice
President since 1989 and as a member of the firm's Equity Investment Committee
since 1985. He received an M.B.A. from Harvard Business School and a B.A. from
Boston University and is also a Chartered Financial Analyst.
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 in 1999, Mr. Gatz was a portfolio
manager at Banc One Investment Advisers Corporation and certain of its corporate
predecessors since 1993. He received a M.B.A. from Indiana University and 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. She received a M.B.A. from University of Michigan
and a B.S. from Virginia Commonwealth University and has eight years of
investment experience.
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 is also a Chartered Financial Analyst and 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 12 years of investment
experience.
STAR WORLDWIDE FUND
ROBERT J. SANBORN
Mr. 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 has managed the Oakmark Fund since
its inception in August 1991. 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 15 years of investment experience.
DAVID G. HERRO
Mr. 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 13 years of investment experience.
MICHAEL J. WELSH
Mr. 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 14 years of investment management experience.
OSCAR CASTRO
Mr. 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 16 years of investment experience.
JOHN BOICH
Mr. 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 14 years of investment
experience.
ALEXANDER MUROMCEW
Alexander Muromcew serves as co-portfolio manager for the Loomis Sayles segment
of the Star Worldwide Fund, 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, 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 and his B.A. from
Dartmouth College
JOHN TRIBOLET
John Tribolet serves as co-portfolio manager for the Loomis Sayles segment of
Star Worldwide Fund, 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, 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.
ESWAR MENON
Eswar Menon serves as co-portfolio manager for the Loomis Sayles segment of the
Star Worldwide Fund, 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, 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 and an M.S. from the University of California. He
received his B.S. from Indian Institute of Technology, Madras, India.
STAR VALUE FUND
LAURIANN KLOPPENBURG
Lauriann Kloppenburg has co-managed the Star Value Fund since August 1998, and
the Loomis Sayles segment of Star Value Fund since March 2000. Ms. Kloppenburg
is Vice President and Director of Equity Research at Loomis Sayles. She is also
a Chartered Financial Analyst. Ms. Kloppenburg received her B.A.from Wellesley
College and has over 16 years of investment experience.
JEFFREY W. WARDLOW
Jeffrey Wardlow has co-managed the Star Value Fund since August 1998 and the
Loomis Sayles segment of Star Value Fund since March 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 16 years of
investment experience.
GERALD H. SCRIVER
Gerald Scriver has managed the Westpeak segment of Star Value Fund since March
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 33 years of investment experience.
MARGARET M. BUESCHER
Margaret M. Buescher has co-managed the VNSM segment of Star Value Fund since
March 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 24 years of investment experience.
JEAN MALO
Jean Malo has co-managed the VNSM segment of Star Value Fund since March 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 21 years of investment
experience.
ROBERT M. LEVY
Robert Levy has co-managed the Harris Associates segment of Star Value Fund
since March 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, Unversity of Pennsylvania and has 23 years of
investment experience.
FLOYD J. BELLMAN
Floyd Bellman has co-managed the Harris Associates segment of Star Value Fund
since March 2000. Mr. Bellman is -- of Harris Associates and he joined the
company in 1995. Mr. Bellman, a Chartered Financial Analyst, received a B.B.A.
from the University of Wisconsin and has 19 years of investment experience.
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>
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 and Expenses" in this Prospectus.
CERTIFICATES
Certificates will not be automatically issued for any class of shares. Upon
written request, you may receive certificates for Class A shares only.
<PAGE>
[graphic omitted] FUND SERVICES
-------------
HOW SALES CHARGES ARE CALCULATED
CLASS A SHARES
The price that you pay when you buy Class A shares ("offering price") is their
net asset value plus a sales charge (sometimes called a "front-end sales
charge") which varies depending upon the size of your purchase.
- --------------------------------------------------------------------------------
CLASS A SALES CHARGES
ALL FUNDS
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 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, 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 members (one-year
CDSC may apply);
o Non-discretionary and non-retirement accounts of bank trust departments or
trust companies only if they principally engage in banking or trust
activities; and
o Investments of $25,000 or more in 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
will generally be eliminated in the following cases:
o to make distributions from a retirement plan (a plan termination or total
plan redemption may incur a CDSC);
o to make payments through a systematic withdrawal plan; or
o due to shareholder death or disability.
If you think you may be eligible for a sales charge elimination or reduction,
contact your financial representative or Nvest Funds.
<PAGE>
Fund Services [Graphic Omitted]
-------------
IT'S EASY TO OPEN AN ACCOUNT
<TABLE>
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:
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
MINIMUM TO OPEN AN
MINIMUM TO ACCOUNT USING MINIMUM FOR
TYPE OF ACCOUNT OPEN AN ACCOUNT INVESTMENT BUILDER EXISTING ACCOUNTS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Any account other than those listed below $2,500 $100 $100
Accounts registered under the Uniform
Gifts to Minors Act or the Uniform
Transfers to Minors Act $2,000 $100 $100
Individual Retirement Accounts ("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 401(k), SARSEP, SEP, SIMPLE, 403(b)(7)
and certain other retirement plans $ 25 N/A $ 25
- ---------------------------------------------------------------------------------------------------------
</TABLE>
3. Complete the appropriate parts of the account application, carefully
following the instructions. If you have any questions, please call your
financial representative or 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 checks "Nvest Funds." Third party checks
will generally not be accepted. will generally not be accepted.
o Mail the check with your completed o Fill out the detachable investment
application to 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 Instruct your bank to transfer funds
obtain an account number and wire to State Street Bank & Trust
transfer instructions. Your bank may Company, ABA# 011000028, DDA#
charge you for such a transfer. 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 to
whether it is a member of the ACH add shares to your account through
system. 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 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 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 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 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. Power of Attorney 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"). 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.
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 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 the sole discretion of the
in order to raise capital: adviser or subadviser
The Fund may close your account and send you o When the fund account falls
the proceeds. You will have 60 days after being below a set minimum
notified of the Fund's intention to close your (currently $1,000 as set by
account to increase the account to the set the Funds' Board of
minimum. This does not apply to certain Trustees)
qualified 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 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
New York Stock Exchange (the "Exchange") on the days the Exchange is open for
trading. This is normally 4:00 p.m. Eastern time.
o The price you pay for purchasing, redeeming or exchanging a share will be
based upon the net asset value next calculated after your order is received
"in good order" by State Street Bank and Trust Company, the Fund's custodian
(plus or minus applicable sales charges as described earlier in this
Prospectus).
o Requests received by the Distributor after the Exchange closes will be
processed based upon the net asset value determined at the close of regular
trading on the next day that the Exchange is open, with the exception that
those orders received by your investment dealer before the close of the
Exchange and received by the Distributor before 5:00 p.m. Eastern time* on the
same day will be based on the net asset value determined on that day.
o A Fund heavily invested in foreign securities may have net asset value changes
on days when you cannot buy or sell its shares.
* Under limited circumstances, the Distributor may enter into a contractual
agreement where it may accept orders after 5:00 pm, but not later than 8:00 pm
Generally, during times of substantial economic or market change, it may be
difficult to place your order by phone. During these times, you may deliver your
order in person to the Distributor or send your order by mail as described in
"Buying Shares" and "Selling Shares."
Generally, Fund securities are valued as follows:
o EQUITY SECURITIES -- most recent sales or quoted bid price as provided by a
pricing service.
o DEBT SECURITIES (OTHER THAN SHORT-TERM OBLIGATIONS) -- based upon pricing
service valuations.
o SHORT-TERM OBLIGATIONS (REMAINING MATURITY OF LESS THAN 60 DAYS) -- amortized
cost (which approximates market value).
o SECURITIES TRADED ON FOREIGN EXCHANGES -- most recent sale/bid price on the
non-U.S. exchange, unless an occurrence after the close of the exchange will
materially affect its value. In that case, it is given fair value as
determined by or under the direction of the Fund's Board of Trustees at the
close of regular trading on the Exchange.
o OPTIONS -- last sale price, or if not available, last offering price.
o FUTURES -- unrealized gain or loss on the contract using current settlement
price. When a settlement price is not used, futures contracts will be valued
at their fair value as determined by or under the direction of the Fund's
Board of Trustees.
o ALL OTHER SECURITIES -- fair market value as determined by the adviser 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 priced by another method that the Fund's Board of
Trustees believes actually 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.
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.
You should consult your tax adviser about any federal, state and local taxes
that may apply to the distributions you receive. Shareholders of the Star
Worldwide Fund should also 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 offers a range of retirement plans, including IRAs, SEPs, SARSEPs,
SIMPLEs, 401(k) plans, 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 has an automatic exchange plan under which shares of a class of a
Fund are automatically exchanged each month for shares of the same class of
other 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.
<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 table
represent the rate 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
included in the SAI, which is available upon request.
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 $12.50 $15.26 $12.50 $15.26
------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (b) (0.20) (0.23) (0.30) (0.33) (0.30) (0.33)
Net Realized and Unrealized Gain on Investments 3.55 0.54 3.54 0.52 3.54 0.52
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment Operations 3.35 0.31 3.24 0.19 3.24 0.19
LESS DISTRIBUTIONS
Distributions from Net Realized Capital Gains (0.48) (0.02) (0.48) (0.02) (0.48) (0.02)
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (0.48) (0.02) (0.48) (0.02) (0.48) (0.02)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Year $15.37 $15.66 $15.26 $15.43 $15.26 $15.43
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)(c) 27.0 2.1 26.1 1.3 26.1 1.3
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average
Net Assets (%)(d) 2.20 2.07 2.95 2.82 2.95 2.82
Ratio of Net Investment Income (Loss) to Average
Net Assets (%) (1.44) (1.52) (2.19) (2.27) (2.19) (2.27)
Portfolio Turnover Rate (%) 140 182 140 182 140 182
Net Assets, End of Year (000) $52,066 $56,161 $52,616 $61,409 $13,970 $15,412
(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 VALUE 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 $ 7.27 $ 8.78 $ 9.60 $10.14 $ 7.23 $ 8.70 $ 9.47 $ 9.91
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) 0.10 0.06 0.03 0.03(b) 0.05 0.01 (0.05) (0.05)(b)
Net Realized and
Unrealized Gain
(Loss) on
Investments 2.21 2.12 1.96 0.59 2.18 2.07 1.92 0.58
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment
Operations 2.31 2.18 1.99 0.62 2.23 2.08 1.87 0.53
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net
Investment Income (0.08) (0.09) (0.06) (0.02) (0.05) (0.01) 0.00 0.00
Distributions From Net
Realized Capital
Gains (0.71) (1.30) (1.43) (1.06) (0.71) (1.30) (1.43) (1.06)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (0.80) (1.36) (1.45) (1.08) (0.76) (1.31) (1.43) (1.06)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End
of the Year $ 8.78 $ 9.60 $10.14 $ 9.68 $ 8.70 $ 9.47 $ 9.91 $ 9.38
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)(a) 32.3 26.3 21.0 7.1 31.3 25.4 20.0 6.3
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to Average
Net Assets (%) 1.37 1.31 1.25 1.26 2.12 2.06 2.00 2.01
Ratio of Net
Investment Income 1.22 0.78 0.28 0.29 0.47 0.03 (0.47) (0.46)
Portfolio Turnover
Rate (%) 52 64 55 75 52 64 55 75
Net Assets, End of
the Year (000) $241,038 $297,581 $348,988 $317,902 $00.00 $27,941 $48,210 $80,008 $86,243 $00.00
<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
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.05 0.01 (0.05)(b) (0.05)(b)
Net Realized and Unrealized Gain (Loss) on
Investments 2.18 2.06 1.94 0.58
------ ------ ------ ------ ------
Total From Investment Operations 2.23 2.07 1.89 0.53
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.05) (0.01) 0.00 0.00
Distributions From Net Realized Capital Gains (0.71) (1.30) (1.43) (1.06)
------ ------ ------ ------ ------
Total Distributions (0.76) (1.31) (1.43) (1.06)
------ ------ ------ ------ ------
Net Asset Value, End of the Year $ 8.70 $ 9.46 $ 9.92 $ 9.39
====== ====== ====== ====== ======
TOTAL RETURN (%)(A) 31.3 25.2 20.2 6.3
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating Expenses to Average Net
Assets (%) 2.12 2.06 2.00 2.01
Ratio of Net Investment Income 0.47 0.03 (0.47) (0.46)
Portfolio Turnover Rate (%) 52 64 55 75
Net Assets, End of the Year (000) $1,224 $3,735 $6,527 $6,445
(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>
[graphic omitted] Fund Performance
----------------
NVEST STAR ADVISERS FUND
<TABLE>
<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 $13.25 $16.78 $18.18 $18.17
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.00 (0.06)(b) (0.02)(b) (0.05)(b)
Net Realized and Unrealized Gain on Investments 4.52 3.17 3.62 3.28
------ ------ ------ ------ ------
Total from Investment Operations 4.52 3.11 3.60 3.23
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions from Net Investment Income 0.00 0.00 0.00 0.00
Distributions from Net Realized Capital Gains (0.99) (1.71) (3.61) (1.38)
------ ------ ------ ------ ------
Total Distributions (0.99) (1.71) (3.61) (1.38)
------ ------ ------ ------ ------
Net Asset Value, End of Period $16.78 $18.18 $18.17 $20.02
====== ====== ====== ====== ======
TOTAL RETURN (%)(c) 34.4 19.0 20.2 19.3
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net
Assets (%) (d) 1.82 1.68 1.66 1.62
Ratio of Net Investment Income
to Average Net Assets (%) (0.33) (0.36) (0.14) (0.24)
Portfolio Turnover Rate (%) 142 127 168 101
Net Assets, End of Period (000) $223,596 $348,573 $416,938 $443,165
<CAPTION>
CLASS B CLASS C
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 $13.23 $16.63 $17.86 $17.63 $13.24 $16.65 $17.87 $17.64
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) 0.00 (0.20)(b) (0.17)(b) (0.18)(b) 0.00 (0.20)(b) (0.17)(b) (0.18)(b)
Net Realized and Unrealized
Gain on Investments 4.39 3.14 3.55 3.16 4.40 3.13 3.55 3.17
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations 4.39 2.94 3.38 2.98 4.40 2.93 3.38 2.99
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions from Net
Investment Income 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) (0.99) (1.71) (3.61) (1.38)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (0.99) (1.71) (3.61) (1.38) (0.99) (1.71) (3.61) (1.38)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of
Period $16.63 $17.86 $17.63 $19.23 $16.65 $17.87 $17.64 $19.25
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)(c) 33.4 18.1 19.3 18.4 33.4 18.0 19.3 18.5
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%)(d) 2.57 2.43 2.41 2.37 2.57 2.43 2.41 2.37
Ratio of Net Investment
Income to Average Net
Assets (%) (1.08) (1.11) (0.89) (0.99) (1.08) (1.11) (0.89) (0.99)
Portfolio Turnover Rate (%) 142 127 168 101 142 127 168 101
Net Assets, End of
Period (000) $220,017 $366,314 $462,034 $508,937 $45,672 $80,312 $94,412 $97,849
(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>
[graphic omitted] Fund Performance
----------------
NVEST STAR WORLDWIDE FUND
<TABLE>
<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 Period (a) $12.50 $14.40 $15.46 $12.50 $14.30 $15.23
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (b) (0.03) (0.02) 0.01 (0.12) (0.14) (0.11)
Net Realized and Unrealized Gain
(Loss) on Investments 2.11 2.11 1.88 0.61 2.10 1.87 0.61
------ ------ ------ ------ ------ ------ ------ ------
Total from Investment Operations 2.08 1.86 0.62 1.98 1.73 0.50
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions from Net Realized
Capital Gains (0.18) (0.76) 0.00 (0.18) (0.76) 0.00
Distributions from Paid-in Capital 0.00 (0.04) 0.00 0.00 (0.04) 0.00
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (0.18) (0.80) 0.00 (0.18) (0.80) 0.00
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $14.40 $15.46 $16.08 $14.30 $15.23 $15.73
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)(c) 16.7 12.7 4.0 15.9 11.9 3.3
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expensesv to Average
Net Assets (%) 2.58 2.07 2.09 3.33 2.82 2.84
Ratio of Net Investment Income (Loss) to
Average Net Assets (%) (0.21) (0.12) 0.03 (0.96) (0.87) (0.72)
Portfolio Turnover Rate (%) 57 80 84 57 80 84
Net Assets, End of Period (000) $68,509 $118,381 $106,763 15.9 $65,367 $123,467 $116,305
<CAPTION>
CLASS C
YEAR ENDED DECEMBER 31,
1996 1997 1998 1999
<C> <C> <C> <C>
Net Asset Value, Beginning of Period (a) $12.50 $14.31 $15.24
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (b) (0.12) (0.13) (0.11)
Net Realized and Unrealized Gain
(Loss) on Investments 2.11 2.11 1.86 0.62
------ ------ ------ ------
Total from Investment Operations 1.99 1.73 0.51
------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions from Net Realized
Capital Gains (0.18) (0.76) 0.00
Distributions from Paid-in Capital 0.00 (0.04) 0.00
------ ------ ------ ------
Total Distributions (0.18) (0.80) 0.00
------ ------ ------ ------
Net Asset Value, End of Period $14.31 $15.24 $15.75
====== ====== ====== ======
TOTAL RETURN (%)(c) 15.9 11.8 3.3
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average
Net Assets (%) 3.33 2.82 2.84
Ratio of Net Investment Income (Loss) to
Average Net Assets (%) (0.96) (0.87) (0.72)
Portfolio Turnover Rate (%) 57 80 84
Net Assets, End of Period (000) $17,980 $26,137 $23,016
(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
Standard & Poor's Group or Moody's Investors Service, Inc. Bonds with a credit
rating of BBB or higher by S&P or Baa or higher by Moody's are generally
considered investment grade.
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
analysts consider 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, these analysts 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 a 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-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).
PRICE-TO-BOOK RATIO -- Current market price of a stock divided by its book
value, or net asset value of the stock.
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.
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>
<TABLE>
<S> <C>
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 NVEST FUNDS
investment strategies that significantly STAR FUNDS
affected the Fund's performance during
its last fiscal year. To reduce costs, we Nvest Star Small Cap Fund
mail one copy per household. For more
copies call Nvest Funds Distributor at Nvest Star Advisers Fund
the number below.
Nvest Star Worldwide Fund
STATEMENT OF ADDITIONAL INFORMATION (SAI)
-- Provides more detailed information Nvest Star Value Fund
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. Text-only copies are available free
from the Commission's Web site at:
www.sec.gov.
Copies of these publications are also
available for a fee by writing or calling
the Public Reference Room of the SEC,
Washington, D.C. 20549-6009
Telephone: 800-SEC-0330
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)
- --------------------------------------------------------------------------------------------
XR51-0200
</TABLE>
<PAGE>
[logo] NvestFunds(SM)
Where The Best Minds Meet(R)
- --------------------------------------------------------------------------------
NVEST
STOCK AND STAR FUNDS
[graphic omitted]
- --------------------------------------------------------------------------------
CLASS Y SHARES OF:
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.
Nvest International Equity Fund
Loomis, Sayles & Company, L.P.
Nvest Star Value Fund
A multiple manager fund
SMALL-CAP EQUITY
Nvest Star Small Cap Equity
A multiple manager fund
ALL- CAP EQUITY
Nvest Star Advisers Fund
A multiple manager fund
Nvest Star Worldwide
A multiple manager 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
[graphic omitted] Goals, Strategies & Risks
Page 2
- --------------------------------------------------------------------------------
[graphic omitted] Fund Fees & Expenses
Page 28
- --------------------------------------------------------------------------------
[graphic omitted] Management Team
Page 31
- --------------------------------------------------------------------------------
[graphic omitted] Fund Services
Page 39
- --------------------------------------------------------------------------------
[graphic omitted] Fund Performance
Page 47
- --------------------------------------------------------------------------------
Nvest Funds
399 Boylston Street, Boston, Massachusetts 02116
800-225-5478
<PAGE>
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
GOALS, STRATEGIES & RISKS
- ------------------------------------------------------------------------------
Nvest Capital Growth Fund ............................................ 2
Nvest Growth Fund .................................................... 4
Nvest Growth and Income Fund ......................................... 6
Nvest Balanced Fund .................................................. 9
Nvest International Equity Fund ...................................... 10
Nvest Star Small Cap Fund ............................................ 12
Nvest Star Advisers Fund ............................................. 16
Nvest Star Worldwide Fund ............................................ 20
Nvest Star Value Fund ................................................ 24
- ------------------------------------------------------------------------------
FUND FEES & EXPENSES
- ------------------------------------------------------------------------------
Fund Fees & Expenses ................................................. 28
- ------------------------------------------------------------------------------
MORE ABOUT RISK
- ------------------------------------------------------------------------------
More About Risk ...................................................... 30
- ------------------------------------------------------------------------------
MANAGEMENT TEAM
- ------------------------------------------------------------------------------
Meet the Funds' Investment Advisers and Subadvisers .................. 31
Meet the Funds' Portfolio Managers ................................... 33
- ------------------------------------------------------------------------------
FUND SERVICES
- ------------------------------------------------------------------------------
It's Easy to Open an Account ......................................... 39
Buying Shares ........................................................ 40
Selling Shares ....................................................... 41
Selling Shares in Writing ............................................ 42
Exchanging Shares .................................................... 43
Restrictions on Buying, Selling and Exchanging Shares ................ 43
How Fund Shares Are Priced ........................................... 44
Dividends and Distributions .......................................... 45
Tax Consequences ..................................................... 45
Compensation to Securities Dealers ................................... 46
- ------------------------------------------------------------------------------
FUND PERFORMANCE
- ------------------------------------------------------------------------------
Nvest Capital Growth Fund ............................................ 47
Nvest Growth Fund .................................................... 48
Nvest Growth and Income Fund ......................................... 49
Nvest Balanced Fund .................................................. 50
Nvest International Equity Fund ...................................... 51
Nvest Star Small Cap Fund ............................................ 52
Nvest Star Advisers Fund ............................................. 53
Nvest Star Worldwide Fund ............................................ 54
Nvest Star Value Fund ................................................ 55
Glossary of Terms .................................................... 56
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
-------------------------- Stability Income Growth
NVEST CAPITAL GROWTH FUND -----------------------
High X
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Mangement") Mod. X
--------- ------ ------
SUBADVISER: Westpeak Investment Advisors, L.P. Low X
("Westpeak")
MANAGER: Gerald H. Scriver
CATEGORY: Large-Cap Equity
INVESTMENT GOAL
The Fund seeks long-term capital growth.
The Fund's investment goal may be changed without shareholder approval.
INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all of its
assets in common stock of U.S. medium and large capitalization companies in any
industry.
Westpeak constructs a portfolio of reasonably-priced growth stocks by combining
its experience and judgment with a dynamic weighting process known as "portfolio
profiling." The portfolio emphasizes the characteristics that Westpeak believes
are most likely to be rewarded by the market in the period ahead. Using
proprietary research based on economic, market and company specific information,
Westpeak analyzes each stock and ranks them based on characteristics such as:
x earnings-to-price ratios
x earnings growth rates
x positive earnings surprises
x book-to-price ratios
In selecting investments for the Fund's portfolio, Westpeak employs the
following strategy:
o It starts with the Russell 3000 Growth Index of about 1,800 stocks and
generally eliminates stocks of companies below a $500 million market
capitalization threshold. This creates an overall valuation universe of
about 1,200 stocks, with approximately 90% 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 and value
characteristics.
o All of the stocks are then screened using Wall Street analysts' projected
earnings estimates for the company and each is assigned an "expectations
rank." This rank accounts for the company's potential earnings revisions
and "positive earnings surprises"(whether its business has the potential to
improve in the near future).
o The final step is to calculate a "composite rank" for each stock by
combining their fundamental and expectation ranks and to evaluate whether
to buy, sell or hold a stock by comparing its composite rank to those of
other stocks on a stock valuation matrix.
o The desired result is a portfolio of 75 to 125 stocks that Westpeak
believes will produce the highest long-term returns consistent with the
Fund's risk parameters.
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).
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 could adversely affect the value of the portfolio.
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. 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 7.9%
1994 -1.6%
1995 30.7%
1996 17.1%
1997 17.2%
1998 29.0%
/\ Highest Quarterly Return: , up %
\/ Lowest Quarterly Return: , down %
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 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 Lipper Multi-Cap Growth Fund and
Morningstar Large 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 Lipper, Inc. and Morningstar, 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 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
Lipper Multi-Cap Growth Fund and Morningstar Large 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 SINCE
31, 1999) PAST 1 YEAR PAST 5 YEARS INCEPTION
- -------------------------------------------------------------------------------
Nvest Capital Growth Fund: Class A
(inception 8/3/92) % % %
Russell 1000 Growth Index % % %
Lipper Multi-Cap Growth Fund Average
(calculated from 8/6/92) % % %
Morningstar Large Growth Average
(calculated from 7/31/92) % % %
Nvest Capital Growth Fund: Class B
(inception 9/13/93) % % %
Russell 1000 Growth Index % % %
Lipper Multi-Cap Growth Fund Average
(calculated from 9/30/93) % % %
Morningstar Large Growth Average
(calculated from 9/30/93) % % %
Nvest Capital Growth Fund: Class C
(inception 12/30/94) % %
Russell 1000 Growth Index % %
Lipper Multi-Cap Growth Fund Average % %
Morningstar Large Growth Average % %
- --------------------------------------------------------------------------------
For the expenses of Class Y shares, see the section entitled "Fund Fees and
Expenses."
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
--------------------------- Stability Income Growth
NVEST GROWTH FUND -----------------------
High X
--------- ------ ------
Mod.
--------- ------ ------
ADVISER: Capital Growth Management Limited Low X X
Partnership ("CGM")
MANAGER: G. Kenneth Heebner TICKER SYMBOL: CLASS Y
---------
CATEGORY: Large-Cap Equity 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.
INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all of its
assets in 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 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 will generally employ 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).
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.
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.
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. 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 5.1%
1991 56.7%
1992 -6.6%
1993 11.3%
1994 -7.1%
1995 38.1%
1996 20.9%
1997 23.5%
1998 33.4%
1999 %
/\ Highest Quarterly Return: , up %
\/ Lowest Quarterly Return: , down %
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 Lipper Large-Cap Core Fund and
Morningstar Large Blend 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 Lipper, Inc. and Morningstar, 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 500 returns have
not been adjusted for ongoing management, distribution and operating expenses
and sales charges applicable to mutual fund investments. The Lipper Large-Cap
Core Fund Average and Morningstar Large Blend 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 inception
<S> <C> <C> <C>
Nvest Growth Fund: Class A
(inception 11/27/68) % % %
S&P 500 % % %
Lipper Large-Cap Core Fund Average % % %
Morningstar Large Blend Average % % %
Nvest Growth Fund: Class B
(inception 2/28/97) % %*
S&P 500 % %*
Lipper Large-Cap Core Fund Average % %*
Morningstar Large Blend Average % %*
Nvest Growth Fund: Class C
(inception 9/1/98) %*
S&P 500 %*
Lipper Large-Cap Core Fund Average
(calculated from 8/31/98) %*
Morningstar Large Blend Average
(calculated from 8/31/98) %*
- --------------------------------------------------------------------------------
For the expenses of Class Y shares, see the section entitled "Fund Fees &
Expenses."
</TABLE>
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
-------------------------- Stability Income Growth
NVEST GROWTH -----------------------
AND INCOME FUND High X
--------- ------ ------
ADVISER: Nvest Funds Management, L.P. Mod. X
("Nvest Mangement") --------- ------ ------
Low X
SUBADVISER: Westpeak Investment Advisors, L.P.
("Westpeak")
MANAGER: Gerald H. Scriver TICKER SYMBOL: CLASS Y
-------
CATEGORY: Large-Cap Equity 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.
INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all its
assets in common stock of large capitalization companies in any industry.
Westpeak constructs a portfolio of recognizable, reasonably-priced growth stocks
by combining its experience and judgment with a dynamic weighting process known
as "portfolio profiling." The portfolio emphasizes the characteristics that
Westpeak feels are most likely to be rewarded by the market in the period ahead.
Using proprietary research based on economic, market and company specific
information, Westpeak analyzes each stock and ranks them based on
characteristics such as:
x earnings-to-price ratios
x earnings growth rates
x positive earnings surprises
x book-to-price ratios
x dividend yield
In selecting investments for the Fund, Westpeak employs the following strategy:
o It starts with an initial universe of approximately 1,300 stocks of large
capitalization companies and generally eliminates stocks of companies below
a $1.4 billion market capitalization threshold. This creates an overall
universe of about 900 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 and value
characteristics.
o All of the stocks are then screened using Wall Street analysts' projected
earnings estimates for the company and each is assigned an "expectations
rank." This rank accounts for the company's potential earnings revisions
and "positive earnings surprises"(whether its business has the potential to
improve in the near future).
o The final step is to calculate a "composite rank" for each stock by
combining their fundamental and expectation ranks and to evaluate whether
to buy, sell or hold a stock by comparing its composite rank to those of
other stocks on a stock valuation matrix;
o The desired result is a portfolio of 75 to 150 stocks, with a dividend
yield that approximates that of the Standard & Poor's Composite Rank of 500
Stocks ("S&P 500"), 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
Depository 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).
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.
FOREIGN SECURITIEs: ADRs may be more volatile than U.S. securities and carry
political, economic and information risks that are associated with foreign
securities.
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. The returns shown are those of the Fund's Class
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 C shares and would only differ to the
extent that the classes do not have the same expenses. The Fund also offers
Class A and B shares in a separate prospectus. 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 C shares since its first
full year of operations. The returns for Class A, B and Y shares differ from the
Class C 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 16.3%
1997 32.6%
1998 22.9%
1999 %
/\ Highest Quarterly Return: , up %
\/ Lowest Quarterly Return: , down %
The table below shows the Fund's Class C shares 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 Lipper Multi-Cap Core Fund and Morningstar
Large 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 Lipper,
Inc. and Morningstar, 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 S&P 500 returns have not been
adjusted for ongoing management, distribution and operating expenses and sales
charges applicable to mutual fund investments. The Lipper Multi-Cap Core Fund
Average and Morningstar Large Value 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 Inception
- -------------------------------------------------------------------------------
Nvest Growth and Income Fund: Class C
(inception 5/1/95) % %
- -------------------------------------------------------------------------------
S&P 500 % %
- -------------------------------------------------------------------------------
Lipper Multi-Cap Core Fund Average
(calculated from 4/30/95) % %
- -------------------------------------------------------------------------------
Morningstar Large Value Average
(calculated from 4/30/95) % %
- -------------------------------------------------------------------------------
For the expenses of Class Y shares, see the section entitled "Fund Fees and
Expenses."
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- Stability Income Growth
NVEST BALANCED FUND -----------------------
High
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Mangement") Mod. X X X
--------- ------ ------
SUBADVISER: Loomis, Sayles & Company, L.P. Low
("Loomis Sayles")
TICKER SYMBOL: CLASS Y
MANAGERS: Equity (Value Component): Jeff Wardlow ----------
and Gregg Watkins NEBYX
Equity (Growth Component): Mark Baribeau,
Pamela Czekanski, Richard Skaggs
Fixed Income: John Hyll
CATEGORY: Large-Cap Equity
INVESTMENT GOAL
The Fund seeks a reasonable long-term investment return from a combination of
long-term capital appreciation and moderate current income.
INVESTMENT STRATEGIES
Generally, the Fund will invest appoximately 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. The Fund principally invests in common
stocks of quality, large capitalization companies of any industry and investment
grade bonds. Loomis Sayles uses a flexible approach to seek investments with the
following characteristics, although not all of the companies selected will have
these attributes:
EQUITY SECURITIES - VALUE COMPONENT:
x discounted price compared to its current value
x below-average price-to-earnings ratios
x competitive current and estimated dividend yield
x attractive 5-year estimated earnings growth
EQUITY SECURITIES - GROWTH COMPONENT:
x large to mid-market capitalization
x leading positin within industry
x superior earnings growth potential
x undervalued ralative to future growth prospects
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, primarily those with a market capitalization in excess of
$2 billion. 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, primarily those with a large to mid-market
capitalization (currently in excess of $5 billion.) 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.
o Rule 144A securities.
o Mortgage- and asset-backed securities.
o 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).
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 may react differently to issuer, political, market and
economic developments than other types of stocks and the market as a whole.
Growth stocks tend to be more expensive relative to their underlying
earnings or assets compared to other types of stocks and as a result, tend
to be sensitive to changes in their earnings and more volatile than other
types of stocks.
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 liquidy
risk. Credit risk relates to the ability of an issuer to make payments of
principal and interest when due and includes the risk of default. Interest
rate risk relates to changes in a security's value as a result of changes
in interest rates. 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.
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. 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 26.8%
1996 17.6%
1997 18.1%
1998 8.6%
1999 %
/\ Highest Quarterly Return: , up %
\/ Lowest Quarterly Return: , down %
The table below shows the Fund's average annual total returns for the one-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 Lipper Balanced Fund and Morningstar Domestic Hybrid
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 Lipper, Inc. and
Morningstar, 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 Lipper Balanced
Fund Average and the Morningstar Domestic Hybrid Average returns have been
adjusted for these expenses.
<TABLE>
- ------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999) PAST 1 YEAR PAST FIVE YEARS SINCE INCEPTION
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nvest Balanced Fund: Class Y (inception 3/8/94) % % %
S&P/Lehman G/C Blend
(Lehman calculated from 3/31/94) % % %
Lipper Balanced Fund Average
(calculated from 3/31/94) % % %
Morningstar Domestic Hybrid Average
(calculated from 3/31/94) % % %
- ------------------------------------------------------------------------------------------------
</TABLE>
*For actual past expenses of Class Y shares, see the section entitled "Fund Fees
and Expenses."
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- Stability Income Growth
NVEST INTERNATIONAL EQUITY -----------------------
FUND High X
--------- ------ ------
ADVISER: Nvest Funds Management, L.P. Mod.
("Nvest Management") --------- ------ ------
Low X X
SUBADVISER: Loomis, Sayles & Company, L.P.
("Loomis Sayles")
MANAGERS: Alexander Muromcew, John Tribolet and TICKER SYMBOL: CLASS Y
Eswar Menon -------
NEIYX
CATEGORY: Large-Cap Equity
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.
INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest primarily in equity
securities of companies 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. 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.
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).
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.
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.
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. 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.
1994 8.9%
1995 6.6%
1996 4.0%
1997 -6.7%
1998 7.3%
1999 %
/\ Highest Quarterly Return: , up %
\/ Lowest Quarterly Return: , down %
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 Lipper International Fund and Morningstar Foreign Stock
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 Lipper, Inc. and
Morningstar, 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 Lipper International Fund
Average and the Morningstar Foreign Stock Average returns have been adjusted for
these expenses.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS SINCE
(for the periods ended December 31, 1999) PAST 1 YEAR PAST 5 YEARS INCEPTION
- --------------------------------------------------------------------------------
Nvest International Equity Fund: Class Y
(inception 9/9/93) % % %
MSCI EAFE % % %
Lipper International Fund Average
(calculated from 9/30/93) % % %
Morningstar Foreign Stock Average
(calculated from 9/30/93) % % %
- --------------------------------------------------------------------------------
For actual past expenses of Class Y shares, see the section entitled "Fund Fees
& Expenses."
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- Stability Income Growth
NVEST STAR SMALL CAP FUND -----------------------
High X
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Management") Mod.
--------- ------ ------
SUBADVISER: Harris Associates L.P. Low X X
("Harris Associates")
RS Investment Management, L.P.
("RS Investment Management")
Montgomery Asset Management, LLC
(Montgomery")
CATEGORY: Small-Cap Equity
INVESTMENT GOAL
The Fund seeks capital appreciation.
The Fund's investment goal may be changed without shareholder approval.
INVESTMENT STRATEGIES
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 own 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 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").
o Enter into options, futures and currency hedging transactions.
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 OF THE STAR SMALL CAP FUND
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.
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. Credit risk relates to the ability of an issuer to make
payments of principal and interest when due and includes the risk of
default. Interest rate risk relates to changes in a security's value as a
result of changes in interest rates. 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.
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. 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
calendar year since its first full year of operations. The return 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 27.0%
1998 2.1%
1999 %
/\ Highest Quarterly Return: , up %
\/ Lowest Quarterly Return: , down %
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 Lipper Small-Cap Growth Fund and Morningstar
Small 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 Lipper,
Inc. and Morningstar, 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 Russell 2000 Index returns have
not been adjusted for ongoing management, distribution and operating expenses
and sales charges applicable to mutual fund investments. The Lipper Small-Cap
Growth Fund and Morningstar Small Growth Average returns have been adjusted for
these expenses but do not reflect any sales charges.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN *The inception date of the Fund's
(for the periods ended December 31, 1999) PAST 1 YEAR SINCE INCEPTION* Class A, B and C shares is
- -------------------------------------------------------------------------------- December 31, 1996.
Nvest Star Small Cap Fund: Class A % %
Nvest Star Small Cap Fund: Class B % %
Nvest Star Small Cap Fund: Class C % %
Russell 2000 Index % %
Lipper Small-Cap Growth Fund Average % %
Morningstar Small Growth Average % %
- --------------------------------------------------------------------------------
For the expenses of Class Y shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<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
Harris Associates uses a value-oriented investment philosophy to arrive at its
opinion of a company's "true business value." This philosophy is based upon its
belief that over time a stock's market price and value will converge. Harris
Associates believes that this philosophy provides the best opportunity to
achieve long-term capital growth and 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:
|| Discounted share price compared to "true business value"
|| Positive free cash flow
|| Competitive return on equity
|| High level of insider ownership
|| Favorable earnings growth potential
In making investment decisions for its segment of the Fund, Harris Associates
generally employs the following methods:
o Harris Associates uses a fundamental bottom-up investment approach. This
means that Harris 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' standards of quality and value.
o Harris Associates analysts typically look for companies that generate free
cash flow, review a company's market value compared to other companies,
visit companies and talk to various industry sources.
o Once Harris Associates determines that a stock sells at a significant
discount to its potential value, 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 a pricing
committee that sets specific "buy" and "sell" targets for each company.
These targets are repeatedly adjusted to reflect changes in a company's
fundamentals. Harris Associates will generally buy a stock for its segment
of the Fund when it sells for a price below 60% of its estimated worth, and
will generally sell a stock when it approaches 90% of its estimated worth.
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 which 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:
|| New and/or distinctive products, technologies or services
|| Expected growth of at least 20% per year driven by strong sales
and improving profitability
|| 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 they are no longer deemed to be small cap -- typically when
the market capitalization of the company exceeds $2 billion. Finally,
stocks may be sold if a better opportunity is identified by the portfolio
managers.
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:
|| A new product launch || A new management team
|| Expansion into new markets || 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.
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:
|| Quantitative screen identifying growth-oriented companies with
improving business fundamentals
|| Fundamental analysis to determine the long-term sustainability
of the company's growth characteristics
|| Valuation to ensure that the company's growth prospects have not yet been
discovered 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 must be
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.
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- Stability Income Growth
NVEST STAR ADVISERS FUND -----------------------
High X
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Mangement") Mod.
--------- ------ ------
SUBADVISERS: Harris Associates L.P. Low X X
("Harris Associates")
TICKER SYMBOL: CLASS Y
Loomis, Sayles & Conpany, L.P. --------
("Loomis Sayles") NESYX
Janus Capital Corporation ("Janus")
Kobrick Funds LLC ("Kobrick")
CATEGORY: All-Cap Equity
INVESTMENT GOAL
The Fund seeks long-term growth of capital.
The Fund's investment goal may be changed without shareholder approval.
INVESTMENT STRATEGIES
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 own 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.
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.
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 OF THE STAR ADVISERS FUND
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. With special situation companies, the
primary risk is that they may not achieve their expected value because
events do not materialize as anticipated.
FIXED-INCOME SECURITIES: Subject to credit risk, interest rate risk and
liquidity risk. Credit risk relates to the ability of an issuer to make
payments of principal and interest when due and includes the risk of
default. Interest rate risk relates to changes in a security's value as a
result of changes in interest rates. 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.
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. 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 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 34.8%
1996 19.6%
1997 20.5%
1998 19.6%
1999 %
/\ Highest Quarterly Return: , up %
\/ Lowest Quarterly Return: , down %
The table below shows the Fund's average annual total returns for the one-year
and since-inception periods 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. The returns are also compared to
the Lipper Multi-Cap Growth Fund and Morningstar Mid 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 Lipper, Inc. and Morningstar, 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 500 returns have not been
adjusted for ongoing management, distribution and operating expenses applicable
to mutual fund investments. The Lipper Multi-Cap Growth Fund Average and
Morningstar Mid Cap Growth Average returns have been adjusted for these
expenses.
<TABLE>
- ---------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999) PAST 1 YEAR PAST FIVE YEARS SINCE INCEPTION
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nvest Star Advisers Fund: Class Y
(inception 11/15/94) % % %
S&P 500 % % %
Lipper Multi-Cap Growth Fund Average
(calculated from 11/30/94) % % %
Morningstar Mid Cap Growth Average
(calculated from 11/30/94) % % %
- ---------------------------------------------------------------------------------------------------
</TABLE>
For the actual past expenses of Class Y shares, see the section entitled "Fund
Fees & Expenses." Ticker Symbol: Class Y
<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 capitalization companies which Harris
Associates believes are trading at a substantial discount to the company's "true
business value."
Harris Associates uses a value-oriented investment philosophy to arrive at its
opinion of a company's "true business value." This philosophy is based upon its
belief that over time a stock's market price and value will converge. Harris
Associates believes that this philosophy provides the best opportunity to
achieve long-term capital growth and 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:
|| Discounted share price compared to "true business value"
|| Positive free cash flow
|| Competitive return on equity
|| High level of insider ownership
|| Favorable earnings growth potential
In making investment decisions, Harris Associates generally employs the
following methods:
o Harris Associates uses a fundamental bottom-up investment approach. This
means that Harris 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' standards of quality and value.
o Harris Associates analysts typically look for companies that generate free
cash flow, review a company's market value compared to other companies,
visit companies and talk to various industry sources.
o Once Harris Associates determines that a stock sells at a significant
discount to its potential value, 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 a pricing
committee that sets specific "buy" and "sell" targets for each company.
These targets are adjusted periodically to reflect changes in a company's
fundamentals. Harris Associates will generally buy a stock for this segment
of the Fund when it sells for a price below 60% of its estimated worth, and
will generally sell a stock when it approaches 90% of its estimated worth.
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 both
undervalued securities and securities with significant growth potential. 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:
|| Above average growth rates || Higher than average cash flows
|| Low price-to-earnings ratio || 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
the 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 earnings growth falls below the
market average, when the fundamental outlook is deteriorating or when other
more favorable opportunities arise.
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:
|| Strong competitive position in a particular industry
|| Secure current and expected financial position
|| Proven and capable management teams
|| Attractive valuations relative to growth prospects and peer group
|| High return on equity || 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 significant changes in a
company's allocation of existing capital, a restructuring of assets or a
redirection of free cash flows. Special situations may also exist where
there is a change in a company's management or business strategy.
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.
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 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:
|| The strength of a company's management team
|| Expected growth in earnings || Relative financial condition
|| Competitive position and business strategy
|| Entrepreneurial character
|| 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.
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
------------------------- Stability Income Growth
NVEST STAR WORLDWIDE FUND -----------------------
High X
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Mangement") Mod.
--------- ------ ------
SUBADVISERS: Harris Associates L.P. Low X X
("Harris Associates")
Loomis, Sayles & Company, Inc.
("Loomis Sayles")
Montgomery Asse Management LLC
("Montgomery")
CATEGORY: All-Cap Equity
INVESTMENT GOAL
The Fund seeks long-term growth of capital.
The Fund's investment goal may be changed without shareholder approval.
INVESTMENT STRATEGIES
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 own
investment style and strategy.
Aside from investing primarily in equity securities of foreign and domestic
companies, the Fund may:
o Enter into options, futures, swap contracts and currency hedging
transactions.
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 OF THE FUND
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.
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. Credit risk relates to the ability of an issuer to make
payments of principal and interest when due and includes the risk of
default. Interest rate risk relates to changes in a securities value as a
result of changes in interest rate. 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.
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. 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
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 16.7%
1997 12.7%
1998 4.0%
1999 %
/\ Highest Quarterly Return: , up %
\/ Lowest Quarterly Return: , down %
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 Lipper Global Fund
and Morningstar World Stock 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 Lipper, Inc. and Morningstar, 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 Lipper Global Fund
Average and Morningstar Worldstock Average returns have been adjusted for these
fees but do not reflect sales charges.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS *The inception date of the
(for the periods ended December 31, 1999) PAST 1 YEAR SINCE INCEPTION* Fund's Class A, B and C shares
- -------------------------------------------------------------------------------- is December 29, 1995.
Nvest Star Worldwide Fund: Class A % %
Nvest Star Worldwide Fund: Class B % %
Nvest Star Worldwide Fund: Class C % %
MSCI World Index % %
Lipper Global Fund Average % %
Morningstar World Stock Average % %
- --------------------------------------------------------------------------------
For the expenses of Class Y shares, see the section entitled "Fund Fees & Expenses."
</TABLE>
<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 capitalization companies which Harris
Associates believes are trading at a substantial discount to the company's "true
business value."
Harris Associates uses a value-oriented investment philosophy to arrive at its
opinion of a company's "true business value." This philosophy is based on its
belief that over time a stock's market price and value will converge. Harris
Associates believes that this philosophy provides the best opportunity to
achieve long-term capital growth and 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:
|| Discounted share price compared to "true business value"
|| Positive free cash flow
|| Competitive return on equity || High level of insider ownership
|| Favorable earnings growth potential
In making investment decisions, Harris Associates generally employs the
following methods:
o Harris Associates uses a fundamental bottom-up approach. This means that
Harris 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' standards of quality and value.
o Harris Associates analysts typically look for companies that generate free
cash flow, review a company's market value compared to other companies,
visit companies and talk to various industry sources.
o Once Harris Associates determines that a stock sells at a significant
discount to its potential value, 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 a pricing
committee that sets specific "buy" and "sell" targets for each company.
These targets are adjusted periodically to reflect changes in a company's
fundamentals. Harris Associates will generally buy a stock for this segment
of the fund when it sells for a price below 60% of its estimated worth, and
will generally sell a stock when it approaches 90% of its estimated worth.
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 evaluates:
|| The relative political and economic stability of the issuer's home country
|| The ownership structure of the company
|| 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.
LOOMIS SAYLES
The segment of the Star Worldwide Fund managed by Loomis Sayles will invest
primarily in equity securities of companies 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:
|| Strong competitive position in a particular industry || Strong pricing power
|| Strong distribution channels || 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.
MONTGOMERY
Montgomery will invest at least 65% of its segment's assets in equity securities
of companies of any size located throughout the world. This 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.
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. Analysts' secondary
responsibilities are allocated on a country basis. Country research is a
valuable complement to its bottom-up sector and specific security work, and
is focused on macroeconomic and sociopolitical forces that impact markets,
sectors and companies that they follow. Roughly 85% of the analysts' time
is spent on specific security and sector research, 15% on country 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 valuation, near-term earnings/business momentum, and long-term projected
earnings growth.
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/country 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 versus 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] Goals, Strategies & Risks FUND FOCUS
------------------------- Stability Income Growth
NVEST STAR VALUE FUND -----------------------
High X
ADVISER: Nvest Funds Management, L.P. --------- ------ ------
("Nvest Mangement") Mod. X
--------- ------ ------
SUBADVISER: Harris Associates L.P. Low X
("Harris Associates")
Loomis, Sayles & Company L.P. TICKER SYMBOL: CLASS A
("Loomis Sayles") ---------
Vaughan, Nelson, Scarborough NEVYX
& McCullough, L.P. ("VNSM")
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.
INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all of its
assets in equity securities. The Fund primarily invests in common stock of large
capitalization companies of various industries. The companies the Fund invests
in are value-oriented according to one of more of the following measuries:
price to earning 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 own investment style and strategy. Although
theFund primarily invests in equity securities, it may also:
o Hold securities of foreign issuers traded over the counter or on foreign
exchanges.
o Purchase U.S. government securiies, 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
investment may prevent the Fund from achieving its goal.
The Fund may:
o Invest in foreign securities.
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 OF THE STAR VALUE FUND
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.
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. 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 different investment policies and 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 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 32.8%
1996 26.4%
1997 21.3%
1998 7.4%
1999 %
/\ Highest Quarterly Return: , up %
\/ Lowest Quarterly Return: , down %
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 3000 Index, selected for
their greater value orientation. The returns are also compared to the Lipper
Multi-Cap Value Fund and Morningstar Large 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 Lipper, Inc. and Morningstar, 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 Russell 1000 Value Index returns have not been
adjusted for ongoing management, distribution and operating expenses applicable
to mutual fund investments. The Lipper Multi-Cap Value Fund Average and the
Morningstar Large Value Average returns have been adjusted for these expenses.
<TABLE>
- ------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1999) PAST 1 YEAR PAST FIVE YEARS SINCE INCEPTION
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nvest Value Fund: Class Y (inception 3/31/94) % % %
Russell 1000 Value Index % % %
Lipper Multi-Cap Value Fund % % %
Morningstar Large Value Average % % %
- ------------------------------------------------------------------------------------------------
</TABLE>
For actual past expenses of Class Y shares, see the section entitled "Fund Fees
and Expenses."
<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 U.S. segment of the Fund is subadvised by Harris Associates and will
primarily invest in common stock of large capitalization companies which Harris
Associates believes are trading at a substantial discount to the company's "true
business value."
Harris Associates uses a value-oriented investment philosophy to arrive at its
opinion of a company's "true business value." This philosophy is based on its
belief that over time a stock's market price and value will converge. Harris
Associates believes that this philosophy provides the best opportunity to
achieve long-term capital growth and 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:
[] Discounted share price compared to "true business value"
[] Positive free cash flow [] Competitive return on equity
[] High level of insider ownership [] Favorable earnings growth potential
In making investment decisions, Harris Associates generally employs the
following methods:
o Harris Associates uses a fundamental bottom-up approach. This means that
Harris 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' standards of quality and value.
o Harris Associates analysts typically look for companies that generate free
cash flow, review a company's market value compared to other companies,
visit companies and talk to various industry sources.
o Once Harris Associates determines that a stock sells at a significant
discount to its potential value, 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 a pricing
committee that sets specific "buy" and "sell" targets for each company.
These targets are adjusted periodically to reflect changes in a company's
fundamentals. Harris Associates will generally buy a stock for this segment
of the fund when it sells for a price below 60% of its estimated worth, and
will generally sell a stock when it approaches 90% of its estimated worth.
LOOMIS SAYLES
Loomis Sayles uses non-technical, 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:
[] Low price-to-earnings ratios based on earnings estimates
[] Competitive return on equity
[] Competitive current and estimated dividend yield
[] High 5-year estimated earnings growth
Inselecting investments for the Fund, 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 that rank in the top third of the valuation model become prime
candidates for purchase and receive a more intensive fundamental research
effort.
o The Fund's portfolio is constructed by choosing approximatly 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.
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 selcted will have the following attributes:
[] Higher dividend yields compared to the Russell 1000 Value Index
[] Higher profitability (return-on-equity) than the market
[] Strong and growing cash flows and dividends-to-cash flow ratio
[] Low price-to-sales ratio
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 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 or 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 Russell 1000 Value Index 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.
WESTPEAK
In managing its segment of the Fund, Westpeak will construct a portfolio of
recognizable, reasonably-priced stocks by combining its experience and judgement
with a dynamic weighting process known as "portfolio profiling." The portfolio
emphasizes the characteristics that Westpeak feels are most likely to be
rewarded by the market in the period ahead. Using proprietary research based on
economic, market and company specific information, Westpeak analyzes each stock
and ranks them based on characteristics such as:
[] Earning-to-price ratios [] Earnings growth rates
[] Positive earnings surprises
[] Book-to-price ratios [] Dividend yield
In selecting investments, Westpeak will employ the following strategy:
o It starts with an initial universe of approximately 1,300 stocks of large
capitalization companies and generally eliminates stocks of companies below
a $1.4 billion market capitalization threshold. This creates an overall
universe of about 900 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 and value
characteristics.
o All of the stocks are the screened using Wall Street analysts' projected
earning estimatesfor the company and each is assigned an "expectations
rank." This rank accounts for the company's potential earnings revisions and
"positive earnings surprises" (whether its business has the potential to
improve in the near future).
o The final step is to calculate a "composite rank" for each stock by
combining their fundamental and expectation ranks to evaluate whether to
buy, sell or hold a stock by comparing its composite rank to those of other
stocks on a stock valuation matrix.
o The desired result is a portfolio of 75 to 150 stocks, with a dividend yield
that approximates that of the Russell 1000 Value Index, which Westpeak
believes will produce the highest long-term returns consistent with the
portfolio's risk parameters.
<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)
CAPITAL GROWTH AND
GROWTH FUND* GROWTH FUND INCOME FUND
CLASS Y CLASS Y CLASS Y
- --------------------------------------------------------------------------------
Management fees % % %
Distribution and/or service
(12b-1) fees % % %
Other expenses % % %
Total annual fund operating
expenses % % %
BALANCED INTERNATIONAL STAR
FUND EQUITY FUND VALUE FUND
CLASS Y CLASS Y CLASS Y
- -------------------------------------------------------------------------------
Management fees % % %
Distribution and/or service
(12b-1) fees % % %
Other expenses % % %
Total annual fund operating expenses % % %
STAR
STAR SMALL STAR ADVISERS WORLDWIDE
CAP FUND* FUND FUND*
CLASS Y CLASS Y CLASS Y
- --------------------------------------------------------------------------------
Management fees % % %
Distribution and/or service
(12b-1) fees % % %
Other expenses % % %
Total annual fund operating expense % % %
* Capital Growth Fund, Star Small Cap Fund and Star Worldwide Fund currently do
not offer Class Y shares.
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:
GROWTH AND
CAPITAL GROWTH FUND GROWTH FUND INCOME FUND
CLASS Y CLASS Y CLASS Y
- -------------------------------------------------------------------------------
1 year $ $ $
3 years $ $ $
5 years $ $ $
10 years $ $ $
- -------------------------------------------------------------------------------
BALANCED FUND INTERNATIONAL STAR
FUND EQUITY FUND VALUE FUND
CLASS Y CLASS Y CLASS Y
- -------------------------------------------------------------------------------
1 year $ $ $
3 years $ $ $
5 years $ $ $
10 years $ $ $
- -------------------------------------------------------------------------------
STAR
STAR SMALL CAP FUND STAR ADVISERS FUND WORLDWIDE FUND
CLASS Y CLASS Y CLASS Y
- --------------------------------------------------------------------------------
1 year $ $ $
3 years $ $ $
5 years $ $ $
10 years $ $ $
- --------------------------------------------------------------------------------
<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, 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 except Capital Growth Fund) 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, 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.
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 securites, 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, 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 (Balanced, 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 except Capital Growth Fund) 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 $ billion
in assets under management as of March 31, 2000. Nvest Funds are distributed
through Nvest Funds Distributor, L.P. (the "Distributor"). This Prospectus
covers Class Y shares of Nvest Stock Funds and Nvest Star Funds (the "Funds" or
each a "Fund"), which along with 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' 14 principal subsidiary or affiliated asset management firms,
collectively, had more than $ billion in assets under management as of March
31, 2000. 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 %
for Capital Growth Fund, % for Growth and Income Fund, % for International
Equity Fund, % for Balanced Fund, % for Star Advisers Fund, % for Star
Small Cap Fund, % for Star Worldwide Fund and % for Star Value Fund.
SUBADVISERS OF STOCK FUNDS
Loomis Sayles, located at One Financial Center, Boston, Massachusetts 02111,
serves as subadviser to Balanced Fund. Loomis Sayles is a subsidiary of Nvest
Companies. Founded in 1926, Loomis Sayles is one of America's oldest and largest
investment advisory firms with over $ billion in assets under management. 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 manages over $
billion in assets for mutual funds and other institutional clients, including
accounts of New England Financial.
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 six additional mutual funds and various institutional
investors. CGM is an affiliate of Nvest Companies and has grown to manage over
$ billion in assets. In 1999, Growth Fund paid % of its average daily net
assets to CGM in advisory fees.
SUBADVISERS OF STAR FUNDS
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 $ billion in assets, 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.
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 and largest investment advisory firms with over $ billion in
assets under management. Loomis Sayles, a subsidiary of Nvest Companies, is well
known for its professional research staff, which is one of the largest in the
industry.
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.
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 % of the outstanding voting stock
of Janus. Thomas H. Baily, President and Chairman of the Board of Janu s, owns
approximately % of its voting stock and, by agreement with KCSI, selects a
majority of Janus' Board.
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.
RS INVESTMENT MANAGEMENT, located at 555 California Street, San Francisco,
California 94104, (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.
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 March 31, 2000,
VNSM had approximately $-- 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 manages over $6 billion in assets for
mutual funds and other institutional clients, including accounts of New England
Financial.
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
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 34 year
veteran of the investment industry.
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 founder, President and Chief
Executive Officer of Westpeak Investment Advisors. 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 33 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 15 years of investment
experience.
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 received both his B.B.A. and his M.B.A.
from Michigan State University and has over 16 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 14 years of investment experience.
MARK B. BARIBEAU
Mark B. Baribeau has 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. He received a M.B.A. from University of Maryland, a B.A.
from University of Vermont. He is a Chartered Financial Analyst with 14 years of
investment experience.
PAMELA N. CZEKANSKI
Pamela N. Czekanski has 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. She received a B.A. from Middlebury College. She is a
Chartered Financial Analyst with 16 years of investment experience.
RICHARD D. SKAGGS
Richard D. Skaggs has 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. He received a M.S.M. and a B.S. from Oakland University. He
is a Chartered Financial Analyst with 14 years of investment experience.
ALEXANDER MUROMCEW
Alexander Muromcew serves as co-portfolio manager for INTERNATIONAL EQUITY FUND.
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 and his B.A. from Dartmouth College.
JOHN TRIBOLET
John Tribolet serves as co-portfolio manager for INTERNATIONAL EQUITY FUND. 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.
ESWAR MENON
Eswar Menon serves as co-portfolio manager for INTERNATIONAL EQUITY FUND. 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 and an M.S. from the University of California. He
received his B.S. from Indian Institute of Technology, Madras, India.
STAR SMALL CAP FUND
CHRISTOPHER R. ELY
Mr. 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 20 years of investment
management experience.
PHILIP C. FINE
Dr. 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 11 years of investment management experience.
DAVID L. SMITH
Mr. 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 13 years of
investment management experience.
JAMES P. BENSON
Mr. 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 18 years of investment experience.
STEVEN J. REID
Mr. 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 12 years of
investment experience.
KATHRYN PETERS
Ms. 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
12 years of investment management experience.
JOHN L. WALLACE
Mr. 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
Growth & Income 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 18 years of investment experience.
JOHN H. SEABERN
Mr. 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 8 years of investment management experience.
STAR ADVISERS FUND
ROBERT J. SANBORN
Mr. 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 has managed Oakmark Fund since its
inception in August 1991. 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 15 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). He has been in the investment business for more than 28 years.
For the 12 year period immediately prior to becoming President of the
predecessor to Kobrick Funds LLC in 1997, he was an equity portfolio manager at
State Street Research & Management Company, where he had served as Senior Vice
President since 1989 and as a member of the firm's Equity Investment Committee
since 1985. He received an M.B.A. from Harvard Business School and a B.A. from
Boston University and is also a Chartered Financial Analyst.
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 in 1999, Mr. Gatz was a portfolio
manager at Banc One Investment Advisers Corporation and certain of its corporate
predecessors since 1993. He received a M.B.A. from Indiana University and 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. She received a M.B.A. from University of Michigan
and a B.S. from Virginia Commonwealth University and has eight years of
investment experience.
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 is also a Chartered Financial Analyst and 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 12 years of investment experience.
STAR WORLDWIDE FUND
ROBERT J. SANBORN
Mr. 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 has managed Oakmark Fund since its
inception in August 1991. 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 15 years of investment experience.
DAVID G. HERRO
Mr. 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 13 years of investment experience.
MICHAEL J. WELSH
Mr. Welsh has co-managed the Harris Associates international segment of Star
Worldwide Fund since the Fund's inceptio n. 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 14 years of investment management experience.
OSCAR CASTRO
Mr. 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 16 years of investment experience.
JOHN BOICH
Mr. 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 14 years of investment
experience.
ALEXANDER MUROMCEW
Alexander Muromcew serves as co-portfolio manager for the Loomis Sayles segment
of Star Worldwide Fund, 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, 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 and his B.A. from
Dartmouth College.
JOHN TRIBOLET
John Tribolet serves as co-portfolio manager for the Loomis Sayles segment of
Star Worldwide Fund, 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, 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.
ESWAR MENON
Eswar Menon serves as co-portfolio manager for the Loomis Sayles segment of the
Star Worldwide Fund, 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, 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 and an M.S. from the University of California. He received his B.S.
from Indian Institute of Technology, Madras, India.
STAR VALUE FUND
LAURIANN KLOPPENBURG
Lauriann Kloppenburg has co-managed Star Value Fund since August 1998 and the
Loomis Sayles segment of Star Value Fund since March 2000. Ms. Kloppenburg is
Vice President and Director of Equity Research at Loomis Sayles. She is also a
Chartered Financial Analyst. Ms. Kloppenburg received her B.A.from Wellesley
College and has over 16 years of investment experience.
JEFFREY W. WARDLOW
Jeffrey Wardlow has co-managed Star Value Fund since August 1998, the Loomis
Sayles segment of Star Value Fund since March 2000 and the equity portion of
Balanced Fund since March 2000. 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 16 years of investment
experience.
GERALD H. SCRIVER
Gerald Scriver has managed the Westpeak segment of Star Value Fund since March
2000. He slso manages Growth and Income Fund and Capital Growth Fund. Mr.
Scriver is the founder, President and Chief Executive officer of Westpeak
Investment Advisors. Mr. Sciver is a graduate of the State University of N.Y. at
Buffalo and has over 33 years of investment experience.
MARGARET M. BUESCHER
Margaret M. Buescher has co-managed the VNSM segment of Star Value Fund since
March 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 24 years of investment experience.
JEAN MALO
Jean Malo has co-managed the VNSM segment of Star Value Fund since March 2000.
He also co-manages 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 21 years of investment
experience.
ROBERT M. LEVY
Robert Levy has co-managed the Harris Associates segment of Star Value Fund
since March 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, Unversity of Pennsylvania and has 23 years of
investment experience.
FLOYD J. BELLMAN
Floyd Bellman has co-managed the Harris Associates segment of Star Value Fund
since March 2000. Mr. Bellman is -- of Harris Associates and he joined the
company in 1995. Mr. Bellman, a Chartered Financial Analyst, received a B.B.A.
from the University of Wisconsin and has 19 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 SPECIAL ACCOUNTS for International Equity Fund (including bank common
trusts, bank collective trust funds and dedicated corporate or trust
funds, such as nuclear decommissioning trusts and hospital depreciation
funds).
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 net asset 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 NEW ENGLAND FINANCIAL DEFERRED COMPENSATION PLAN ACCOUNTS for agents,
general agents, directors and senior officers of New England Financial
and its insurance company subsidiaries.
o SERVICE ACCOUNTS through an omnibus account by investment advisers,
financial planners, broker-dealers or other intermediaries who have
entered into a service agreement with a Fund. A fee may be charged to
shareholders purchasing through a service account if they effect
transactions through such parties and should contact such parties
regarding information regarding such fees.
3. You should contact Nvest Funds at 800-225-5478 before attempting to purchase
Fund shares.
4. Use the sections of this Prospectus that follow as your guide for purchasing
shares.
CERTIFICATES
You will not receive certificates representing Class Y shares.
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 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 checks "Nvest Funds." Third party checks
will generally not be accepted. will generally not be accepted.
o Mail the check with your completed o Fill out the detachable investment
application to 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 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."
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 Instruct your bank to transfer funds
obtain an account number and wire to State Street Bank & Trust
transfer instructions. Your bank may Company, ABA# 011000028, DDA#
charge you for such a transfer. 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.
THROUGH AUTOMATED CLEARING HOUSE (ACH)
[graphic omitted]
o Ask your bank or credit union o Call Nvest Funds at 800-225-5478 to
whether it is a member of the ACH add shares to your account through
system. 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 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 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 to request a redemption through this system.
o Proceeds (less any applicable CDSC) 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 Fund 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 Fund does not anticipate doing so, it reserves the right to suspend
or change the terms of purchasing or exchanging shares. The Fund and the
Distributor reserve the right to refuse or limit any purchase or exchange order
by a particular purchaser (or group of related purchasers) if the transaction is
deemed harmful to the best interest of the Fund's other shareholders or would
disrupt the management of the Fund. The Fund and the Distributor reserve the
right to restrict purchases and exchanges for the accounts of "market timers" by
limiting the transaction to a maximum dollar amount. An account will be deemed
to be one of a market timer if: (i) more than two exchange purchases of a given
Fund are made for the account in a calendar quarter or (ii) the account makes
one or more exchange purchases of a given Fund in a calendar quarter in an
aggregate amount in excess of 1% of the Fund's total net assets.
SELLING RESTRICTIONS
The table below describes restrictions placed on selling shares of the Fund:
RESTRICTION SITUATION
The Fund may suspend the right of 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 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 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 the Fund without a sales charge,
and is calculated each business day using this formula:
TOTAL VALUE OF SECURITIES + CASH AND OTHER ASSETS - LIABILITES
NET ASSET VALUE = --------------------------------------------------------------
NUMBER OF OUTSTANDING SHARES
The net asset value of Fund shares is determined according to this schedule:
o A share's net asset value is determined at the close of regular trading on the
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 priced by another method that the Funds' Board of
Trustees believes actually 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
Star Small Cap
Star Advisers
Star Worldwide
Star Value
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 Star Small Cap
Fund and Star Worldwide Fund 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 included in the SAI, 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 $ $14.89 $18.09 $18.74 $19.10 $
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) (0.11)(b) (0.14)(c) (0.18)(c) (0.13)(c) (0.16)(b) (0.28)(c) (0.32)(c) (0.27)(c)
Net Realized and
Unrealized Gain
(Loss) on
Investments 4.74 3.22 3.43 5.18 4.60 3.15 3.25 4.87
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment
Operations 4.63 3.08 3.25 5.05 4.44 2.87 2.93 4.60
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From
Net Realized Capital
Gains (1.24) (2.22) (2.57) (4.33) (1.24) (2.22) (2.57) (4.33)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (1.24) (2.22) (2.57) (4.33) 0.00 (2.22) (2.57) (4.33)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End
of the Year $18.41 $19.27 $19.95 $20.67 $18.09 $18.74 $19.10 $19.37
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) (a) 30.7 17.1 17.2 29.0 29.7 16.2 15.9 28.2
RATIOS/SUPPLEMENTAL
DATA
Ratio of Operating
Expenses to Average
Net Assets (%) 1.61 1.50 1.45 1.46 2.36 2.25 2.20 2.21
Ratio of Net
Investment Income
(Loss) to Average
Net Assets (%) (0.67) (0.71) (0.87) (0.62) (1.42) (1.46) (1.62) (1.37)
Portfolio Turnover
Rate (%) 69 74 48 136 69 74 48 136
Net Assets, End of
Year (000) $123,504 $141,326 $149,734 $175,511 $26,234 $37,439 $45,546 $57,796
<CAPTION>
CLASS C
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $14.89 $18.08 $18.74 $19.11
------ ------ ------ ------ ------
INCOME FROM INVESTMEN OPERATIONS
Net Investment Income (Loss) (0.09)(b) (0.28)(c) (0.34)(c) (0.27)(c)
Net Realized and Unrealized Gain (Loss)
on Investments 4.52 3.16 3.28 4.86
------ ------ ------ ------ ------
Total From Investment Operations 4.43 2.88 2.94 4.59
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net Realized Capital
Gains (1.24) (2.22) (2.57) (4.33)
------ ------ ------ ------ ------
Total Distributions (1.24) (2.22) (2.57) (4.33)
------ ------ ------ ------ ------
Net Asset Value, End of the Year $18.08 $18.74 $19.11 $19.37
====== ====== ====== ====== ======
TOTAL RETURN (%) (a) 29.7 16.2 15.9 28.1
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average
Net Assets (%) 2.36 2.25 2.20 2.21
Ratio of Net Investment Income (Loss) to
Average Net Assets (%) (1.42) (1.46) (1.62) (1.37)
Portfolio Turnover Rate (%) 69 74 48 136
Net Assets, End of Year (000) $354 $504 $979 $1,609
(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>
<CAPTION>
[graphic omitted] Fund Performance
----------------
NVEST GROWTH FUND
CLASS A CLASS B
- --------------------------------------------------------------------------------------------------------------------------------
FEBRUARY 28(A)
THROUGH YEAR ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997 1998 1999 1997 1998 1999
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Year $ 8.87 $10.55 $11.63 $10.41 $12.47 $10.32
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.05 0.04 0.01 0.08(c) (0.07) 0.00(c)
Net Realized and Unrealized Gain (Loss)
on Investments 3.30 2.07 2.79 3.00 1.94 2.95
------ ------ ------ ------ ------ ------ ------ ------
Total From Investment Operations 3.35 2.11 2.80 3.08 1.87 2.95
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net Investment
Income (0.05) (0.04) 0.00 (0.10) 0.00 (0.06)
Distributions From Net Realized Gain
on Investments (1.62) (0.99) (4.02) (1.32) (4.02) (1.32)
Distributions in Excess of Realized
Gain on Investments 0.00 0.00 0.00 (0.35) 0.00 (0.35)
Distributions from Return of Capital 0.00 0.00 0.00 (0.36) 0.00 (0.39)
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (1.67) (1.03) (4.02) (2.13) (4.02) (2.12)
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of the Year $10.55 $11.63 $10.41 $11.36 $10.32 $11.15
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (b) 38.1 20.9 23.5 33.4 14.4 32.4
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 1.20 1.18 1.12 1.12 1.87(d) 1.87
Ratio of Net Investment Income
to Average Net Assets (%) 0.42 0.33 0.08 0.74 (0.67)(d) (0.01)
Portfolio Turnover Rate (%) 235 199 214 202 214(d) 202
Net Assets, End of Year (000,000) $1,201 $1,297 $1,460 $1,825 $18 $75
<CAPTION>
CLASS C
- ---------------------------------------------------------------------
SEPTEMBER 1(A)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1999
- ---------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the
Year $11.18
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.00(c)
Net Realized and Unrealized Gain (Loss
on Investments 2.09
------ ------
Total From Investment Operations 2.09
------ ------
LESS DISTRIBUTIONS
Distributions From Net Investment
Income (0.06)
Distributions From Net Realized Gain
on Investments (1.32)
Distributions in Excess of Realized
Gain on Investments (0.35)
Distributions from Return of Capital (0.39)
------ ------
Total Distributions (2.12)
------ ------
Net Asset Value, End of the Year $11.15
====== ======
TOTAL RETURN (b) 22.2
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 1.87(d)
Ratio of Net Investment Income
to Average Net Assets (%) (0.01)(d)
Portfolio Turnover Rate (%) 202
Net Assets, End of Year (000,000) $2
(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>
[graphic omitted] Fund Performance
----------------
NVEST GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
CLASS Y
NOVEMBER 18(A) THROUGH DECEMBER 31, 1998 YEAR ENDED DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $15.42
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.02
Net Realized and Unrealized Gain on Investments 1.22
------ ------
Total From Investment Operations 1.24
------ ------
LESS DISTRIBUTIONS
Distributions From Net Investment Income (0.02)
Distributions From Net Realized Capital Gains (0.07)
------ ------
Total Distributions (0.09)
------ ------
Net Asset Value, End of Period $16.57
====== ======
TOTAL RETURN (%)(c) 8.1
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) 0.98(b)
Ratio of Net Investment Income to
Average Net Assets (%) 0.58(b)
Portfolio Turnover Rate (%) 114
Net Assets, End of Period (000) $1
- --------------------------------------------------------------------------------
(a) Commencement of Operations
(b) Computed on an annualized basis.
(c) Periods of less than one year are not annualized.
</TABLE>
<PAGE>
[graphic omitted] Fund Performance
----------------
NVEST BALANCED FUND
- -------------------------------------------------------------------------------
CLASS Y
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
Net Asset Value,
Beginning of Period $11.27 $13.15 $13.95 $14.27
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.46 0.44 0.40 0.39
Net Realized and
Unrealized Gain (Loss)
on Investments 2.51 1.76 2.06 0.74
------ ------ ------ ------ ------
Total From Investment
Operations 2.97 2.20 2.46 1.13
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net
Investment Income (0.45) (0.45) (0.40) (0.38)
Distributions From Net
Realized Capital Gains (0.64) (0.95) (1.74) (1.48)
------ ------ ------ ------ ------
Total Distributions (1.09) (1.40) (2.14) (1.86)
------ ------ ------ ------ ------
Net Asset Value,
End of Period $13.15 $13.95 $14.27 $13.54
====== ====== ====== ====== ======
TOTAL RETURN (%) 26.8 17.6 18.1 8.6
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets (%) 1.11 0.88 0.88 0.90
Ratio of Net Investment
Income to Average Net
Assets (%) 3.62 3.24 2.66 2.65
Portfolio Turnover Rate (%) 54 70 69 81
Net Assets, End of
the Period (000) $59,411 $77,665 $85,620 $73,212
<PAGE>
[graphic omitted] Fund Performance
----------------
NVEST INTERNATIONAL EQUITY 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 the Year $ 15.64 $ 16.25 $ 16.48 $ 14.35
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.42 0.11(b) 0.19(b) 0.25(b)
Net Realized and Unrealized Gain (Loss) on Investments 0.60 0.54 (1.23) 0.77
------- ------- ------- ------- -------
Total From Investment Operations 1.02 0.65 (1.04) 1.02
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends From Net Investment Income (0.41) (0.09) 0.00 (0.33)
Dividends in Excess of Net Investment Income 0.00 0.00 0.00 (0.31)
Distributions From Net Realized Capital Gains 0.00 (0.33) (1.05) (0.19)
Distributions in Excess of Net Realized Gains 0.00 0.00 (0.04) (0.09)
Distributions From Paid-in Capital 0.00 0.00 0.00 0.00
------- ------- ------- ------- -------
Total Distributions (0.41) (0.42) (1.09) (0.92)
------- ------- ------- ------- -------
Net Asset Value, End of the Year $ 16.25 $ 16.48 $ 14.35 $ 14.45
======= ======= ======= ======= =======
TOTAL RETURN (%) 6.6 4.0 (6.7) 7.3
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%)(a) 1.00 1.00 1.15 1.31
Ratio of Net Investment Income to Average Net Assets (%) 1.99 0.89 1.22 1.64
Portfolio Turnover Rate (%) 119 59 154 105
Net Assets, End of the Year (000) $83,119 $52,161 $ 4,752 $ 5,552
The Subadviser to the Fund prior to February 15, 1997 was Draycott Partners, Ltd. Effective February 15, 1997 Loomis,
Sayles & Company, L.P. became the subadviser to the Fund.
(a) 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
(b) Per share net investment income 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
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1998 1999 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year (a) $12.50 $15.37 $12.50 $15.26
------ ------ ------ ------ ------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (b) (0.20) (0.23) (0.30) (0.33)
Net Realized and Unrealized Gain on
Investments 3.55 0.54 3.54 0.52
------ ------ ------ ------ ------ ------
Total from Investment Operations 3.35 0.31 3.24 0.19
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions from Net Realized
Capital Gains (0.48) (0.02) (0.48) (0.02)
------ ------ ------ ------ ------ ------
Total Distributions (0.48) (0.02) (0.48) (0.02)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Year $15.37 $15.66 $15.26 $15.43
====== ====== ====== ====== ====== ======
TOTAL RETURN (%)(c) 27.0 2.1 26.1 1.3
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 2.20 2.07 2.95 2.82
Ratio of Net Investment Income (Loss)
to Average Net Assets (%) (1.44) (1.52) (2.19) (2.27)
Portfolio Turnover Rate (%) 140 182 140 182
Net Assets, End of Year (000) $52,066 $56,161 $52,616 $61,409
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CLASS C
YEAR ENDED DECEMBER 31,
1997 1998 1999
<S> <C> <C> <C>
Net Asset Value, Beginning of the Year (a) $12.50 $15.26
------ ------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (b) (0.30) (0.33)
Net Realized and Unrealized Gain on
Investments 3.54 0.52
------ ------ ------
Total from Investment Operations 3.24 0.19
------ ------ ------
LESS DISTRIBUTIONS
Distributions from Net Realized
Capital Gains (0.48) (0.02)
------ ------ ------
Total Distributions (0.48) (0.02)
------ ------ ------
Net Asset Value, End of Year $15.26 $15.43
====== ====== ======
TOTAL RETURN (%)(c) 26.1 1.3
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 2.95 2.82
Ratio of Net Investment Income (Loss)
to Average Net Assets (%) (2.19) (2.27)
Portfolio Turnover Rate (%) 140 182
Net Assets, End of Year (000) $13,970 $15,412
(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>
FUND PERFORMANCE
----------------------
[graphic omitted] NVEST STAR ADVISERS FUND
- --------------------------------------------------------------------------------
CLASS Y
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
Net Asset Value,
Beginning of Period $13.24 $16.83 $18.33 $18.41
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (Loss) 0.00 (0.02)(e) 0.03(e) 0.00(e)
Net Realized and
Unrealized Gain (Loss)
on Investments 4.58 3.23 3.66 3.34
------ ------ ------ ------ ------
Total From Investment
Operations 4.58 3.21 3.69 3.34
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net
Investment Income 0.00 0.00 0.00 0.00
Distributions From Net
Realized Capital Gains (0.99) (1.71) (3.61) (1.38)
------ ------ ------ ------ ------
Total Distributions (0.99) (1.71) (3.61) (1.38)
------ ------ ------ ------ ------
Net Asset Value,
End of Period (000) $16.83 $18.33 $18.41 $20.37
====== ====== ====== ====== ======
TOTAL RETURn (%)(c) 34.8 19.6 20.5 19.6
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets (%)(d) 1.57 1.43 1.41 1.37
Ratio of Net Investment
Income to Average Net Assets(%) (0.08) (0.11) 0.11 0.01
Portfolio Turnover Rate (%) 142 127 168 101
Net Assets, End of
Period (000) $ 5,569 $18,649 $37,006 $42,517
(a) Commencement of operations.
(b) Computed on an annualized basis.
(c) Periods less than one year are not annualized.
(d) The ratio of operating expenses to average net assets, without giving
effect to the voluntary fee waiver in effect through December 31, 1994
would have been 1.90% for period ended December 31, 1994.
(e) Per share net investment loss has been calculated using the average shares
outstanding during the year.
<PAGE>
[graphic omitted] FUND PERFORMANCE
NVEST STAR WORLDWIDE FUND
<TABLE>
<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 Period (a) $12.50 $14.40 $15.46 $12.50 $14.30 $15.23
------ ------ ------ ------ ------ ------ ------ ------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net Investment Income (Loss) (b) (0.03) (0.02) 0.01 (0.12) (0.14) (0.11)
Net Realized and Unrealized
Gain (Loss) on Investments 2.11 1.88 0.61 2.10 1.87 0.61
------ ------ ------ ------ ------ ------ ------ ------
Total from Investment Operations 2.08 1.86 0.62 1.98 1.73 0.50
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions from Net Realized
Capital Gains (0.18) (0.76) 0.00 (0.18) (0.76) 0.00
Distributions from Paid-in Capital 0.00 (0.04) 0.00 0.00 (0.04) 0.00
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (0.18) (0.80) 0.00 (0.18) (0.80) 0.00
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $14.40 $15.46 $16.08 $14.30 $15.23 $15.73
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)(c) 16.7 12.7 4.0 15.9 11.9 3.3
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 2.58 2.07 2.09 3.33 2.82 2.84
Ratio of Net Investment Income
(Loss) to Average Net Assets (%) (0.21) (0.12) 0.03 (0.96) (0.87) (0.72)
Portfolio Turnover Rate (%) 57 80 84 57 80 84
Net Assets, End of Period (000) $68,509 $118,381 $106,763 $65,367 $123,467 $116,305
<CAPTION>
- -----------------------------------------------------------------------------
CLASS C
YEAR ENDED DECEMBER 31,
1996 1997 1998 1999
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period (a) $12.50 $14.31 $15.24
------ ------ ------ ------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
Net Investment Income (Loss) (b) (0.12) (0.13) (0.11)
Net Realized and Unrealized
Gain (Loss) on Investments 2.11 1.86 0.62
------ ------ ------ ------
Total from Investment Operations 1.99 1.73 0.51
------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions from Net Realized
Capital Gains (0.18) (0.76) 0.00
Distributions from Paid-in Capital 0.00 (0.04) 0.00
------ ------ ------ ------
Total Distributions (0.18) (0.80) 0.00
------ ------ ------ ------
Net Asset Value, End of Period $14.31 $15.24 $15.75
====== ====== ====== ======
TOTAL RETURN (%)(c) 15.9 11.8 3.3
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets (%) 3.33 2.82 2.84
Ratio of Net Investment Income
(Loss) to Average Net Assets (%) (0.96) (0.87) (0.72)
Portfolio Turnover Rate (%) 57 80 84
Net Assets, End of Period (000) $17,980 $26,137 $23,016
(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>
[graphic omitted] Fund Performance
----------------
NVEST STAR VALUE FUND
- --------------------------------------------------------------------------------
CLASS Y
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998 1999
Net Asset Value,
Beginning of Period $7.24 $8.75 $9.55 $10.10
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.12 0.08 0.06(a) 0.06(a)
Net Realized and
Unrealized Gain
on Investments 2.21 2.10 1.95 0.59
------ ------ ------ ------ ------
Total From Investment
Operations 2.33 2.18 2.01 0.65
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Distributions From Net
Investment Income (0.11) (0.08) (0.03) (0.04)
Distributions From Net
Realized Capital Gains (0.71) (1.30) (1.43) (1.06)
------ ------ ------ ------ ------
Total Distributions (0.82) (1.38) (1.46) (1.10)
------ ------ ------ ------ ------
Net Asset Value,
End of Period $ 8.75 $ 9.55 $10.10 $9.65
====== ====== ====== ====== ======
Total Return (%) 32.8 26.4 21.3 7.4
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating
Expenses to Average
Net Assets (%) 1.12 1.06 1.00 1.01
Ratio of Net Investment
Income to Average Net
Assets (%) 1.47 1.03 0.53 0.54
Portfolio Turnover Rate (%) 52 64 55 75
Net Assets, End of
Period (000) $6,738 $12,716 $24,164 $17,789
(a) Per share net investment income has been calculated using the average shares
outstanding during the year.
<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
Standard & Poor's Group or Moody's Investors Service, Inc.. Bonds with a credit
rating of BBB or higher by S&P or Baa or higher by Moody's are generally
considered investment grade.
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
compar able 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
analysts consider 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, these analysts 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 a 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-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).
PRICE-TO-BOOK RATIO -- Current market price of a stock divided by its book
value, or net asset value, of the stock.
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 Loomis Sayles has determined, under
guidelines established by Loomis Sayles Funds' 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>
NOTES
<PAGE>
NVEST FUNDS
STOCK AND STAR FUNDS
Class Y Shares of:
Nvest Capital Growth Fund
Nvest Growth Fund
Nvest Growth and Income Fund
Nvest Balanced Fund
Nvest International Equity Fund
Nvest Star Small Cap Fund
Nvest Star Advisers Fund
Nvest Star Worldwide Fund
Nvest Star Value 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 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. Text-only copies are available free from the
Commission's Web site at: www.sec.gov.
Copies of these publications are also available for a fee
by writing or calling the Public Reference Room of the SEC,
Washington, D.C. 20549-6009
Telephone: 800-SEC-0330
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)
- --------------------------------------------------------------------------------
XS51-0599
<PAGE>
[Logo](SM)
Where The Best Minds Meet(R)
NVEST FUNDS
- --------------------------------------------------------------------------------
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 3, 1999 for
Class A, Class B and Class C shares or the Prospectus of the Funds dated May 3,
1999 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 seven 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 offers a total of eight
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 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,
Strategic Income and International Equity 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 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.)
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 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 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.)
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 total
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.
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' 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; or
*(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;
+(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).
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.)
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 Securities and Exchange Commission (the "SEC") is
currently of the view that repurchase agreements maturing in more than
seven days are liquid 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. Prior to August 30, 1996, CGM
served as adviser to the Growth Fund pursuant to an advisory agreement providing
for an advisory fee at the same rate as that in effect prior to June 1, 1999.
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
(reduced by 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 (dated February 14, 1997, and amended May 1, 1998, March 16,
1998, April 17, 1998 and July 27, 1999 in the case of International Equity,
Bullseye, Capital Growth Funds and Equity Income Funds, 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
Fund Subadviser (as a percentage of average daily net
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 January 2, 1996 to August 30, 1996, Nvest Management served as
adviser and Loomis Sayles served as subadviser to the Balanced Fund pursuant to
separate advisory and subadvisory agreements providing for the same management
and subadvisory fees as are currently in effect for the Fund. Prior to January
2, 1996, Loomis Sayles served as adviser to the Fund pursuant to a separate
advisory agreement, which provided for an advisory fee payable by the fund to
Loomis Sayles at the same rate as the management fee currently payable by the
Fund to Nvest Management.
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 January
2, 1996 to August 30, 1996, Nvest Management served as adviser and Loomis Sayles
served as subadviser to the Fund pursuant to separate advisory and subadvisory
agreements providing for the same management and subadvisory fees as are
currently in effect for the Funds. Prior to January 2, 1996, Loomis Sayles
served as adviser to the Fund pursuant to a separate advisory agreement, which
provided for an advisory fee payable by the Fund to Loomis Sayles at the same
rate as the management fee currently payable by the Fund to Nvest Management.
From May 1, 1995 until August 30, 1996, Nvest Management served as adviser
and Westpeak served as subadviser to the Growth and Income Fund pursuant to
advisory and subadvisory agreements providing for the same management and
subadvisory fee rates as are currently in effect for the Fund.
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 December
29, 1995 to August 30, 1996, Nvest Management served as adviser to the
International Equity Fund pursuant to an advisory agreement providing for a
management fee at the same rate as is currently in effect for such Fund.
From May 1, 1998 to April 30, 2000, Nvest Management gave 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% and prior to December 31,
1996, 1.00%) 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 and prior to December 29, 1995, voluntary limitations
were in effect with respect to Draycott, the Distributor and the Fund.
From November 28, 1995 to August 30, 1996, Nvest Management served as
adviser and Loomis Sayles served as subadviser to the Equity Income Fund
pursuant to separate advisory and subadvisory agreements providing for the same
management and subadvisory fees as currently in effect for the Fund. 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. Nvest Management and VNSM have agreed to continue the binding
undertaking to Equity Income Fund that was currently in effect 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 and VNSM for the life of the Fund's Prospectus (subject to the
obligation of the Fund to pay Nvest Management and VNSM such deferred fees 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 more than two years after the end of the
fiscal year in which the fee was deferred).
Nvest Management has given 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 Prospectus (subject to the obligation of the Fund to pay
Nvest Management such deferred fees (but not expenses borne) in later periods to
the extent that the Funds 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 more than
two years after the end of the fiscal year in which the fee was deferred).
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
Capital Growth Fund $1,436,893 $1,546,360
Balanced Fund $2,830,754 $2,876,837
International Equity Fund* $1,241,968 $734,344
Growth and Income Fund $1,809,523 $2,586,482
Equity Income Fund***** $41,756 $248,935
Bullseye Fund****** N/A $115,268
* As a result of the voluntary expense limitation in effect, the
International Equity Fund paid $734,003, $460,772 and $____,
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 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 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.
**** [TO BE SUPPLIED]
***** 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 and the Fund paid no subadvisory fees to Nvest
Management for the fiscal year ended December 31, 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.
****** The Bullseye Fund commenced operations on March 31, 1998. As a result of
the voluntary 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. Without
the voluntary fee deferral and expense limitation, the Fund would have
paid Nvest Management a management fee of $46,107 and Jurika & Voyles a
subadvisory fee of $69,161.
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 $___ respectively, were allocated to brokers
providing research services, and $782,645, $925,576 and $____, 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
$____, respectively.
In 1997, 1998 and 1999, brokerage transactions for Balanced Fund
aggregating $17,718,990, $68,151,350 and $____, respectively, were allocated to
brokers providing research services, and $24,900, $107,472 and $___,
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 $____, respectively.
In 1997, 1998 and 1999, brokerage transactions for Growth and Income Fund
aggregating $531,986,567, $365,997,958 and $____, respectively, were allocated
to brokers providing research services and $162,980, $154,557 and $___,
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 $____, respectively.
In 1997, 1998 and 1999, brokerage transactions for International Equity
Fund aggregating $462,898,584, $15,145, and $____, respectively, were allocated
to brokers providing research services and $0, $0 and $____, 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
$____, respectively.
In 1997, 1998 and 1999, brokerage transactions for Capital Growth Fund
aggregating $105,213,412, $179,733,449 and $_____, respectively, were allocated
to brokers providing research services and $4,000, $63,846 and $____,
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 $____, respectively.
In 1997, 1998 and 1999, brokerage transactions for Equity Income Fund
aggregating $0, $44,172 and $____, respectively, were allocated to brokers
providing research services and $0, $2,508 and $____, 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 $____,
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 $____, respectively, were allocated to brokers
providing research services, and $4,375 and $____, respectively, in commissions
were paid on these transactions. During 1998 and 1999, the Bullseye Fund paid
total brokerage commissions of $35,314 and $____, 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 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 (Class A)
$71,751 $398,656 (Class B)
$3,017 (Class C)
Balanced Fund $567,385 $574,918 (Class A)
$680,895 $810,837 (Class B)
$36,277 $54,042 (Class C)*
Growth and Income Fund $487,914 $645,966 (Class A)
$626,147 $1,126,326 (Class B)
$52,226 $115,169 (Class C)**
International Equity $197,567 $132,001 (Class A)
Fund $347,996 $255,391 (Class B)
$8,625 $10,161 (Class C)*
Capital Growth Fund $370,087 $390,354 (Class A)
$426,954 $496,089 (Class B)
$9,279 $10,563 (Class C)*
Equity Income Fund** $11,355 $46,136 (Class A)
$12,154 $149,076 (Class B)
$2,076 $20,584 (Class C)
Bullseye Fund*** N/A $14,605 (Class A)
N/A $45,443 (Class B)
N/A $17,474 (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 1, 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, expenses relating to
each Fund's 12b-1 plans were
as follows: [TO BE UPDATED]
GROWTH FUND
(Class A shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
(Class B shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
(Class C shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
BALANCED FUND
(Class A shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
(Class B shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other $
Related Costs $
TOTAL $
(Class C shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
GROWTH AND INCOME FUND
(Class A shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
(Class B shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
(Class C shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
INTERNATIONAL EQUITY FUND
(Class A shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
(Class B shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
(Class C shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
CAPITAL GROWTH FUND
(Class A shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
(Class B shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
(Class C shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
EQUITY INCOME FUND
(Class A shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
(Class B shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
(Class C shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
BULLSEYE FUND
(Class A shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
(Class B shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
(Class C shares)
Compensation to Investment Dealers $
Compensation to Distributor's Sales Personnel and Other
Related Costs $
TOTAL $
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"), a broker-dealer affiliate of the
Distributor: $____ relating to the Class A shares, $_____ relating to the
Class B shares and $____ relating to the Class C shares of the Growth Fund;
$____ relating to the Class A shares, $____ relating to the Class B shares
and $____ relating to the Class C shares of the Balanced Fund; $____ relating
to the Class A shares, $____ relating to the Class B shares and $____
relating to the Class C shares of the Growth and Income Fund; $____ relating
to the Class A shares, $____ relating to the Class B shares and $____
relating to the Class C shares of the International Equity Fund; $____
relating to the Class A shares, $____ relating to the Class B shares and
$____ relating to the Class C shares of the Capital Growth Fund; $____
relating to the Class A shares, $____ relating to the Class B shares and
$____ relating to the Class C shares of the Equity Income Fund; and $____
relating to the Class A shares, $____ relating to the Class B shares and
$____ relating to the Class C shares of the Bullseye Fund. New England
Securities paid substantially all of the fees it received from the
Distributor (a) in commissions to its sales personnel and (b) to defray
sales-related overhead costs.
- --------------------------------------------------------------------------------
OWNERSHIP OF FUND SHARES
- --------------------------------------------------------------------------------
As of February 1, 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. In addition, each person that
has direct or indirect beneficial ownership of more than 25% of the outstanding
shares of the indicated classes of the Funds set forth below may be deemed to
control that Fund as defined in the 1940 Act.
OWNERSHIP
FUND SHAREHOLDER AND ADDRESS PERCENTAGE
---- ----------------------- ----------
CAPITAL GROWTH FUND
Class Y shares New England Life Insurance Company 19.37%
C/O Mary Beth Klein
Insurance Accounting, 6th Floor
501 Boylston Street
Boston, MA 02116-3706
Metropolitan Life Insurance 78.38%
C/O Dianne Lenny
501 Boylston Street, 6th Floor
Boston, MA 02116-3706
GROWTH AND INCOME FUND
Class C Shares MLPF&S For the Sole Benefit of It's 11.33%
Customers
ATTN: Fund Administration ML#97UA2
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Forest County Potawatomi - Children 16.59%
P.O. Box 340
Crandon, WI 54520-0340
GROWTH AND INCOME FUND
Class Y shares Metropolitan Life Insurance Company 10.92%
C/O MetLfie FBC/SFM
ATTN: Jay Langan
4100 W Boy Scout Blvd
Tampa, FL 33607-5793
Chase Manhattan Bank 50.81%
Directed Trustee for MetLife Defined
Contribution Group
770 Broadway - 10th Floor
New York, NY 10003-9522
Metropolitan Life Insurance 32.66%
GADC Dianne Lunny
501-6 Boylston Street
Boston, MA 02116-3706
INTERNATIONAL EQUITY FUND
Class Y shares Metropolitan Life Insurance Company 39.45%
C/O GADC-Gerald Hart Agency
Operations NELICO
501 Boylston Street, 10th Floor
Boston, MA 02116-3706
Metropolitan Life Insurance Company 8.61%
C/O MetLife FBC/SFM
ATTN: Jay Langan
4100 Boy Scout Blvd.
Tampa, FL 33607-5793
Chase Manhattan Bank Directed 48.95%
Trustee for MetLife Defined
Contribution Group
770 Broadway, 10th Floor
New York, NY 10003-9522
EQUITY INCOME FUND
Class C shares State Street Bank & Trust Company 8.02%
Cust for the IRA of William D.
McCarthy
410 Bounty Way #221
Avon Lake, OH 44012-2480
Dorothy N. & Ronald P. Frudden & 7.41%
Susan T. Gilles
Trustees
Frudden Exempt Tax Deferral Trust
202 Villa Drive
King City, CA 93930-3014
Wexford Clearing Services Corp FBO 11.56%
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 5.81%
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 CAN Trust Corp 14.08%
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 7.33%
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 81.99%
Company
Separate Investment Accounting
ATTN Brenda Harmon
501 Boylston Street, 6th Floor
Boston, MA 02116-3706
Metropolitan Life Insurance Company 9.75%
C/O GADC-Gerald Hart Agency
Operations NELICO
501 Boylston Street, 10th Floor
Boston, MA 02116-3706
Chase Manhattan Bank 7.61%
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 6.54%
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 29.57%
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 100%
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 6.23%
Customers
ATTN Fund Administration ML # 97UR8
4800 Deer Lake Drive East, 2nd floor
Jacksonville, FL 32246-6484
State Street Bank & Trust Company 9.00%
Cust for IRA of Norma J. Plonkey
38101 Afton Drive
Sterling Heights, MI 48310-3305
NFSC FEBO # CL5-424757 5.06%
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
Maximum Offering Price
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
Redemption at End of Period
Aggregate Average Annual
Total Return Total Return
------------------------ -------------------
Since Since
Class C shares: As a % of 9/1/98*** 9/1/98***
- ------------------------- --------- ---------
Net Asset Value
Redemption at End of Period
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
Maximum Offering Price
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
Redemption at End of Period
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
Redemption at End of Period
Aggregate Average Annual
Total Return Total Return
------------------------ -------------------
1 5 Since Since
Class Y shares: As a % of Year Years 3/8/94*** 5 Years 3/8/94***
- --------------- --------- ---------- --------- ------- ---------
Net Asset Value 13.7
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
Maximum Offering Price
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
Redemption at End of Period
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
Redemption at End of Period
Aggregate Average Annual
Total Return Total Return
------------------------ -------------------
Since Since
Class Y shares: As a % of 1 Year 11/18/98*** 11/18/98***
- --------------- --------- ------ ----------- -----------
Net Asset Value
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
Maximum Offering Price
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
Redemption at End of Period
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
Redemption at End of Period
Aggregate Average Annual
Total Return Total Return
------------------------ -------------------
Since Since
Class Y shares: As a % of 1 Year 5 Years 9/9/93*** 5 Years 9/13/93***
- -------------------------- ------ ------- ----------- ------- ----------
Net Asset Value
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
Maximum Offering Price
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
Redemption at End of Period
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
Redemption at End of Period
Aggregate Average Annual
Total Return Total Return
------------------------ -------------------
Since Since
Class Y shares: As a % of 1 Year 5 Years inception 5 Years inception
- -------------------------- ------ ------- ----------- ------- ----------
Net Asset Value
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
Maximum Offering Price
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
Redemption at End of Period
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
Redemption at End of Period
Aggregate Average Annual
Total Return Total Return
------------------------ -------------------
Since Since
Class Y shares: As a % of 1 Year inception inception
- -------------------------- ------ --------- ---------
Net Asset Value
BULLSEYE FUND
Aggregate Average Annual
Total Return Total Return
------------------------ -------------------
Since Since
Class A shares: As a % of 3/31/98*** 3/31/98***
- -------------------------- ---------- ----------
Net Asset Value
Maximum Offering Price
Aggregate Average Annual
Total Return Total Return
------------------------ -------------------
Since Since
Class B shares: As a % of 3/31/98*** 3/31/98***
- -------------------------- ---------- ----------
Net Asset Value
Redemption at End of Period
Aggregate Average Annual
Total Return Total Return
------------------------ -------------------
Since Since
Class C shares: As a % of 3/31/98*** 3/31/98***
- -------------------------- ---------- ----------
Net Asset Value
Redemption at End of Period
* 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 this original
cost.
<PAGE>
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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 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.
TABLE OF CONTENTS
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 75
International Equity Funds
<PAGE>
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INVESTMENT RESTRICTIONS
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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 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 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 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 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);
(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 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 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 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. 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 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 SEC is currently of the view that repurchase agreements
maturing in more than seven days are subject to restriction (17) above.
<PAGE>
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FUND CHARGES AND EXPENSES
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MANAGEMENT FEES
Pursuant to separate advisory agreements, each dated August 30, 1996
and amended May 1, 1998 for the Star Advisers and Star Worldwide 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, reduced by the amount of any subsidiary fees paid by
the Fund to its subadvisers pursuant to any subadvisory agreement, and 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, reduced by the amount
of any subadvisory 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"). The subadvisory agreement with Janus Capital is dated August 30,
1996. The subadvisory agreements with Loomis Sayles and Harris 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 Fund pays Harris, for providing subadvisory
services to a segment of the Star Advisers 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 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, 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 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 voluntarily
agreed to waive its entire subadvisory fee from July 25, 1997 to August 31,
1997. This waiver by Harris 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, which
manages two of the four segments, LOOMIS SAYLES, and Montgomery Asset
Management, L.L.C. ("Montgomery"), each of which manage one of the four
segments. The subadvisory agreement with Harris is dated August 30, 1996 and
amended May 1, 1998, and the subadvisory agreement with LOOMIS Sayles is dated
April 14, 2000. 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 and LOOMIS SAYLES a subadvisory fee for managing its segment or
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 served as subadviser to the segment of the Star
Worldwide Fund managed by Loomis Sayles, pursuant to a subadvisory agreement
providing for a subadvisory fee to be paid by Nvest Management to Janus 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, each of which
manage one of the four segments. The subadvisory agreements with Loomis Sayles
and Harris are each dated December 31, 1996 and amended May 1, 1998. The
subadvisory agreement with Montgomery is dated July 31, 1997. 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 a subadvisory fee at
the annual rate of 0.70% of the average daily net assets of the segment of the
Fund that Harris manages.
Pursuant to separate subadvisory agreements each dated April 19, 2000,
Nvest Management has delegated responsibility for the investment and
reinvestment of the assets of the Star Value Fund's portfolio to four different
subadvisers. The subadvisers of Star Value Fund are Loomis Sayles, Harris,
Vaughan, Nelson, Scarborogough & McCullough, L.P. ("Vaughan Nelson") and
Westpeak Investment Advisors L.P. ("Westpeak"), each of which manages one of the
four segments. The Fund pays to Loomis Sayles a sub-advisory fee equal to the
annual rate of 0.535% of the first $200 million of a Fund segment's average
daily net assets, 0.350% of the next $300 million of a Fund segment's average
daily net assets and 0.300% of a Fund segment's average daily net assets in
excess of $500 million. The Fund pays to Vaughan Nelson a sub-advisory fee equal
to the annual rate of 0.500% of the first $25 million of a Fund segment's
average daily net assets, 0.400% of the next $175 million of a Fund segment's
average daily net assets, 0.325% of the next $300 million of a Fund segment's
average daily net assets and 0.275% of a Fund segment's average daily net assets
in excess of $500 million. The Fund pays to Harris Associates a sub-advisory fee
equal to the annual rate of 0.500% of the first $100 million of a Fund segment's
average daily net assets and 0.475% of a Fund segment's average daily net assets
in excess of $100 million. The Fund pays to Westpeak a sub-advisory fee equal to
the annual rate of 0.50% of the first $25 million of a Fund segment's average
daily net assets, 0.40% of the next $75 million of a Fund segment's average
daily net assets, 0.35% of the next $100 million of a Fund segment's average
daily net assets and 0.30% of a Fund segment's average daily net 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 sub-advisory 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 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
$____, respectively.
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
$_____, 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 $____,
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 $____,
RESPECTIVELY. THE STAR VALUE FUND ASSUMED A MULTI-MANAGER STRUCTURE ON FEBRUARY
28, 2000. THE FUND COMMENCED OPERATIONS IN 1970.
FOR THE STAR ADVISERS FUND, THE FUND PAID KOBRICK $____ IN SUBADVISORY
FEES FOR THE PERIOD AUGUST 23 THROUGH DECEMBER 31, 1999. NVEST MANAGEMENT PAID
$1,263,834, $1,313,190 AND $____ 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 AUGUST 20, 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 $____ IN
SUBADVISORY FEES TO JANUS FOR THE FISCAL YEARS ENDING DECEMBER 31, 1997, 1998
AND 1999, RESPECTIVELY. THE FUND PAID LOOMIS SAYLES $839,505 AND $____ 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 $882,519 AND $____ in subadvisory fees for the period May
1 THROUGH December 31, 1998 and for the fiscal year ended December 31, 1999,
respectively. NVEST Management paid Harris $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 $____; $321,893, $428,211 and $____; and $353,540, $278,706 and $____;
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 August 20, 1999 for
Founders). NVEST MANAGEMENT paid $611,766 and $252,350 in subadvisory fees to
Harris for the fiscal YEAR ending December 31, 1997 and for the period January
1 to April 30, 1998, respectively. The Fund paid Harris $445,724 and $____;
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 $____; and $100,286, $185,912 AND $____ in subadvisory fees to
Montgomery (or its predecessor) and RS Investment Management, 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
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 $____,
and $114,053 and $____ to Harris and Loomis Sayles, respectively, for the period
May 1 to December 31, 1998 AND THE FISCAL YEAR ENDED DECEMBER 31, 1999.
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 $____, respectively, were allocated to brokers providing
research services, and $406,641, $164,649 AND $____, respectively, in
commissions were paid on these transactions. For the fiscal years ended December
31, 1997, 1998 and 1999, the Fund paid total brokerage commissions of
$2,844,608, $2,180,020 AND $_____, respectively. For the fiscal year ended
December 31, 1999, the Fund paid $____ in brokerage commissions (___% of
the Fund's total 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 effected ____% 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 $____ respectively, were allocated to brokers providing
research services, and $79,513, $84,070 AND $____, 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 $____, respectively. For the fiscal year ended
December 31, 1999, the Fund paid $____ in brokerage commissions (____% of
the Fund's total brokerage commissions) to HASLP. For the fiscal year ended
December 31, 1999, the Fund effected ____% 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 $____ were allocated to brokers providing research services,
and $34,323, $48,385 AND $___ 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 $____. For the fiscal year ended December 31, 1999, the
Fund paid $____ in brokerage commissions (___% of the Fund's total brokerage
commissions) to HASLP. For the fiscal year ended December 31, 1999, the Fund
effected ____% 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 $___, RESPECTIVELY, WERE ALLOCATED TO
BROKERS PROVIDING RESEARCH SERVICES, AND $29,690, $119,738, AND $____,
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 $____, 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 (Class A)
$4,220,821 $4,826,734 (Class B)
$875,440 $958,464 (Class C)
Star Worldwide Fund $261,744 $285,578 (Class A)
$1,037,171 $1,235,217 (Class B)
$241,823 $249,303 (Class C)
Star Small Cap Fund* $79,699 $132,793 (Class A)
$304,812 $569,200 (Class B)
$86,522 $142,047 (Class C)
Star Value Fund $819,873 $840,948 (Class A)
$661,091 $840,370 (Class B)
$52,413 $70,069 (Class C)
* The Star Small Cap Fund commenced operations on December 31, 1996.
During the fiscal year ended December 31, 1999, expenses relating to each Fund's
12b-1 plans were as follows:
STAR ADVISERS FUND
(Class A shares)
Compensation to Investment DEALERS $
COMPENSATION to Distributor's Sales Personnel and Other Related COSTS $
-
TOTAL $
(Class B shares)
Compensation to Investment DEALERS $
COMPENSATION to Distributor's Sales Personnel and Other Related COSTS $
-
TOTAL $
(Class C shares)
Compensation to Investment DEALERS $
COMPENSATION to Distributor's Sales Personnel and Other Related COSTS $
-
TOTAL $
STAR WORLDWIDE FUND
(Class A shares)
Compensation to Investment DEALERS $
COMPENSATION to Distributor's Sales Personnel and Other Related COSTS $
-
TOTAL $
(Class B shares)
Compensation to Investment DEALERS $
COMPENSATION to Distributor's Sales Personnel and Other Related COSTS $
-
TOTAL $
(Class C shares)
Compensation to Investment DEALERS $
COMPENSATION to Distributor's Sales Personnel and Other Related COSTS $
-
TOTAL $
STAR SMALL CAP FUND
(CLASS A SHARES)
Compensation to Investment DEALERS $
COMPENSATION to Distributor's Sales Personnel and Other Related COSTS $
-
TOTAL $
(CLASS B SHARES)
Compensation to Investment DEALERS $
COMPENSATION to Distributor's Sales Personnel and Other Related COSTS $
-
TOTAL $
(CLASS C SHARES)
Compensation to Investment DEALERS $
COMPENSATION to Distributor's Sales Personnel and Other Related COSTS $
-
TOTAL $
STAR VALUE FUND
(CLASS A SHARES)
COMPENSATION TO INVESTMENT DEALERS $
COMPENSATION TO DISTRIBUTOR'S SALES PERSONNEL AND OTHER RELATED COSTS $
-
TOTAL $
(CLASS B SHARES)
COMPENSATION TO INVESTMENT DEALERS $
COMPENSATION TO DISTRIBUTOR'S SALES PERSONNEL AND OTHER RELATED COSTS $
-
TOTAL $
(CLASS C SHARES)
COMPENSATION TO INVESTMENT DEALERS $
COMPENSATION TO DISTRIBUTOR'S SALES PERSONNEL AND OTHER RELATED COSTS $
-
TOTAL $
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"), a broker-dealer affiliate of the
Distributor: $____ relating to the Class A shares, $____ relating to the Class
B shares and $____ relating to the Class C shares of the Star Advisers Fund;
$____ relating to the Class A shares, $____ relating to the Class B shares
and $____ relating to the Class C shares of the Star Worldwide Fund; and
$____ relating to the Class A shares, $____ relating to the Class B shares
and $____ relating to the Class C shares of the Star Small Cap Fund and $____
RELATING TO THE CLASS A SHARES, $____ RELATING TO THE CLASS B SHARES AND $____
RELATING TO THE CLASS C SHARES OF THE STAR VALUE FUND. New England Securities
paid substantially all of the fees it received from the Distributor (a) in
commissions to its sales personnel and (b) to defray sales-related overhead
costs.
- --------------------------------------------------------------------------------
OWNERSHIP OF FUND SHARES
- --------------------------------------------------------------------------------
As of February 1, 2000, to the Trusts' knowledge, the following persons
owned of record or beneficially 5% or more of the outstanding shares of the
indicated classes set forth below. In addition, each person that has direct or
indirect beneficial ownership of more than 25% of the outstanding shares of the
indicated classes of the Funds set forth below may be deemed to control that
Fund as defined in the 1940 Act.
FUND SHAREHOLDER AND ADDRESS OWNERSHIP PERCENTAGE
- ---- ----------------------- --------------------
STAR ADVISERS FUND
Class Y shares
New England Mutual Life Insurance Co. 56.61%
Separate Investment Accounting
Attn Brenda Harmon
501 Boylston Street - 6th Floor
Boston, MA 02116-3706
New England Life Insurance Co. 14.34%
Insurance Accounting 6th Floor
501 Boylston Street
Boston, MA 02116-3706
New England Life Insurance Co. 8.36%
C/o Mary Beth Klein
Insurance Accounting 6th Fl.
501 Boylston St.
Boston, MA 02116-3706
Metropolitan Life Insurance Co. 17.85%
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 Benefit 6.67%
of it's Customers
Attn Fund Administration ML #97MR9
4800 Deer Lake Dr. East - 2nd Fl.
Jacksonville, FL 32246-6484
STAR SMALL CAP
Class C shares MLPF &S For the Sole Benefit 11.57%
Of it's Customers
Attn Fund Administration ML#97UA9
4800 Deer Lake Dr. East -2nd Fl.
Jacksonville, FL 32246-6484
STAR VALUE FUND
Class Y shares New England Life Insurance Co. 80.02%
Separate Investment Accounting
Attn Brenda Harmon
501 Boylston Street - 6th Fl.
Boston, MA 02116-3706
New England Life Insurance Co. 17.93%
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
<TABLE>
<CAPTION>
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**
- -------------------------- ------ ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Asset VALUE
MAXIMUM Offering PRICE
<CAPTION>
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**
- ------------------------- ------ ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Asset VALUE
REDEMPTION at End of PERIOD
<CAPTION>
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**
- ------------------------- ------ ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value
Aggregate Average Annual
<CAPTION>
Total Return Total Return
------------------------------------------- -----------------------------
Since Since
Class Y shares: As a % of 1 Year 5 Years 11/15/94** 5 Years 11/15/94**
- ------------------------- ------ ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset VALUE
<CAPTION>
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**
- -------------------------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset VALUE
MAXIMUM Offering Price
Aggregate Average Annual
<CAPTION>
Total Return Total Return
------------------------------------------- -----------------------------
Since Since
Class B shares: As a % of 1 Year 12/29/95** 12/29/95**
- -------------------------- ------ ---------- ----------
<S> <C> <C> <C>
Net Asset VALUE
REDEMPTION at End of Period
<CAPTION>
Aggregate Annualized
Total Return Total Return
------------------------------------------- ----------------------------
Since Since
Class C shares: As a % of 1 Year 12/29/95** 12/29/95**
- ------------------------- ------ ---------- ----------
<S> <C> <C> <C>
Net Asset VALUE
<CAPTION>
Aggregate Average Annual
Total Return Total Return
------------------------------------------- ----------------------------
Since Since
Class Y shares: As a % of 1 Year inception** inception**
- ------------------------- ------ ----------- -----------
<S> <C> <C> <C>
Net Asset Value N\A N\A N\A
<CAPTION>
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**
- ------------------------- ------ ---------- ----------
<S> <C> <C> <C>
Net Asset VALUE
Maximum Offering Price
<CAPTION>
Aggregate Average Annual
Total Return Total Return
------------------------------------------- ----------------------------
Since Since
Class B shares: As a % of 1 Year 5 Years 12/31/96** 5 Years 12/31/96**
- ------------------------- ------ ------- ---------- ------- ----------
<S> <C> <C> <C>
Net Asset Value
Redemption at End of Period
<CAPTION>
Aggregate Annualized
Total Return Total Return
------------------------------------------- ----------------------------
Since Since
Class C shares: As a % of 1 Year 12/31/96** 12/31/96**
- ------------------------- ------ ---------- ----------
<S> <C> <C> <C>
Net Asset VALUE
REDEMPTION at End of Period
<CAPTION>
Aggregate Average Annual
Total Return Total Return
------------------------------------------- ----------------------------
Since Since
Class Y shares: As a % of 1 Year inception** inception**
- ------------------------- ------ ----------- -----------
<S> <C> <C> <C>
Net Asset Value N/A N/A N/A
STAR VALUE 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
Maximum Offering Price
<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
Redemption at End of Period
<CAPTION>
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***
- ------------------------- ------ ------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value
Redemption at End of Period
<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
* 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.
</TABLE>
The foregoing data represent past performance only and are not a
prediction as to the future returns of any Fund. The investment return and
principal value of an investment in any Fund will fluctuate so that the
investor's shares, when redeemed, may be worth more or less than this original
cost.
<PAGE>
[logo] NvestFunds(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:
SERIES OF NVEST FUNDS TRUST I
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>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
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.
<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 When-issued Securities Mortgage-backed Securities
Mortgage-backed Securities Asset-backed Securities Asset-backed Securities
Asset-backed Securities Collateralized Mortgage Obligations Collateralized Mortgage Obligations
Collateralized Mortgage Obligations Repurchase Agreements When-issued Securities
Stripped Securities Foreign Currency Hedging Transactions Convertible Securities
Repurchase Agreements Investments in Closed-end Securities of Emerging Markets
When-issued Securities Investment Companies Foreign Currency Hedging
Convertible Securities Futures, Options and Swap Contracts Transactions
Foreign Currency Hedging Short Sales Illiquid Securities
Transactions Illiquid Securities (including Rule 144A Securities)
Illiquid Securities (including Rule 144A Securities) Loans of Portfolio Securities
(including Rule 144A Securities) Loans of Portfolio Securities Short-term Investments
Loans of Portfolio Securities Borrowing/Reverse Repurchase Money Market Instruments
Short-term Investments Agreements Foreign Government Bonds
Money Market Instruments Short-term Investments
Structured Notes Money Market Instruments
Step Coupon Bonds Step Coupon Bonds
MUNICIPAL INCOME FUND SHORT TERM CORPORATE INCOME FUND LIMITED TERM U.S. GOVERNMENT FUND
- --------------------- -------------------------------- ---------------------------------
Repurchase Agreements Convertible Bonds Corporate Fixed Income Securities
Stripped Securities Stripped Securities Mortgage-backed Securities
When-issued Securities Repurchase Agreements Collateralized Mortgage Obligations
Futures and Options When-issued Securities Stripped Securities
Short-term Investments Securities in Emerging Markets Repurchase Agreements
Money Market Instruments Foreign Currency Hedging When-issued Securities
Transactions/Forward Commitments Foreign Securities
Futures and Options (Global Markets, Supranational
Illiquid Securities Agencies)
(including Rule 144A Securities) Foreign Currency Hedging Transactions
Short-term Investments Futures and Options
Money Market Instruments Illiquid Securities
Zero Coupon Securities (including Rule 144A Securities)
Foreign Securities Loans of Portfolio Securities
(Supranational Agencies) Short-term Investments
Structured Notes Money Market Instruments
Non-Convertible Preferred Stocks, Foreign Government Bonds
Notes or Bonds
Step Coupon 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
(including Rule 144A Securities) (including Rule 144A Securities)
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 U.S. Equity Securities Various Equity Securities
U.S. Government Securities U.S. Government Securities Corporate Fixed Income Securities
Repurchase Agreements U.S. Corporate Fixed Income Securities (investment grade)
When-issued Securities (investment grade) U.S. Government Securities
Foreign Securities (Global Markets, Lower-quality Fixed Income Securities Repurchase Agreements
Supranational agencies) (Foreign and U.S.) Zero Coupon Securities
Securities of Emerging Markets Repurchase Agreements Convertible Securities
Foreign Currency Hedging Zero Coupon Securities Futures, Options and Swap
Transactions When-issued Securities Contracts
Futures, Options and Swap Foreign Currency Hedging Short Sales Against the Box
Contracts Transactions Illiquid Securities
Short Sales Against the Box Foreign Corporate Bonds (including Rule 144A Securities)
Illiquid Securities Foreign Convertible Bonds Borrowing/Reverse Repurchase
(including Rule 144A Securities) Foreign Government Bonds Agreements
Loans of Portfolio Securities Supranational Agencies Short-term Investments
Borrowing/Reverse Repurchase Warrants Money Market Instruments
Agreements Investments in Other Investment
Short-term Investments Companies
Money Market Instruments Futures, Options and Swap
Foreign Government Bonds Contracts
Short Sales Against the Box
Illiquid Securities
(including Rule 144A Securities)
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
Corporate Fixed Income Securities Corporate Fixed Income Securities Non-Convertible Preferred Stock
(investment grade) (investment grade) Lower Quality Corporate Fixed Income
U.S. Government Securities U.S. Government Securities Securities
Zero Coupon Securities Repurchase Agreements Repurchase Agreements
Repurchase Agreements Zero Coupon Securities Investments in Other Investment
Convertible Securities Convertible Securities Companies
Foreign Securities (Global Markets, Foreign Securities (Global markets, Foreign Currency Hedging
Supranational agencies, Depository Supranational agencies, Transactions
Receipts) Depository receipts) Futures, Options and Swap Contracts
Foreign Currency Hedging Foreign Currency Hedging Short Sales Against the Box
Transactions Transactions Illiquid Securities
Investments in Other Investment Investments in Other Investment (including Rule 144A Securities)
Companies Companies Loans of Portfolio Securities
Futures, Options and Swap Contracts Futures, Options and Swap Borrowing/Reverse Repurchase
Short Sales Against the Box Contracts Agreements
Illiquid Securities Short Sales Against the Box Short-term Investments
(including Rule 144A Securities) Illiquid Securities Money Market Instruments
Loans of Portfolio Securities (including Rule 144A Securities)
Borrowing/Reverse Repurchase Loans of Portfolio Securities
Agreements Borrowing/Reverse Repurchase
Short-term Investments Agreements
Money Market Instruments Short-term Investments
Foreign Government Bonds Money Market Instruments
Foreign Government Bonds
<PAGE>
EQUITY INCOME FUND
- ------------------
Various Equity Securities
Corporate Fixed Income Securities (investment grade)
Lower Quality Corporate Fixed
Income Securities
U.S. Government Securities
Repurchase Agreements
Zero Coupon Securities
Convertible Bonds
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 (including Rule 144A Securities)
Loans of Portfolio Securities
Borrowing/Reverse Repurchase
Agreements
Short-term Investments
Money Market Instruments
Foreign Government 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
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; Forward Commitments
Step Coupon and Strips When-issued; Forward Commitments Foreign Currency Hedging
When-issued; Forward Commitments Foreign Currency Hedging Transactions
Foreign Currency Hedging Transactions Privatizations
Transactions Privatizations Investments in Other Investment
Privatizations Investments in Other Investment Companies
Investments in Other Investment Companies Futures, Options and Swap
Companies Futures, Options and Swap Contracts
Futures, Options and Swap Contracts Contracts Short Sales
Short Sales Against the Box Short Sales Against the Box Illiquid Securities
Illiquid Securities Illiquid Securities (including Rule 144A Securities
(including Rule 144A Securities (including Rule 144A Securities and Section 4(2) Commercial Paper)
and Section 4(2) Commercial and Section 4(2) Commercial Paper) Borrowing/Reverse Repurchase
Paper) Borrowing/Reverse Repurchase Agreements
Borrowing/Reverse Repurchase Agreements Short-term Investments
Agreements Short-term Investments Money Market Instruments
Short-term Investments Money Market Instruments Mortgage- and Asset-backed Securities
Money Market Instruments Loans of Portfolio Securities Loans of Portfolio Securities
Loans of Portfolio Securities Mortgage- and Asset-backed Securities Foreign Government Bonds
Mortgage- and Asset backed Securities Foreign Government Bonds Collateralized Mortgage Obligations
Foreign Government Bonds Step Coupon Bonds Step Coupon Bonds
Collateralized Mortgage Obligations Pay-in-kind Securities Pay-in-kind Securities
Foreign Securities (Global Markets, Foreign Currency Speculation Foreign Currency Speculation Transactions
Supranational Agencies) Transactions Zero Coupon Securities
Securities of Emerging Markets Collateralized Mortgage Obligations Stripped Securities
Foreign Depository Receipts Foreign Securities (Supranational Convertible Bonds
Foreign Currency Speculation Agencies, Emerging Markets) Foreign Securities (Global Markets,
Transactions Emerging Markets, Depository Receipts,
Supranational Agencies)
STAR VALUE FUND
- ---------------
Various Equity Securities
Corporate Fixed Income Securities (investment grade)
U.S. Government Securities
Repurchase Agreements
Zero Coupon Securities
When-issued Securities
Convertible Securities
Foreign Currency Hedging
Transactions
Investments in Other Investment
Companies
Futures, Options and Swap Contracts
Short Sales Against the Box
Illiquid Securities (including Rule 144A Securities)
Loans of Portfolio Securities
Borrowing/Reverse Repurchase
Agreements
Short-term Investments
Money Market Instruments
Foreign Government Bonds
</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 - Investments in companies with relatively small
capitalization 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'
manager. 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.
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 subadviser's
analysis of the issuer's creditworthiness and financial prospects, and of the
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 the Prospectus.
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 $40,000 filing a joint return would have to earn
a taxable yield of ___% to equal a tax-free yield of ___%. This example and the
following table do not take into account the effect of state or local income
taxes, if any, or federal income taxes on social security benefits which may
arise as a result of receiving tax-exempt income, or the federal alternative
minimum tax that may be payable to the extent that Fund dividends are derived
from interest on "private activity" bonds (see the section entitled "Income
Dividends, Capital Gains Distributions and Tax Status"). Also, a portion of the
Fund's distributions may consist of ordinary income or short-term or long-term
capital gains and will be taxable to you as such.
<TABLE>
<CAPTION>
TAXABLE EQUIVALENT YIELDS - MUNICIPAL INCOME FUND
TAXABLE INCOME*
FEDERAL IF TAX EXEMPT YIELD IS
SINGLE RETURN ($) JOINT RETURN ($) MARGINAL 4.0% 5.0% 6.0% 7.0% 8.0%
TAX RATE** THEN THE EQUIVALENT TAXABLE YIELD WOULD BE:
- ---------------------- ------------------- ------------- ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
* 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 Standard and Poor's 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.
TAX FREE INVESTING
<TABLE>
<CAPTION>
MASSACHUSETTS FUND
2000
COMBINED MA
TAXABLE INCOME* AND IF TAX EXEMPT YIELD IS
- ------------------------------------------------- FEDERAL ----------------------------------------------------
SINGLE JOINT TAX 4.00% 5.00% 6.00% 7.00% 8.00%
RETURN($) RETURN ($) BRACKET** THEN THE EQUIVALENT TAXABLE YIELD WOULD BE:
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
CALIFORNIA FUND
2000 COMBINED
TAXABLE INCOME* FEDERAL AND IF TAX EXEMPT YIELD IS
- ------------------------------------------------ CALIFORNIA ----------------------------------------------------
SINGLE JOINT MARGINAL 4.00% 5.00% 6.00% 7.00% 8.00%
RETURN ($) RETURN ($) TAX RATE** THEN THE EQUIVALENT TAXABLE YIELD WOULD BE:
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
* This amount represents taxable income as defined in the Internal Revenue 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, where 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
legislature 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 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 Internal Revenue Code of 1986, as amended (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 or Delayed Delivery Securities; Forward Commitments - Certain Funds
may enter into agreements with banks or broker-dealers for the purchase or sale
of securities at an agreed-upon price on a specified future date. Such
agreements might be entered into, for example, when a Fund anticipates a decline
in interest rates and is able to obtain a more advantageous yield by committing
currently to purchase securities to be issued later. When a Fund purchases
securities in this manner (i.e., on a when-issued or delayed-delivery basis), it
is required to segregate with the Trust's custodian cash or liquid securities
eligible for purchase by a Fund in an amount equal to or greater than, on a
daily basis, the amount of the Fund's when-issued or delayed-delivery
commitments. A Fund will make commitments to purchase on a when-issued or
delayed-delivery basis only securities meeting the Fund's investment criteria.
The Fund may take delivery of these securities or, if it is deemed advisable as
a matter of investment strategy, the Fund may sell these securities before the
settlement date. When the time comes to pay for when-issued or delayed-delivery
securities, a Fund will meet its obligations from the then available cash flow
or the sale of securities, or from the sale of the when-issued or
delayed-delivery securities themselves (which may have a value greater or less
than the Fund's payment obligation).
Certain Funds may also enter into a contract with a third party that
provides for the sale of securities held by the Fund at a set price, with a
contingent right for the Fund to receive additional proceeds from the purchaser
upon the occurrence of designated future events, such as a tender offer for the
securities of the subject company by the purchaser, and satisfaction of any
applicable conditions. Under such an arrangement, the amount of contingent
proceeds that the Fund will receive from the purchaser, if any, will generally
not be determinable at the time such securities are sold. The Fund's rights
under such an arrangement will not be secured and the Fund may not receive the
contingent payment if the purchaser does not have the resources to make the
payment. The Fund's rights under such an arrangement also generally will be
illiquid and subject to the limitations on ownership of illiquid securities.
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.
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 Securities and Exchange Commission (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 and Short Sales "Against the Box" - A short sale is a transaction in
which a party borrows a security and then sells the borrowed security to another
party. Certain Funds may engage in short sales if it owns (or has the right to
acquire without further consideration) the security it has sold, a practice
known as selling short "against the box." The Star Small Cap Fund, however, may
engage in short sales that are not against the box (i.e. does not own or have
the right to acquire the security sold). A Fund may engage in short sales of
securities in order to profit from an anticipated decline in the value of a
security or may also engage in short sales to attempt to limit its exposure to a
decline in the value of its portfolio securities. In a short sale, the Fund does
not deliver from its portfolio the securities sold and does not receive
immediately the proceeds from the short sale. Instead, the Fund borrows the
securities sold short from a broker-dealer through whom the short sale is
executed, and the broker-dealer delivers such securities, on behalf of the Fund,
to the purchaser of such securities. The Fund is then obligated to replace the
security borrowed by delivering such security to the broker-dealer. Until the
security is replaced, the Fund is required to pay to the lender any accrued
interest or dividends paid on the security sold short and may also be required
to pay a premium to the broker-dealer. The broker-dealer is entitled to retain
the proceeds from the short sale until the Fund delivers to the broker-dealer
the securities sold short. 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
(a) the securities sold short, (b) securities convertible into or exchangeable
for such securities without the payment of additional consideration or (c) cash
or certain liquid assets. The 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. The 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, or, if such
securities are owned by the Fund, by delivering from its portfolio an equal
amount of the securities sold short.
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 there
can be no assurance that the Fund will be able to close out the position at any
particular time or at an acceptable price. 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. The Fund will also incur
transaction costs in connection with short sales. Certain provisions of the Code
limit tax advantages previously available to the Fund with respect to short
sales. Star Small Cap Fund and Star Worldwide Fund currently expect that no more
than 25% and 20% of their total assets, respectively, would be involved in short
sales.
Illiquid Securities (Rule 144 and Section 4(2) commercial paper) - Illiquid
securities are those which are not readily resalable, which may include
securities whose disposition is restricted by federal securities laws.
Rule 144A securities are privately offered securities that can be
resold only to certain qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933. Certain Funds may also purchase commercial
paper issued under Section 4(2) of the Securities Act of 1933. Investing in Rule
144A securities and Section 4(2) commercial paper could have the effect of
increasing the level of a Fund's illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities. Rule 144A securities and Section 4(2) commercial paper are treated
as illiquid, unless 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.
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MANAGEMENT OF THE TRUSTS
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The Funds are governed by a Board of Trustees, which is responsible for
generally overseeing the conduct of Fund business and for protecting the
interests of 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 (59); 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 (54); 452 Fifth Avenue, New York, New York 10018;
Member of the Audit and Transfer Agent and Shareholder Services Committee
for the Trusts; President and CEO, Cain Brothers & Company, Incorporated
(investment banking); Trustee, Universal Health Realty Income Trust (NYSE);
Norman Rockwell Museum; Sharon Health Corporation and National Committee for
Quality Healthcare (all not-for-profit organizations);
KENNETH J. COWAN -- Trustee (67); One Beach Drive, S.E. #2103, St. Petersburg,
Florida 33701; Member of the Contract Review and Governance Committee for
the Trusts; Retired; Director, A Young Woman's Residence; 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,
Genesis Cable (cable communications); 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 (57); Exchange Place, Boston, Massachusetts 02109;
Member of the Audit and Transfer Agent and Shareholder Services 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).
JOHN A. SHANE -- Trustee (66); 200 Unicorn Park Drive, Woburn, Massachusetts
01801; Member of the Audit and Transfer Agent and Shareholder Services
Committee for the Trusts; President, Palmer Service Corporation (venture
capital organization); General Partner, Palmer Partners L.P.; Director, Abt
Associates, Inc. (consulting firm); Director, Arch Communications Group,
Inc. (paging service); Director, Dowden Publishing Company, Inc. (publisher
of medical magazines); 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
(52); 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; Chairman of the Board and Director, Nvest Distribution
Corporation; Chairman of the Board and Director, BBAI; formerly, Director,
New England Financial.
PENDLETON P. WHITE -- Trustee (68); 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
operational issues relating to the transfer agent.
Officers
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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.
NEAL G. LITVACK - President (43); President and Chief Executive Officer, Nvest
Distribution Corporation; President and Chief Executive Officer, Nvest
Management; Executive Vice President of Retail Marketing, Nvest Companies.
THOMAS P. CUNNINGHAM - Treasurer (53); 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); Senior Vice President, General
Counsel, Secretary and Clerk, 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, Counsel,
The Boston Company Advisors, Inc.; formerly, Associate, Ropes & Gray (law
firm).
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 December 31, 1999 a
total of 27 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 Estimated Total
from from from Accrued as Part Annual Compensation
Nvest Funds Nvest Funds Nvest Funds of Fund Benefits from the
Trust I Trust II Trust III Expenses Upon Nvest Funds 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. $0 $0
Daniel M. Cain $0 $0
Kenneth J. Cowan $0 $0
Richard Darman $0 $0
Sandra O. Moose $0 $0
John A. Shane $0 $0
Pendleton P. White $0 $0
</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 each Fund on the normal payment date for such fees. As
a result of this method of calculating the deferred payments, each Fund, upon
making the deferred payments, will be in the same financial position as if the
fees had been paid on the normal payment dates.
At February 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 (except Growth Fund) also pays Nvest Management for certain legal and
accounting services provided to the Fund by Nvest Management.
Each Fund's advisory agreement and (except in the case of Growth Fund)
each Fund's subadvisory agreement between Nvest Management and the subadviser
that manages the Fund (or, in the case of Star Advisers Fund, Star Worldwide
Fund, Star Small Cap Fund and Star Value Fund, each subadvisory agreement
between Nvest Management and the subadviser that manages a segment or segments
of the Fund's portfolio) provides that it will continue in effect for two years
from its date of execution and thereafter from year to year if its continuance
is approved at least annually (i) by the Board of Trustees of the relevant Trust
or by vote of a majority of the outstanding voting securities of the relevant
Fund and (ii) by vote of a majority of the trustees who are not "interested
persons" of the relevant Trust, as that term is defined in the 1940 Act, cast in
person at a meeting called for the purpose of voting on such approval. Each Fund
has received an exemptive order from the Securities and Exchange Commission
which permits Nvest Management to amend or continue existing subadvisory
agreements 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. [In addition, each advisory agreement will
automatically terminate if the Trust or the Fund shall at any time be required
by Nvest Funds Distributor, L.P. to eliminate all reference to the words "_____"
or the letters "______" in the name of the relevant Trust or the relevant Fund,
unless the continuance of the agreement after such change of name is approved by
a majority of the outstanding voting securities of the relevant Fund and by a
majority of the trustees who are not interested persons of the relevant Trust or
the Fund's adviser or subadviser.]
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, the transfer and dividend disbursing
agent of the Funds. Nvest Companies owns the entire limited partnership interest
in each of Nvest Management and Nvest Funds Distributor, L.P. Nvest Services
Company has subcontracted certain of its obligations as the transfer and
dividend disbursing agent of the Funds to State Street Bank and Trust Company
(see "Custodial Arrangements".) Nvest Services Company, Inc. will also do
business as Nvest Services Company, Nvest Services Co. and Nvest Funds Service
Company.
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 mutual life insurance company. MetLife
owns approximately 46% (and in the aggregate, directly and indirectly,
approximately 47%) 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 fourteen principal subsidiary or
affiliated asset management firms of Nvest Companies, collectively, have more
than $___ 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, BBAI, 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, Incorporated,
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 in 1998 as the result of a reorganization of its successor,
Kobrick-Cendant Funds, Inc., an investment manager. Kobrick is a wholly owned
subsidiary of Nvest Companies engaged in the business of investment management.
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.
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") was formed
in 1993 and provides investment advisory services to both private and public
investment funds (formerly, Robertson, Stephens & Company Investment Management,
L.P.). 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 trustees of Nvest
Funds Trust I approved the continuation of the Fund's arrangement with RS
Investment Management following consummation of the transaction.
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, and 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.
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
where securities transactions are carried on at the same time on behalf of the
Fund and such other mutual funds and 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 segments of the portfolio of Star Advisers Fund. Although the overall
investment objectives of the Funds 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 Funds 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
Funds and for one or more of the other funds or other investment accounts. To
the extent that the Funds 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 Funds or the amount of securities that may be purchased or
sold by the Funds at one time may be adversely affected. In such cases, the
purchase and sale transactions are allocated among the Funds, 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 the
Trusts 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 and Capital Growth Fund
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. 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 Fund 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 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 the Trusts 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 the Trusts 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 the
Trusts 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 1, 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 __%,
__%, __% and __%, respectively. As of March 1, 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 __%, __%, __% and __%, respectively. As of
March 1, 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 __%, __%, __%, and __%, respectively. As of
March 1, 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 __%, __%, __% and __%, 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 these 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 also provides 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 segment of any Fund. Because each subadviser will be
managing its segment of the portfolio independently from the others, the same
security may be held in two different segments of a Fund or may be acquired for
one segment of the 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 for its or their segment of the Fund. Because
each subadviser directs the trading for its own segment of the 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 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 segment or will allocate the
segment's assets among the other segments of the 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 Distributor is
not obligated to sell a specific number of shares. The Distributor bears the
cost of making information about the Funds available through advertising and
other means and the cost of printing and mailing Prospectuses to persons other
than shareholders. Each Fund pays the cost of registering and qualifying its
shares under state and federal securities laws and the distribution of
Prospectuses to existing shareholders.
The Distributor 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 (currently 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.
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 1998 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 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 1998 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 (formerly Adjustable Rate
U.S. Government Fund); $1,919,349 for Bond Income Fund; $0 for Strategic Income
Fund; $1,700,600 for Municipal Income Fund and $0 for High Income Fund. The
Class B service fees for all Funds, and the Class C service fees for Limited
Term U.S. Government Fund, Strategic Income Fund, Bond Income Fund, and High
Income Fund are payable regardless of the amount of the Distributor's related
expenses.
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, an affiliate of the Distributor, for
the sale of the Funds' shares. The Distributor may at its expense pay an amount
not to exceed 0.50% of the amount invested to dealers who have selling
agreements with the Distributor. Class Y shares of the Funds may be offered by
registered representatives of New England Securities who are also employees of
New England Investment Associates, Inc. ("NEIA"), an indirect, wholly-owned
subsidiary of Nvest Companies. NEIA may receive compensation from 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 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>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
ALL FUNDS EXCEPT SHORT TERM CORPORATE INCOME FUND AND LIMITED TERM U.S. GOVERNMENT FUNDS
MAXIMUM MAXIMUM MAXIMUM MAXIMUM
SALES CHARGE REALLOWANCE OR FIRST YEAR FIRST YEAR
PAID BY INVESTORS COMMISSION SERVICE FEE COMPENSATION
(% OF OFFERING (% OF OFFERING (% OF NET (% OF OFFERING
INVESTMENT PRICE) PRICE) INVESTMENT) 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) 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%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
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 Internal Revenue Code with investments
of $1 million or more that have 100 or more eligible employees), the Distributor may pay a 0.50% commission for
investments in excess of $3 million and up to $10 million. Those Plans with investments of over $10 million are eligible
to purchase Class Y shares of the Funds (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>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
HIGH INCOME, STRATEGIC INCOME, BOND INCOME, MUNICIPAL INCOME AND GOVERNMENT SECURITIES FUNDS
(class B only for Municipal Income and Government Securities Funds)
- ------------------------------------------------------------------------------------------------------------------------
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
(% OF OFFERING (% OF OFFERING (% OF NET (% OF OFFERING
INVESTMENT PRICE) PRICE) INVESTMENT) 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% 1.40%
$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
(% OF OFFERING (% OF OFFERING (% OF NET (% OF OFFERING
INVESTMENT PRICE) PRICE) INVESTMENT) 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
(% OF OFFERING (% OF OFFERING (% OF NET (% OF OFFERING
INVESTMENT PRICE) PRICE) INVESTMENT) 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 Internal Revenue Code with investments
of $1 million or more that have 100 or more eligible employees), the Distributor may pay a 0.50% commission for
investments in excess of $3 million and up to $10 million. Those Plans with investments of over $10 million are eligible
to purchase Class Y shares of the funds, which are described in a separate prospectus.
(2) These commissions are not payable if the purchase represents the reinvestment of a redemption made during the previous 12
calendar months.
(3) Refers to any investments made by municipalities, financial institutions, trusts and affinity group members as described
earlier in the Prospectus under the section entitled "Ways to Reduce or Eliminate Sales Charges."
</TABLE>
The Class B and Class C service fees are payable regardless of the
amount of the Distributor's related expenses. The portion of the various fees
and expenses for Class B and Class C shares of the 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 Fund receives the net asset value next determined after an order
is received on sales of each class of shares. The sales charge is allocated
between the investment dealer and the Distributor. The Distributor receives the
Contingent Deferred Sales Charge (the "CDSC"). Proceeds from the CDSC on Class A
and 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 $______, respectively, of which
$9,669,150, $7,375,844 and $_____, 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
contingent deferred sales charges ("CDSCs") on the redemption of Class A, Class
B and Class C shares of Nvest Funds Trust I aggregating $2,391,360, $3,195,287
and $____, respectively, of which $2,286,280, $3,124,921 and $_____,
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 $____, respectively, of
which $1,286,296, $2,206,752 and $____, 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 $____, respectively, of which
$343,457, $497,662 and $_____, 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 $_____, respectively, of
which $236,902, $502,693 and $____, 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 $____, respectively, of which $1,953,
$49,553 and $____, 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. The Funds
pay an annual per-account fee to Nvest Services Company for these services in
the amount of $17.75 for Bullseye Fund, Balanced Fund, Growth Fund, Capital
Growth Fund, International Equity Fund, Star Advisers Fund, Star Worldwide Fund,
Star Small Cap Fund, Star Value Fund, Growth and Income Fund and Strategic
Income Fund, and $15.95 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 and Government Securities Fund. Nvest
Services Company has subcontracted with State Street Bank for it to provide,
through its subsidiary, Boston Financial Data Services, Inc. ("BFDS"),
transaction processing, mail and other services. For these services, Nvest
Services Company pays BFDS a monthly per account fee of $0.95 for California
Fund, Bond Income Fund, Municipal Income Fund, Short Term Corporate Income Fund,
Government Securities Fund and Strategic Income Fund; $0.87 for Massachusetts
Fund, High Income Fund and Limited Term U.S. Government Fund; $0.78 for Bullseye
Fund, International Equity Fund, Capital Growth Fund, Balanced Fund, Growth
Fund, Star Advisers Fund, Star Worldwide Fund, Star Value Fund and Star Small
Cap Fund; and $0.70 for Growth and Income Fund. Equity Income Fund pays a $250
monthly fee to Nvest Services Company for these services which Nvest Services
Company pays in full to State Street Bank for it to provide through BFDS
transaction processing and other services.
In addition, during the fiscal year ended December 31, 1999 Nvest
Services Company performed certain accounting and administrative services for
the Funds. Each Fund reimbursed Nvest Services Company for all or part of Nvest
Services Company's expenses of providing these services which include the
following: (i) expenses for personnel performing bookkeeping, accounting,
internal auditing and financial reporting functions and clerical functions
relating to the Fund, (ii) expenses for services required in connection with the
preparation of registration statements and prospectuses, registration of shares
in various states, shareholder reports and notices, proxy solicitation material
furnished to shareholders of the Fund or regulatory authorities and reports and
questionnaires for SEC compliance, and (iii) registration, filing and other fees
in connection with requirements of regulatory authorities.
During the fiscal year ended December 31, 1997, Nvest Management
received legal and accounting services fees paid by Growth Fund, Balanced Fund,
Bond Income Fund, Municipal Income Fund, Government Securities Fund,
International Equity Fund, Capital Growth Fund, Equity Income Fund, Star
Advisers Fund, Star Value Fund and Star Worldwide Fund in the amounts of
$194,847, $63,400, $43,165, $38,598, $30,213, $32,743, $38,845, $3,543,
$129,628, $66,675 and $43,298.
During the fiscal year ended December 31, 1998, Nvest Management
received legal and accounting services fees paid by Bullseye Fund, Growth Fund,
Balanced Fund, Bond Income Fund, Municipal Income Fund, Government Securities
Fund, International Equity Fund, Capital Growth Fund, Equity Income Fund, Star
Advisers Fund, Star Worldwide Fund, Star Value Fund, and Star Small Cap Fund in
the amounts of $13,737, $298,419, $82,246, $60,796, $47,566, $34,398, $28,617,
$50,067, $21,298, $191,247, $58,980, $90,930, and $35,775.
During the fiscal year ended December 31, 1999, Nvest Management
received legal and accounting services fees paid by Growth Fund, Balanced Fund,
Bond Income Fund, Municipal Income Fund, Government Securities Fund,
International Equity Fund, Capital Growth Fund, Equity Income Fund, Star
Advisers Fund, Star Value Fund and Star Worldwide Fund in the amounts of $____,
$____, $____, $____, $____, $____, $____, $____, $____, $____ and $____,
respectively.
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PORTFOLIO TRANSACTIONS AND BROKERAGE
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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 who 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 which it
believes are financially responsible, will provide efficient and effective
services in executing, clearing and settling an order and will charge commission
rates that, when combined with the quality of the foregoing services, will
produce best price and execution for the transaction. This does not necessarily
mean that the lowest available brokerage commission will be paid. However, the
commissions are believed to be competitive with generally prevailing rates. 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 whom 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 the segment of the Fund, 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 whom 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 prevalent bid/ask
spread characteristics of the markets and securities in which transactions for
the 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
who 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 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 which 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 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 which 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 who 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 which 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 P/E 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.
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.
The Bond Income, Government Securities and Municipal Income Funds and
all the Funds of Nvest Funds Trust II may pay brokerage commissions to New
England Securities for acting as the respective Fund's agent on purchases and
sales of securities. SEC rules require that the commissions paid to New England
Securities by a Fund for portfolio transactions not exceed "usual and customary"
brokerage commissions. The rules define "usual and customary" commissions to
include amounts which are "reasonable and fair compared to the commission, fee
or other remuneration received or to be received by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time." The trustees
of the Trusts, including those who are not "interested persons" of the Trusts,
have adopted procedures for evaluating the reasonableness of commissions paid to
New England Securities and will review these procedures periodically.
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.
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DESCRIPTION OF THE TRUSTS AND OWNERSHIP OF SHARES
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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." From April
1994 to January 2000, its name was "New England 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 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 seven 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." From April 1994 to January
2000, its name was "New England 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.
Intermediate Term Tax-Free Fund of 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 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 the preceding
paragraphs of this section) 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 series or class of shares or fund
into various sub-series or sub-classes with such dividend preferences and other
rights as the trustees may designate. While each Trust's Board of Trustees have
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 which 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.
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.
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HOW TO BUY SHARES
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The procedures for purchasing shares of the Funds are summarized in the
Prospectuses. All purchases made by check should be in U.S. dollars and made
payable to Nvest Funds, or, in the case of a retirement account, the custodian
or trustee. Banks may charge a fee for transmitting funds by wire. With respect
to shares purchased by federal funds, shareholders should bear in mind that wire
transfers may take two or more hours to complete.
For purchase of Fund shares by mail, the settlement date is the first
business day after receipt of the check by the transfer agent so long as it is
received by the close of regular trading of the New York Stock Exchange on a day
when the Exchange is open; otherwise the settlement date is the following
business day. For telephone orders, the settlement date is the third business
day after the order is made.
Shares may also be purchased either in writing, by phone or, in the
case of Class A, B and C shares, by electronic funds transfer using Automated
Clearing House ("ACH"), or by exchange as described in the Prospectuses through
firms that are members of the National Association of Securities Dealers, Inc.
and that have selling agreements with the Distributor. You may also use 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.
The Distributor may at its discretion accept a telephone order for the
purchase of $5,000 or more of a Fund's Class A, B and C shares. Payment must be
received by the Distributor within three business days following the transaction
date or the order will be subject to cancellation. Telephone orders must be
placed through the Distributor or your investment dealer.
If you wish transactions in your account to be effected by another
person under a power of attorney from you, special rules as summarized in the
Prospectus may apply.
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NET ASSET VALUE AND PUBLIC OFFERING PRICE
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The method for determining the public offering price and net asset
value per share is summarized in the Prospectus.
The total net asset value of each class of shares of a Fund (the excess
of the assets of such Fund attributable to such class over the liabilities
attributable to such class) is determined as of the close of regular trading
(normally 4:00 p.m. Eastern time) on each day that the New York Stock Exchange
(the "NYSE") is open for trading. The weekdays that the NYSE is expected to be
closed are New Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Securities listed on a national securities exchange or on the NASDAQ National
Market System are valued at their last sale price, or, if there is no reported
sale during the day, the 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 NYSE. Securities traded on a non-U.S. exchange will be
valued at their last sale price (or the last reported bid price, if there is no
reported sale during the day), on the exchange on which they principally trade,
as of the close of regular trading on such exchange except for securities traded
on the London Stock Exchange ("British Equities"). British Equities will be
valued at the mean between the last bid and last asked prices on the London
Stock Exchange. The value of other securities principally traded outside the
United States will be computed as of the completion of substantial trading for
the day on the markets on which such securities principally trade. Securities
principally traded outside the United States will generally be valued several
hours before the close of regular trading on the NYSE, generally 4:00 p.m.
Eastern time, when the Funds compute the net asset value of their shares.
Occasionally, events affecting the value of securities principally traded
outside the United States may occur between the completion of substantial
trading of such securities for the day and the close of the NYSE, which events
will not be reflected in the computation of a Fund's net asset value. If events
materially affecting the value of a Fund's securities occur during such period,
then these securities will be valued at their fair value as determined in good
faith by or in accordance with procedures approved by the Trusts' trustees. The
effect of fair value pricing is that securities may not be priced on the basis
of quotations from the primary market in which they are traded but rather, may
be priced by another method that the Board of Trustees believes accurately
reflects fair value.
Trading in some of the portfolio securities of some of the Funds takes
place in various markets outside the United States on days and at times other
than when the NYSE is open for trading. Therefore, the calculation of these
Funds' net asset value does not take place at the same time as the prices of
many of its portfolio securities are determined, and the value of the Fund's
portfolio may change on days when the Fund is not open for business and its
shares may not be purchased or redeemed.
The per share net asset value of a class of a Fund's shares is computed
by dividing the number of shares outstanding into the total net asset value
attributable to such class. The public offering price of a Class A share of a
Fund is the net asset value per share next-determined after a properly completed
purchase order is accepted by Nvest Services Company or State Street Bank, plus
a sales charge as set forth in the Fund's Prospectus. The public offering price
of a Class B, C or Y share of a Fund is the next-determined net asset value.
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REDUCED SALES CHARGES
CLASS A SHARES ONLY
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The following special purchase plans are summarized in the Prospectuses.
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 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
Nvest Cash Management Trust and Nvest Tax Exempt Money Market Trust (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
contingent deferred sales charge applies to investments of $25,000 or more in
Class A shares of the Funds by (1) clients of an adviser or subadviser to any
series of the Trusts; any director, officer or partner of a client of an adviser
or subadviser to any series of the Trusts; and the spouse, parents, children,
siblings, in-laws, grandparents or grandchildren of the foregoing; (2) any
individual who is a participant in a Keogh or IRA Plan under a prototype of an
adviser or subadviser to any series of the 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, Nvest Funds Distributor, L.P. 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
contingent deferred sales charge related to investments in Class A shares of any
Fund by any state, county or city or any instrumentality, department, authority
or agency thereof that has determined that a Fund is a legally permissible
investment and that is prohibited by applicable investment laws from paying a
sales charge or commission in connection with the purchase of shares of any
registered investment company.
INVESTMENT 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 you at least thirty days
prior to any payment date. State Street Bank is under no obligation to notify
shareholders as to the nonpayment of any check.
Retirement Plans Offering Tax Benefits (Class A, B and C Shares)
- ----------------------------------------------------------------
The federal tax laws provide for a variety of retirement plans offering
tax benefits. These plans may be funded with shares of the Funds or with certain
other investments. The plans include H.R. 10 (Keogh) plans for self-employed
individuals and partnerships, individual retirement accounts (IRAs), corporate
pension trust and profit sharing plans, including 401(k) plans, and retirement
plans for public school systems and certain tax exempt organizations, i.e.,
403(b) plans.
The reduced minimum initial investment available to retirement plans
offering tax benefits is referred to in the Prospectus. For these plans, initial
investments in a Fund must be at least $250 for each participant in corporate
pension and profit sharing plans and Keogh plans, at least $500 for IRAs and at
least $100 for any subsequent investments. There is a special initial and
subsequent investment minimum of $25 for payroll deduction investment programs
for 401(k), SARSEP, SEP, SIMPLE Plans, 403(b) and certain other retirement
plans. Income dividends and capital gain distributions must be reinvested
(unless the investor is over age 59 1/2 or disabled). Plan documents and further
information can be obtained from the Distributor.
An investor should consult a competent tax or other adviser as to the
suitability of a Fund's shares as a vehicle for funding a plan, in whole or in
part, under the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and as to the eligibility requirements for a specific plan and its
state as well as federal tax aspects.
Certain retirement plans may also be eligible to purchase Class Y
shares. See the Prospectus relating to Class Y shares.
Systematic Withdrawal Plans (Class A, B and C Shares)
- -----------------------------------------------------
An investor owning a Fund's shares having a value of $5,000 or more at
the current public offering price may establish a Systematic Withdrawal Plan
providing for periodic payments of a fixed or variable amount. An investor may
terminate the plan at any time. A form for use in establishing such a plan is
available from the servicing agent or your investment dealer. Withdrawals may be
paid to a person other than the shareholder if a signature guarantee is
provided. Please consult your investment dealer or the Distributor.
A shareholder under a Systematic Withdrawal Plan may elect to receive
payments monthly, quarterly, semiannually or annually for a fixed amount of not
less than $50 or a variable amount based on (1) the market value of a stated
number of shares, (2) a specified percentage of the account's market value or
(3) a specified number of years for liquidating the account (e.g., a 20-year
program of 240 monthly payments would be liquidated at a monthly rate of 1/240,
1/239, 1/238, etc.). The initial payment under a variable payment option may be
$50 or more.
In the case of shares subject to a CDSC, the amount or percentage you
specify may not, on an annualized basis, exceed 10% of the value, as of the time
you make the election, of your account with the Fund with respect to which you
are electing the Plan. Withdrawals of Class B shares of a Fund under the Plan
will be treated as redemptions of shares purchased through the reinvestment of
Fund distributions, or, to the extent such shares in your account are
insufficient to cover Plan payments, as redemptions from the earliest purchased
shares of such Fund in your account. No CDSC applies to a redemption pursuant to
the Plan.
All shares under the Plan must be held in an open (uncertificated)
account. Income dividends and capital gain distributions will be reinvested
(without a sales charge in the case of Class A shares) at net asset value
determined on the record date.
Since withdrawal payments represent proceeds from the liquidation of
shares, withdrawals may reduce and possibly exhaust the value of the account,
particularly in the event of a decline in net asset value. Accordingly, a
shareholder should consider whether a Systematic Withdrawal Plan and the
specified amounts to be withdrawn are appropriate in the circumstances. The
Funds and the Distributor make no recommendations or representations in this
regard. It may be appropriate for a shareholder to consult a tax adviser before
establishing such a plan.
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 for Class A
shares of the California Fund, only 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 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.
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 December 31, 1999, the net assets of the Nvest Funds and the Money Market
Funds totaled over $__ billion.
Automatic Exchange Plan (Class A, B and C Shares)
- -------------------------------------------------
As described in the Prospectus following the caption "Additional
Investor Services," a shareholder may establish an Automatic Exchange Plan under
which shares of a Fund are automatically exchanged each month for shares of the
same class of one or more of the other funds. Registration on all accounts must
be identical. The exchanges are made on the 15th of each month or the first
business day thereafter if the 15th is not a business day until the account is
exhausted or until Nvest Services Company is notified in writing to terminate
the plan. Exchanges may be made in amounts of $100 or more. The Service Options
Form is available from Nvest Services Company or your financial representative
to establish an Automatic Exchange Plan.
Broker Trading Privileges
- -------------------------
The Distributor may, from time to time, enter into agreements with one
or more brokers or other intermediaries to accept purchase and redemption orders
for Fund shares until the close of regular trading on the NYSE (normally, 4:00
p.m. Eastern Time on each day that the Exchange is open for trading); such
purchase and redemption orders will be deemed to have been received by the Fund
when the authorized broker or intermediary accepts such orders; and such orders
will be priced using that Fund's net asset value next computed after the orders
are placed with and accepted by such brokers or intermediaries. Any purchase and
redemption orders received by a broker or intermediary under these agreements
will be transmitted daily to the Distributor no later than the time specified in
such agreement; but, in any event, no later than 6:00 a.m. following the day
that such purchase or redemption orders are received by the broker or
intermediary.
Nvest Portfolio Reporting Option ("NvestPRO")
- ---------------------------------------------
Fund Shareholders who are clients of broker-dealers that have entered
into an agreement with Nvest Funds and the Distributor, and have total net
assets of $50,000 or more may be eligible to receive NvestPRO Quarterly Reports
in addition to their standard Nvest Funds quarterly statements. Eligible clients
are defined as clients with a portfolio of regular and IRA accounts that are
assigned to the same social security number having a minimum account value of:
(i) $50,000 in the case of a new account or (ii) $100,000 in the case of an
existing account. NvestPRO Quarterly Reports include graphic performance
illustrations and are designed to provide investors with individualized
performance information on their Nvest Funds holdings. Individualized
performance illustrated in the NvestPRO reports is determined from the first
date of participation in the NvestPRO product, not the account open date.
Clients who elect to participate in the NvestPRO program are also
offered access to an asset allocation questionnaire that is designed to assist
them and their registered representative in choosing an initial portfolio of
Nvest Funds based on their financial profile, objectives, and risk tolerance.
This is not an actively managed asset allocation program as described in Rule
3a-4 of the 1940 Act. The Distributor will charge a fee for this product
(currently $35 annually per portfolio), and has the right to determine account
minimums for participation in the product.
Self-Servicing Your Account with Nvest Funds Personal Access Line(TM)
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(TM), 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(TM) (PAL).
You are responsible for the confidentiality and use of your personal
identification numbers, account numbers, social security numbers and any other
personal information required to access the site or transmit telephonically. Any
individual that possesses the information required to pass through all security
measures will be presumed to be you. All transactions submitted by an individual
presumed to be you will be solely your responsibility.
You agree that 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(TM) 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 NYSE. Requests made after that time or on a day when the NYSE is not open
for business cannot be accepted and a new request on a later day will be
necessary. The proceeds of a telephone withdrawal will normally be sent on the
first business day following receipt of a proper redemption request.
In order to redeem shares by telephone, a shareholder must either
select this service when completing the Fund application or must do so
subsequently on the Service Options Form, available from Nvest Services Company
or your investment dealer. When selecting the service, a shareholder must
designate a bank account to which the redemption proceeds should be sent. Any
change in the bank account so designated may be made by furnishing to Nvest
Services Company or your investment dealer a completed Service Options Form with
a signature guarantee. Whenever the Service Options Form is used, the
shareholder's signature must be guaranteed as described above. Telephone
redemptions may only be made if the designated bank is a member of the Federal
Reserve System or has a correspondent bank that is a member of the System. If
the account is with a savings bank, it must have only one correspondent bank
that is a member of the System.
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.
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 Lipper
Analytical Services as having similar investment objectives.
Total return may also be used to compare the performance of the Fund
against certain widely acknowledged standards or indices for stock and bond
market performance or against the U.S. Bureau of Labor Statistics' Consumer
Price Index.
The Standard & Poor's Composite Index of 500 Stocks (the "S&P 500") is
a market capitalization-weighted and unmanaged index showing the changes in the
aggregate market value of 500 stocks relative to the base period 1941-43. The
S&P 500 is composed almost entirely of common stocks of companies listed on the
NYSE, although the common stocks of a few companies listed on the American Stock
Exchange or traded over-the-counter are included.
The Standard & Poor's Composite Index of 400 Stocks (the "S&P 400") is
a market capitalization-weighted and unmanaged index that includes approximately
10% of the capitalization of U.S. equity securities. This index is comprised of
stocks in the middle capitalization range. Any midcap stocks already included in
the S&P 500 are excluded from this index.
The Salomon Brothers World Government Bond Index includes a broad range
of institutionally-traded fixed-rate government securities issued by the
national governments of the nine countries whose securities are most actively
traded. This index generally excludes floating- or variable-rate bonds,
securities aimed principally at non-institutional investors (such as U.S.
Savings Bonds) and private-placement type securities.
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 Government Bond Index (the "Lehman Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; 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. Mortgage-backed securities, flower bonds and foreign targeted issues
are not included in the Lehman Government Index.
The Lehman Intermediate 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") is
a measure of the market value of approximately 5,300 bonds with a face value
currently in excess of $1.3 trillion. To be included in the Lehman G/C Index, an
issue must have amounts outstanding in excess of $1 million, have at least one
year to maturity and be rated "Baa" or higher ("investment grade") by a
nationally recognized rated agency such as Standard & Poor's Ratings Group
("S&P") or Moody's Investors Service, Inc. ("Moody's").
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 Bond Index is a market capitalization-weighted
and unmanaged index of fixed-rate, noninvestment grade debt. 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 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 approximate 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 NYSE.
The Merrill Lynch High Yield Index includes over 951 issues and
represents public debt greater than $10 million (original issuance rated BBB/BB
and below), and the First Boston High Yield Index includes over 1,400 issues and
represents all public debt greater than $100 million (original issuance and
rated BBB/BB and below).
The Salomon Brothers Broad Investment Grade Bond Index is a price
composite of a broad range of institutionally based U.S. government
mortgage-backed and corporate debt securities of investment outstanding of at
least $1 million and with a remaining period to maturity of at least one year.
The Consumer Price Index, published by the U.S. Bureau of Labor
Statistics, is a statistical measure of changes, over time, in the prices of
goods and services in major expenditure groups.
Lipper, Inc. is an independent service that monitors the performance of
over 10,000 mutual funds, and calculates total return for the funds grouped by
investment objective. Lipper's Mutual Fund Performance Analysis, Small Cap
Company Analysis and Mutual Fund Indices measure total return and average
current yield for the mutual fund industry. Rankings of individual mutual fund
performance over specified time periods assume reinvestment of all
distributions, exclusive of sales charges.
The Russell 3000 Index is a market capitalization-weighted index which
comprises 3,000 of the largest capitalized U.S. companies whose common stock is
traded in the United States on the NYSE, the American Stock Exchange and NASDAQ.
The Russell 2000 Index represents the smallest 2,000 companies within the
Russell 3000 Index as measured by market capitalization. The Russell 1000 Index
represents the largest 1,000 companies within the Russell 3000 Index. The
Russell 1000 Growth Index is an unmanaged subset of stocks from the larger
Russell 1000 Index, selected for their greater growth orientation. The Russell
1000 Value Index is an unmanaged subset of stocks from the larger Russell 1000
Index, selected for their greater value orientation.
The Morgan Stanley Capital International Europe, Australasia and Far
East Index (the "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.
The current interest rate on many FNMA adjustable rate mortgage
securities ("ARMs") is set by reference to the 11th District Cost of Funds Index
published monthly by the Federal Reserve. Since June 1987, the current interest
rate on these ARMs, measured on a monthly basis, has been higher than the
average yield of taxable money market funds represented by Donoghue's Taxable
Money Fund Average and current rates on newly issued one year bank certificates
of deposit. The interest rates on other ARMs and the yield on the Adjustable
Rate Fund's portfolio may be higher or lower than the interest rates on FNMA
ARMs and there is also no assurance that historical yield relationships among
different types of investments will continue.
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 Inc. 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 NYSE on the record
date for each dividend or distribution. Shareholders, however, may elect to
receive their ordinary income dividends or capital gain distributions, or both,
in cash. The election may be made at any time by submitting a written request
directly to 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.
A loss on the sale of shares held for six months or less will be
disallowed for federal income tax purposes to the extent of exempt-interest
dividends received with respect to such shares and thereafter treated as a
long-term capital loss to the extent of any long-term capital gain dividend paid
to the shareholder with respect to such shares.
Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when a Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.
Under the Code, the interest on so-called "private activity" bonds is
an item of tax preference, which, depending on the shareholder's particular tax
situation, might subject the shareholder to an alternative minimum tax with a
maximum rate of 28%. The interest on tax exempt bonds issued after certain dates
in 1986 is retroactively taxable from the date of issuance if the issuer does
not comply with certain requirements concerning the use of bond proceeds and the
application of earnings on bond proceeds.
Each Fund's transactions, if any, in foreign currencies are likely to
result in a difference between the Fund's book income and taxable income. This
difference may cause a portion of the Fund's income distributions to constitute
a return of capital or capital gain for tax purposes or require the Fund to make
distributions exceeding book income to avoid excise tax liability and to qualify
as a regulated investment company.
International Equity, Star Worldwide and Star Small Cap Funds 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.
International Equity Fund, Star Advisers Fund, Star Worldwide Fund and
Star Small Cap Fund may be liable to foreign governments for taxes relating
primarily to investment income or capital gains on foreign securities in the
Fund's portfolio. The 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 the Fund
makes the election, the amount of each shareholder's distribution reported on
the information returns filed by the Fund with the Internal Revenue Service must
be increased by the amount of the shareholder's portion of the Fund's foreign
tax paid.
A Fund's transactions in foreign currency-denominated debt securities
and its hedging activities will likely produce a difference between its book
income and its taxable income. This difference may cause a part or all of a
Fund's income distributions to constitute returns of capital for tax purposes or
require the Fund to make distributions exceeding book income to avoid federal
income tax liability.
Redemptions and exchanges of each Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions.
Currently, if shares have been held for more than one year, gain or loss
realized will be taxed at long-term federal tax rates (generally 20% for
noncorporate shareholders), provided the shareholder holds the shares as a
capital asset. Furthermore, no loss will be allowed on the sale of Fund shares
to the extent the shareholder acquired other shares of the same Fund within 30
days prior to the sale of the loss shares or 30 days after such sale.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and related regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative actions.
Dividends and distributions also may be subject to state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.
Each Fund (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
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
ABC and affiliates
Adam Smith's Money World
America OnLine
Anchorage Daily News
Atlanta Constitution
Atlanta Journal
Arizona Republic
Austin American Statesman
Baltimore Sun
Bank Investment Marketing
Barron's
Bergen County Record (NJ)
Bloomberg Business News
B'nai B'rith Jewish Monthly
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
Cincinnati Post
CNBC
CNN
Columbus Dispatch
CompuServe
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghues Money Fund Report
Dorfman, Dan (syndicated column)
Dow Jones News Service
Economist
FACS of the Week
Fee Adviser
Financial News Network
Financial Planning
Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World
Fitch Insights
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Fund Decoder
Global Finance
(the) Guarantor
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Individual Investor
Institutional Investor
International Herald Tribune
Internet
Investment Advisor
Investment Company Institute
Investment Dealers Digest
Investment Profiles
Investment Vision
Investor's Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas City)
KOA-AM (Denver)
LA Times
Leckey, Andrew (syndicated column)
Lear's
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
Mutual Funds Magazine
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment 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., Marlborough Capital Advisors,
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:
|X| 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;
|X| Specific and general investment emphasis, specialties, fields of expertise,
competencies, operations and functions;
|X| Specific and general investment philosophies, strategies, processes,
techniques and types of analysis;
|X| Specific and general sources of information, economic models, forecasts and
data services utilized, consulted or considered in the course of providing
advisory or other services;
|X| The corporate histories, founding dates and names of founders of the
entities;
|X| Awards, honors and recognition given to the entities;
|X| The names of those with ownership interest and the percentage of ownership
interest;
|X| The industries and sectors from which clients are drawn and specific client
names and background information on current individual, corporate and
institutional clients, including pension and profit sharing plans;
|X| Current capitalizations, levels of profitability and other financial and
statistical information;
|X| Identification of portfolio managers, researchers, economists, principals
and other staff members and employees;
|X| The specific credentials of the above individuals, including, but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors;
|X| Specific and general reference to past and present notable and renowned
individuals including reference to their field of expertise and/or specific
accomplishments;
|X| Current and historical statistics regarding:
-total dollar amount of assets managed
-Nvest Funds' assets managed in total and by fund
-the growth of assets
-asset types managed
-numbers of principal parties and employees, and the length of their
tenure, including officers, portfolio managers, researchers, economists,
technicians and support staff
-the above individuals' total and average number of years of industry
experience and the total and average length of their service to the
adviser or sub-adviser;
|X| The general and specific strategies applied by the advisers in the
management of 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
|X| 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 the NYSE. Nvest Companies has 14 principal
subsidiary or affiliated asset management firms, which collectively had more
than $___ billion of assets under management as of December 31, 1999. In
addition, promotional materials may include:
|X| Specific and general references to Nvest Funds multi-manager approach
through Nvest Companies affiliates and outside firms including, but not
limited to, the following:
-that each adviser/manager operates independently on a day-to-day basis
and maintains an image and identity separate from Nvest Companies and the
other investment 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 Advisor Services ("NAS") and Nvest Retirement Services ("NRS"),
divisions of Nvest Companies, may be referenced in Fund advertising and
promotional literature concerning the marketing services it provides to Nvest
Companies affiliated fund groups including: Nvest Funds, Loomis Sayles Funds,
Jurika & Voyles, Back Bay Advisors, Oakmark Funds, Delafield Fund and Kobrick
Funds.
NAS and NRS will provide marketing support to Nvest Companies
affiliated fund groups targeting financial advisers, financial intermediaries
and institutional clients who may transact purchases and other fund-related
business directly with these fund groups. Communications will contain
information including, but not limited to: descriptions of clients and the
marketplaces to which it directs its efforts; the mission and goals of NAS and
NRS and the types of services it provides which may include: seminars; its 1-800
number, web site, Internet or other electronic facilities; qualitative
information about the funds' investment methodologies; information about
specific strategies and management techniques; performance data and features of
the funds; institutional oriented research and portfolio manager insight and
commentary. Additional information contained in advertising and promotional
literature may include: rankings and ratings of the funds including, but not
limited to, those of Morningstar and Lipper; 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:
|X| Specific and general references to industry statistics regarding 401(k) and
retirement plans including historical information, industry trends and
forecasts regarding the growth of assets, numbers of plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and other organizations involved in 401(k) and
retirement programs with whom Nvest Funds may or may not have a
relationship.
|X| Specific and general references to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the Nvest Funds as a
401(k) or retirement plan funding vehicle produced by, including, but not
limited to, Investment Company Institute and other industry authorities,
research organizations and publications.
|X| Specific and general discussion of economic, legislative, and other
environmental factors affecting 401(k) and retirement plans, including, but
not limited to, statistics, detailed explanations or broad summaries of:
-past, present and prospective tax regulation, Internal Revenue Service
requirements and rules, including, but not limited to, reporting
standards, minimum distribution notices, Form 5500, Form 1099R and other
relevant forms and documents, Department of Labor rules and standards and
other regulations. This includes past, current and future initiatives,
interpretive releases and positions of regulatory authorities about the
past, current or future eligibility, availability, operations,
administration, structure, features, provisions or benefits of 401(k) and
retirement plans;
-information about the history, status and future trends of Social
Security and similar government benefit programs including, but not
limited to, eligibility and participation, availability, operations and
administration, structure and design, features, provisions, benefits and
costs; and
-current and prospective ERISA regulation and requirements.
|X| Specific and general discussion of the benefits of 401(k) investment and
retirement plans, 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.
|X| 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.
|X| Specific and general reference to the role of the investment dealer and the
benefits and features of working with a financial professional including:
-access to expertise on investments
-assistance in interpreting past, present and future market trends and
economic events
-providing information to clients including participants during enrollment
and on an ongoing basis after participation
-promoting and understanding the benefits of investing, including mutual
fund diversification and professional management.
<PAGE>
APPENDIX D
For the fiscal year ended December 31, 1999, the Short Term Corporate
Income Fund invested __%, the Balanced Fund invested __%, the Municipal Income
Fund invested ___% and the Massachusetts Tax Free Income Fund invested __% 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). The
Intermediate Term Tax Free Fund of California and the 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........................................... %
Preferred Stock........................................ %
Short-term Obligations and Other Assets................ %
Debt - Unrated......................................... %
Debt -- Standard and Poor's Rating
AAA............................................... %
BBB.............................................. %
BB.............................................. %
B.............................................. %
CCC............................................... %
CC................................................ %
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........................................... %
Preferred Stock........................................ %
Short-term Obligations and Other Assets................ %
Debt - Unrated......................................... %
Debt - Standard and Poor's Rating
AAA............................................... %
AA................................................ %
A................................................. %
BBB............................................... %
BB................................................ %
B................................................. %
CCC and lower..................................... %
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
- -------- ------
Preferred Stock ........................................ %
Short-term Obligations and Other Assets................ %
Debt-- Unrated ........................................ %
Debt-- Standard & Poor's Rating
AAA .............................................. %
AA ............................................... %
A ................................................ %
BBB............................................... %
BB................................................ %
B................................................. %
CCC............................................... %
C/D............................................... %
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
INTERNATIONAL EQUITY FUND FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
PERCENTAGE
OF NET
SECURITY ASSETS
- -------- ------
Common Stock .......................................... %
Short-term Obligations and Other Assets ............... %
Debt-- Unrated ........................................ %
Debt -- Standard & Poor's Rating
AAA .............................................. %
AA................................................ %
A ................................................ %
BBB............................................... %
BB................................................ %
B................................................. %
CCC............................................... %
C/D............................................... %
The chart above indicates the composition of International Equity 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. 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.
<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 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. 5 to Amended and Restated Agreement and
Declaration of Trust is incorporated by reference to
exhibit 1(b) to PEA No. 31 to the Registration Statement
filed on April 12, 1996.
(3) Amendment No. 10 to Amended and Restated Agreement and
Declaration of Trust is incorporated by reference to
exhibit 1(d) to PEA No. 34 to the Registration Statement
filed on February 14, 1997.
(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 filed herewith.
(ii) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest Balanced Fund and NFM is
filed herewith.
(iii) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest International Equity Fund
and NFM is filed herewith.
(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 filed herewith.
(v) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest Value Fund and NFM is
filed herewith.
(vi) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest Star Worldwide Fund and
NFM is filed herewith.
(vii) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest Government Securities
Fund and NFM is filed herewith.
(viii) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest Strategic Income Fund and
NFM is filed herewith.
(ix) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest Bond Income Fund and NFM
is filed herewith.
(x) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest Municipal Income Fund and
NFM is filed herewith.
(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 filed herewith.
(3) Form of Subadvisory Agreements relating to the following series
of the Registrant, between NFM and the subadvisers indicated in
parentheses, are incorporated herein by reference to
Post-Effective Amendment No. 39 to this Registration Statement,
filed on February 16, 1999.
(i) Nvest Balanced Fund (Loomis Sayles & Company, L.P.
["Loomis Sayles"])
(ii) Nvest Star Advisers Fund (Janus Capital Corporation
["Janus Capital"])
(iii) Nvest Star Advisers Fund (Loomis Sayles)
(iv) Nvest Star Advisers Fund (Harris Associates L.P. ["Harris"])
(iii) Nvest Value Fund (Loomis Sayles)
(iv) Nvest Star Worldwide Fund (Harris)
(v) Nvest Star Worldwide Fund (Founders Asset Management,
Inc. ["Founders"])
(vi) Nvest Star Worldwide Fund (Janus Capital)
(vii) Nvest Government Securities Fund (Back Bay Advisors
["Back Bay Advisors"])
(viii) Nvest Strategic Income Fund (Loomis Sayles)
(ix) Nvest Bond Income Fund (Back Bay Advisors)
(x) Nvest Municipal Income Fund (Back Bay Advisors)
(xi) Nvest Star Small Cap Fund (Loomis Sayles)
(xii) Nvest Star Small Cap Fund (Harris)
(xiii) Nvest Star Small Cap Fund (RS Investment Management, L.P.
["RS Investment Management"])
(xiv) Nvest Star Small Cap Fund (Montgomery)
(e) Underwriting Contracts.
(1) Form of Distribution Agreement between the Registrant, on
behalf of each of the following series, and Nvest Funds
Distributor, L.P. is incorporated herein by reference to
Exhibit 6(a) to Post-Effective Amendment No. 31 to this
Registration Statement, filed on April
12, 1996:
(i) Nvest Capital Growth Fund
(ii) Nvest Balanced Fund
(iii) Nvest Growth Fund
(iv) Nvest International Equity Fund
(v) Nvest Star Advisers Fund
(vi) Nvest Value Fund
(vii) Nvest Government Securities Fund
(viii) Nvest Strategic Income Fund
(ix) Nvest Bond Income Fund
(x) Nvest Municipal Income Fund
(xi) Nvest Star Worldwide Fund
(2) Distribution Agreement between the Registrant, on behalf of its
Nvest Star Small Cap Fund, and Nvest Funds Distributor, L.P. is
incorporated herein by reference to Exhibit 6(b) to
Post-Effective Amendment No. 34 to this Registration Statement,
filed on February 14, 1997.
(f) Bonus or Profit Sharing Contracts.
None.
(g) Custodian Agreements.
(1) Custodian Contract dated April 13, 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.
(h) Other Material Contracts.
(1) Transfer Agency Agreement between the Registrant and
Nvest Funds Distributor, L.P. is incorporated by
reference to PEA No. 32 to the Registration Statement
filed on July 30, 1996.
(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) Sub-Transfer Agency Agreement between Nvest Funds Distributor,
L.P. and State Street is incorporated by reference to exhibit
9(k) to PEA No. 33 to the Registration Statement filed on
October 3, 1996.
(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) Form of Class B Shares Remittance Agreement between the
Registrant and Nvest Funds Distributor, L.P. relating to each
series of the Registrant other than Nvest Growth Fund is
incorporated by reference to exhibit 9(m) to PEA No. 31 to the
Registration Statement filed on April 12, 1996.
(9) Letter Agreement between the Registrant and State Street
relating to the applicability of the Sub-Transfer Agency
Agreement to Nvest Star Small Cap Fund is incorporated by
reference to exhibit 9(o) to PEA No. 34 to the Registration
Statement filed on February 14, 1997.
(10) Class B Shares Remittance Agreement between the Registrant and
Nvest Funds Distributor, L.P. relating to Nvest Star Small Cap
Fund is incorporated by reference to exhibit 9(p) to PEA No. 34
to the Registration Statement filed on February 14, 1997.
(11) Form of Dealer Agreement of Nvest Funds Distributor, L.P., the
Registrant's principal underwriter, incorporated by reference
to PEA No. 38 filed on April 30, 1998.
(12) 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.
(13) Powers of Attorney are incorporated by reference to PEA
No. 39 to the Registration Statement filed on February
16, 1999.
(14) NFM fee waiver/ Reimbursement Undertaking between the
Registrant and its series is incorporated by reference to PEA
No. 39 to the Registration Statement filed on February 16,
1999.
(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.
Not applicable..
(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.
(o) Code of Ethics.
To be filed by amendment in accordance with Securities and
Exchange Release No. IC-23958 (effective October 29, 1999).
Item 24. Persons Controlled by or Under Common Control with the Registrant
None.
Item 25. Indemnification
See Article 4 of the Registrant's By-laws which are incorporated by
reference to exhibit 2(a) to PEA No. 32 to the Registration Statement
filed on July 30, 1996.
In addition, Nvest L.P., the parent company of the Registrant's adviser
and distributor, maintains a directors and officers liability insurance
policy with maximum coverage of $15 million under which the trustees and
officers of the Registrant are named insured.
Item 26. Business and Other Connections of Investment Adviser
(a) Loomis Sayles, the subadviser of the Registrant's Nvest Value Fund, Nvest
International Equity Fund, Nvest Balanced Fund, Nvest Strategic Income
Fund and Nvest High Income Fund and a subadviser of Nvest Star Advisers
Fund and Nvest Star Small Cap 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) 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. 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 LLC ("Kobrick"), 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, a subadviser to the Registrant's Nvest Star Advisers Fund
and Nvest Star Worldwide 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.
Ths 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 serves as a subadviser to the Registrant's Nvest Star Advisers
Fund, Nvest Star Worldwide 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, 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).
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:
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
- -----------------------------------------------------------------------------
Nvest Distribution General Partner None
Corp.
John T. Hailer President and Chief Executive None
Officer
John E. Pelletier Senior Vice President, General Secretary and Clerk
Counsel, Secretary and Clerk
Scott E. Wennerholm Senior Vice President, None
Treasurer, Chief Financial
Officer,and Chief Operating
Officer
Coleen D. Dinneen Vice President, Associate Assistant Secretary
Counsel, Assistant Secretary
and Assistant Clerk
Martin G. Dyer Vice President and Assistant None
Secretary
Kristin S. Vigneaux Vice President, Assistant Assistant Secretary
Secretary and Assistant Clerk
Beatriz Pina Smith Vice President and Assistant None
Treasurer
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
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) Registrant
Rule 31a-1(b)(4); Rule 31a-2(d)
(b) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Rule 31a-1(a); Rule 31a-1(b)(1), (2), (3), (5), (6), (7), (8) Rule
31a-2(d)
(c) For Nvest Growth Fund:
Capital Growth Management Limited Partnership
One International Place
Boston, Massachusetts 02110
Rule 31a-1(a); Rule 31a-1(b)(9), (10), (11); Rule 31a-1(f) Rule
31a-2(d); Rule 31a-2(e)
(d) For series of the Registrant managed by Back Bay Advisors: Back Bay
Advisors, L.P. 399 Boylston Street Boston, Massachusetts 02116 Rule
31a-1(a); Rule 31a-1(b)(9), (10), (11); Rule 31a-1(f) Rule 31a-2(d);
Rule 31a-2(e)
(e) For the series of the Registrant managed by Harris:
Harris Associates L.P.
Two North LaSalle Street
Chicago, Illinois 60602
Rule 31a-1(b)(9), (10), (11); Rule 31a-1(f)
Rule 31a-2(d); Rule 31a-2(e)
(f) For the series of the Registrant managed by Janus:
Janus Capital Corporation
100 Fillmore Street
Denver, CO 80206
Rule 31a-1(b)(9), (10), (11); Rule 31a-1(f)
Rule 31a-2(d); Rule 31a-2(e)
(g) For the series of the Registrant managed by Kobrick:
Kobrick Funds LLC
101 Federal Street
Boston, Massachusetts 02110 Rule 31a-1(b)(9), (10), (11); Rule
31a-1(f) Rule 31a-2(d); Rule 31a-2(e)
(h) For the series of the Registrant managed by Loomis Sayles:
Loomis, Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02111
Rule 31a-1(b)(9), (10), (11); Rule 31a-1(f)
Rule 31a-2(d); Rule 31a-2(e)
(i) For the series of the Registrant managed by Montgomery: Montgomery
Asset Management, LLC 600 Montgomery Street San Francisco,
California 94111 Rule 31a-1(b)(9), (10), (11); Rule 31a-1(f)
Rule 31a-2(d); Rule 31a-2(e)
(j) For the series of the Registrant managed by RS Investment Management:
RS Investment Management
555 California Street
San Francisco, CA 94101
Rule 31a-1(b)(9), (10), (11); Rule 31a-1(f)
Rule 31a-2(d); Rule 31a-2(e)
(k) Nvest Funds Distributor, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Rule 31a - 1(d)
Rule 31a - 2(c)
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 has duly caused this
Post-Effective Amendment No. 41 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 16th day of February, 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
- --------- ----- ----
Chairman of the Board;
Chief Executive
Officer; Principal
Executive Officer;
PETER S. VOSS* Trustee February 16, 2000
- --------------------------
Peter S. Voss
/s/ THOMAS CUNNINGHAM
- --------------------------
Thomas Cunningham Treasurer February 16, 2000
GRAHAM T. ALLISON, JR.*
- --------------------------
Graham T. Allison, Jr. Trustee February 16, 2000
DANIEL M. CAIN*
- --------------------------
Daniel M. Cain Trustee February 16, 2000
KENNETH J. COWAN*
- --------------------------
Kenneth J. Cowan Trustee February 16, 2000
RICHARD DARMAN*
- --------------------------
Richard Darman Trustee February 16, 2000
SANDRA O. MOOSE*
- --------------------------
Sandra O. Moose Trustee February 16, 2000
JOHN A. SHANE*
- --------------------------
John A. Shane Trustee February 16, 2000
PENDLETON P. WHITE*
- --------------------------
Pendleton P. White Trustee February 16, 2000
*By: /s/ JOHN E. PELLETIER
John E. Pelletier
Attorney-In-Fact
February 16, 2000
<PAGE>
NVEST FUNDS TRUST I
EXHIBIT INDEX
EXHIBITS FOR ITEM 23 OF FORM N-1A
EXHIBIT DESCRIPTION
- ------- -----------
(d)(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")
(d)(2)(ii) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest Balanced Fund and NFM
(d)(2)(iii) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest International Equity Fund
and NFM.
(d)(2)(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.
(d)(2)(v) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest Value Fund and NFM
(d)(2)(vi) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest Star Worldwide Fund and
NFM.
(d)(2)(vii) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest Government Securities
Fund and NFM
(d)(2)(viii) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest Strategic Income Fund and
NFM
(d)(2)(ix) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest Bond Income Fund and NFM
(d)(2)(x) Advisory Agreement dated August 30, 1996 as amended May 1, 1998
between Registrant on behalf of Nvest Municipal Income Fund and
NFM
(d)(2)(xi) Advisory Agreement dated December 31, 1996 as amended May 1,
1998 between Registrant on behalf of Nvest Star Small Cap Fund
and NFM
<PAGE>
Exhibit (d)(2)(i)
NEW ENGLAND CAPITAL GROWTH FUND
ADVISORY AGREEMENT
AGREEMENT made the 30th day of August, 1996, and amended this 1st day of
May, 1998, by and between NEW ENGLAND FUNDS TRUST I, a Massachusetts business
trust (the "Fund"), with respect to its New England Capital Growth Fund series
(the "Series"), and NEW ENGLAND FUNDS MANAGEMENT, L.P., a Delaware limited
partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting pursuant
to delegation from the Manager) will perform certain services for the Series;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own expense,
to furnish such services (either directly or pursuant to delegation to
other parties as permitted by Sections 1(b) and (c) hereof) and to assume
the obligations herein set forth, for the compensation herein provided;
provided, however, that the Manager shall have no obligation to pay the
fees of any Sub-Adviser (as defined in Section 1(b) hereof), to the extent
that the Fund has agreed, under any contract to which the Fund and the
Sub-Adviser are parties (a "Sub-Advisory Agreement") to pay such fees. The
Manager shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written agreement
with such Sub-Adviser that meets the requirements of Section 15 of the
Investment Company Act of 1940 and the rules thereunder (the "1940 Act")
applicable to contracts for service as investment adviser of a registered
investment company (including without limitation the requirements for
approval by the trustees of the Fund and the shareholders of the Series),
subject, however, to such exemptions as may be granted by the Securities
and Exchange Commission. Any Sub-Adviser may (but need not) be affiliated
with the Manager. If different Sub-Advisers are engaged to provide
Portfolio Management Services with respect to different segments of the
portfolio of the Series, the Manager shall determine, in the manner
described in the prospectus of the Series from time to time in effect,
what portion of the assets belonging to the Series shall be managed by
each Sub-Adviser.
(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to one
or more other parties (each such party, an "Administrator") selected by
the Manager. Any Administrator may (but need not) be affiliated with the
Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional investment
research as shall be necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the Series' investment objectives and policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon from
time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities selected to perform such services and exclusive of any
managerial functions described in Section 4);
(c) compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator; and
(d) supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Series'
investment policies, restrictions and guidelines, if the Manager has
delegated to one or more Sub-Advisers any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred to
in sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants retained by the
Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is a
party;
(i) taxes and fees payable by the Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the
Fund, including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and trustees of the Fund;
(m) interest, including interest on borrowings by the Fund;
(n) the costs of services, including services of counsel, required
in connection with the preparation of the Fund's registration statements
and prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation in an amount equal to the annual rate of 0.75% of the first $200
million of the average daily net assets of the Series, 0.70% of the next $300
million of the average daily net assets of the Series, and 0.65% over $500
million of such assets, respectively (or such lesser amount as the Manager may
from time to time agree to receive) minus any fees payable by the Fund, with
respect to the period in question, to any one or more Sub-Advisers pursuant to
any Sub-Advisory Agreements in effect with respect to such period. Such
compensation shall be payable monthly in arrears or at such other intervals, not
less frequently than quarterly, as the Board of Trustees of the Fund may from
time to time determine and specify in writing to the Manager. The Manager hereby
acknowledges that the Fund's obligation to pay such compensation is binding only
on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding interest, taxes, portfolio
brokerage commissions, distribution-related expenses and extraordinary expenses)
for any fiscal year exceeds the lowest applicable percentage of average net
assets or income limitations prescribed by any state in which shares of the
Series are qualified for sale, the Manager shall pay such excess. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Fund shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Fund or belonging to the Series are to
be calculated, that figure shall be calculated by reference to the average daily
net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager; that the
Manager, any such affiliated person or any such organization may have an
interest in the Fund; and that the existence of any such dual interest shall not
affect the validity hereof or of any transactions hereunder except as otherwise
provided in the Agreement and Declaration of Trust of the Fund, the partnership
agreement of the Manager or specific provisions of applicable law.
10. 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 Fund 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 Fund who are not interested persons of the
Fund or the Manager, 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 Manager either by vote of the Board of Trustees of
the Fund 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;
(d) this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to the
provisions of the Fund's Distribution Agreement relating to the Series
with said principal underwriter, this Agreement shall automatically
terminate at the time of such change unless the continuance of this
Agreement after such change shall have been specifically 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 Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called for
the purpose of voting on such approval.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall 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 Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
12. 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. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUND 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
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
<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)(2)(ii)
NEW ENGLAND BALANCED FUND
ADVISORY AGREEMENT
AGREEMENT made the 30th day of August, 1996, and amended this 1st day of
May, 1998, by and between NEW ENGLAND FUNDS TRUST I, a Massachusetts business
trust (the "Fund"), with respect to its New England Balanced Fund series (the
"Series"), and NEW ENGLAND FUNDS MANAGEMENT, L.P., a Delaware limited
partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting pursuant
to delegation from the Manager) will perform certain services for the Series;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own expense,
to furnish such services (either directly or pursuant to delegation to
other parties as permitted by Sections 1(b) and (c) hereof) and to assume
the obligations herein set forth, for the compensation herein provided;
provided, however, that the Manager shall have no obligation to pay the
fees of any Sub-Adviser (as defined in Section 1(b) hereof), to the extent
that the Fund has agreed, under any contract to which the Fund and the
Sub-Adviser are parties (a "Sub-Advisory Agreement") to pay such fees. The
Manager shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written agreement
with such Sub-Adviser that meets the requirements of Section 15 of the
Investment Company Act of 1940 and the rules thereunder (the "1940 Act")
applicable to contracts for service as investment adviser of a registered
investment company (including without limitation the requirements for
approval by the trustees of the Fund and the shareholders of the Series),
subject, however, to such exemptions as may be granted by the Securities
and Exchange Commission. Any Sub-Adviser may (but need not) be affiliated
with the Manager. If different Sub-Advisers are engaged to provide
Portfolio Management Services with respect to different segments of the
portfolio of the Series, the Manager shall determine, in the manner
described in the prospectus of the Series from time to time in effect,
what portion of the assets belonging to the Series shall be managed by
each Sub-Adviser.
(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to one
or more other parties (each such party, an "Administrator") selected by
the Manager. Any Administrator may (but need not) be affiliated with the
Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional investment
research as shall be necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the Series' investment objectives and policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon from
time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities selected to perform such services and exclusive of any
managerial functions described in Section 4);
(c) compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator; and
(d) supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Series'
investment policies, restrictions and guidelines, if the Manager has
delegated to one or more Sub-Advisers any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred to
in sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants retained by the
Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is a
party;
(i) taxes and fees payable by the Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the
Fund, including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and trustees of the Fund;
(m) interest, including interest on borrowings by the Fund;
(n) the costs of services, including services of counsel, required
in connection with the preparation of the Fund's registration statements
and prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation in an amount equal to the annual rate of 0.75% of the first $200
million of the average daily net assets of the Series, 0.70% of the next $300
million of the average daily net assets of the Series, and 0.65% over $500
million of such assets, respectively (or such lesser amount as the Manager may
from time to time agree to receive) minus any fees payable by the Fund, with
respect to the period in question, to any one or more Sub-Advisers pursuant to
any Sub-Advisory Agreements in effect with respect to such period. Such
compensation shall be payable monthly in arrears or at such other intervals, not
less frequently than quarterly, as the Board of Trustees of the Fund may from
time to time determine and specify in writing to the Manager. The Manager hereby
acknowledges that the Fund's obligation to pay such compensation is binding only
on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding interest, taxes, portfolio
brokerage commissions, distribution-related expenses and extraordinary expenses)
for any fiscal year exceeds the lowest applicable percentage of average net
assets or income limitations prescribed by any state in which shares of the
Series are qualified for sale, the Manager shall pay such excess. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Fund shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Fund or belonging to the Series are to
be calculated, that figure shall be calculated by reference to the average daily
net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager; that the
Manager, any such affiliated person or any such organization may have an
interest in the Fund; and that the existence of any such dual interest shall not
affect the validity hereof or of any transactions hereunder except as otherwise
provided in the Agreement and Declaration of Trust of the Fund, the partnership
agreement of the Manager or specific provisions of applicable law.
10. 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 Fund 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 Fund who are not interested persons of the
Fund or the Manager, 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 Manager either by vote of the Board of Trustees of
the Fund 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;
(d) this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to the
provisions of the Fund's Distribution Agreement relating to the Series
with said principal underwriter, this Agreement shall automatically
terminate at the time of such change unless the continuance of this
Agreement after such change shall have been specifically 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 Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called for
the purpose of voting on such approval.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall 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 Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
12. 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. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUND TRUST I,
on behalf of its New England Balanced Fund series
By: /s/ Henry L.P. Schmelzer
- -------------------------------
Name: Henry L.P. Schmelzer
Title: President
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
<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 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)(2)(iii)
NEW ENGLAND INTERNATIONAL EQUITY FUND
ADVISORY AGREEMENT
AGREEMENT made the 30th day of August, 1996, and amended this 1st day of
May, 1998, by and between NEW ENGLAND FUNDS TRUST I, a Massachusetts business
trust (the "Fund"), with respect to its New England International Equity Fund
series (the "Series"), and NEW ENGLAND FUNDS MANAGEMENT, L.P., a Delaware
limited partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting pursuant
to delegation from the Manager) will perform certain services for the Series;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own expense,
to furnish such services (either directly or pursuant to delegation to
other parties as permitted by Sections 1(b) and (c) hereof) and to assume
the obligations herein set forth, for the compensation herein provided;
provided, however, that the Manager shall have no obligation to pay the
fees of any Sub-Adviser (as defined in Section 1(b) hereof), to the extent
that the Fund has agreed, under any contract to which the Fund and the
Sub-Adviser are parties (a "Sub-Advisory Agreement") to pay such fees. The
Manager shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written agreement
with such Sub-Adviser that meets the requirements of Section 15 of the
Investment Company Act of 1940 and the rules thereunder (the "1940 Act")
applicable to contracts for service as investment adviser of a registered
investment company (including without limitation the requirements for
approval by the trustees of the Fund and the shareholders of the Series),
subject, however, to such exemptions as may be granted by the Securities
and Exchange Commission. Any Sub-Adviser may (but need not) be affiliated
with the Manager. If different Sub-Advisers are engaged to provide
Portfolio Management Services with respect to different segments of the
portfolio of the Series, the Manager shall determine, in the manner
described in the prospectus of the Series from time to time in effect,
what portion of the assets belonging to the Series shall be managed by
each Sub-Adviser.
(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to one
or more other parties (each such party, an "Administrator") selected by
the Manager. Any Administrator may (but need not) be affiliated with the
Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional investment
research as shall be necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the Series' investment objectives and policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon from
time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities selected to perform such services and exclusive of any
managerial functions described in Section 4);
(c) compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator; and
(d) supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Series'
investment policies, restrictions and guidelines, if the Manager has
delegated to one or more Sub-Advisers any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred to
in sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants retained by the
Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is a
party;
(i) taxes and fees payable by the Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the
Fund, including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and trustees of the Fund;
(m) interest, including interest on borrowings by the Fund;
(n) the costs of services, including services of counsel, required
in connection with the preparation of the Fund's registration statements
and prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation in an amount equal to the annual rate of 0.90% of the first $200
million of the average daily net assets of the Series, 0.85% of the next $300
million of the average daily net assets of the Series, and 0.80% over $500
million of such assets, respectively (or such lesser amount as the Manager may
from time to time agree to receive) minus any fees payable by the Fund, with
respect to the period in question, to any one or more Sub-Advisers pursuant to
any Sub-Advisory Agreements in effect with respect to such period. Such
compensation shall be payable monthly in arrears or at such other intervals, not
less frequently than quarterly, as the Board of Trustees of the Fund may from
time to time determine and specify in writing to the Manager. The Manager hereby
acknowledges that the Fund's obligation to pay such compensation is binding only
on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding interest, taxes, portfolio
brokerage commissions, distribution-related expenses and extraordinary expenses)
for any fiscal year exceeds the lowest applicable percentage of average net
assets or income limitations prescribed by any state in which shares of the
Series are qualified for sale, the Manager shall pay such excess. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Fund shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Fund or belonging to the Series are to
be calculated, that figure shall be calculated by reference to the average daily
net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager; that the
Manager, any such affiliated person or any such organization may have an
interest in the Fund; and that the existence of any such dual interest shall not
affect the validity hereof or of any transactions hereunder except as otherwise
provided in the Agreement and Declaration of Trust of the Fund, the partnership
agreement of the Manager or specific provisions of applicable law.
10. 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 Fund 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 Fund who are not interested persons of the
Fund or the Manager, 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 Manager either by vote of the Board of Trustees of
the Fund 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;
(d) this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to the
provisions of the Fund's Distribution Agreement relating to the Series
with said principal underwriter, this Agreement shall automatically
terminate at the time of such change unless the continuance of this
Agreement after such change shall have been specifically 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 Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called for
the purpose of voting on such approval.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall 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 Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
12. 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. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUND 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
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
<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 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)(2)(iv)
NEW ENGLAND STAR ADVISERS FUND
ADVISORY AGREEMENT
AGREEMENT made the 30th day of August, 1996, amended the 7th day of May,
1997, and amended this 1st day of May, 1998, by and between NEW ENGLAND FUNDS
TRUST I, a Massachusetts business trust (the "Fund"), with respect to its New
England Star Advisers Fund series (the "Series"), and NEW ENGLAND FUNDS
MANAGEMENT, L.P., a Delaware limited partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting pursuant
to delegation from the Manager) will perform certain services for the Series;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own expense,
to furnish such services (either directly or pursuant to delegation to
other parties as permitted by Sections 1(b) and (c) hereof) and to assume
the obligations herein set forth, for the compensation herein provided;
provided, however, that the Manager shall have no obligation to pay the
fees of any Sub-Adviser (as defined in Section 1(b) hereof), to the extent
that the Fund has agreed, under any contract to which the Fund and the
Sub-Adviser are parties (a "Sub-Advisory Agreement") to pay such fees. The
Manager shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written agreement
with such Sub-Adviser that meets the requirements of Section 15 of the
Investment Company Act of 1940 and the rules thereunder (the "1940 Act")
applicable to contracts for service as investment adviser of a registered
investment company (including without limitation the requirements for
approval by the trustees of the Fund and the shareholders of the Series),
subject, however, to such exemptions as may be granted by the Securities
and Exchange Commission. Any Sub-Adviser may (but need not) be affiliated
with the Manager. If different Sub-Advisers are engaged to provide
Portfolio Management Services with respect to different segments of the
portfolio of the Series, the Manager shall determine, in the manner
described in the prospectus of the Series from time to time in effect,
what portion of the assets belonging to the Series shall be managed by
each Sub-Adviser.
(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to one
or more other parties (each such party, an "Administrator") selected by
the Manager. Any Administrator may (but need not) be affiliated with the
Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional investment
research as shall be necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the Series' investment objectives and policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon from
time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities selected to perform such services and exclusive of any
managerial functions described in Section 4);
(c) compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator; and
(d) supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Series'
investment policies, restrictions and guidelines, if the Manager has
delegated to one or more Sub-Advisers any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred to
in sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants retained by the
Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is a
party;
(i) taxes and fees payable by the Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the
Fund, including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and trustees of the Fund;
(m) interest, including interest on borrowings by the Fund;
(n) the costs of services, including services of counsel, required
in connection with the preparation of the Fund's registration statements
and prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation in an amount equal to the annual rate of 1.05% of the first $1
billion of the average daily net assets of the Series, and 1.00% of such assets
in excess of $1 billion (or such lesser amount as the Manager may from time to
time agree to receive) minus any fees payable by the Fund, with respect to the
period in question, to any one or more Sub-Advisers pursuant to any Sub-Advisory
Agreements in effect with respect to such period. Such compensation shall be
payable monthly in arrears or at such other intervals, not less frequently than
quarterly, as the Board of Trustees of the Fund may from time to time determine
and specify in writing to the Manager. The Manager hereby acknowledges that the
Fund's obligation to pay such compensation is binding only on the assets and
property belonging to the Series.
8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding interest, taxes, portfolio
brokerage commissions, distribution-related expenses and extraordinary expenses)
for any fiscal year exceeds the lowest applicable percentage of average net
assets or income limitations prescribed by any state in which shares of the
Series are qualified for sale, the Manager shall pay such excess. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Fund shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Fund or belonging to the Series are to
be calculated, that figure shall be calculated by reference to the average daily
net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager; that the
Manager, any such affiliated person or any such organization may have an
interest in the Fund; and that the existence of any such dual interest shall not
affect the validity hereof or of any transactions hereunder except as otherwise
provided in the Agreement and Declaration of Trust of the Fund, the partnership
agreement of the Manager or specific provisions of applicable law.
10. 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 Fund 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 Fund who are not interested persons of the
Fund or the Manager, 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 Manager either by vote of the Board of Trustees of
the Fund 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;
(d) this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to the
provisions of the Fund's Distribution Agreement relating to the Series
with said principal underwriter, this Agreement shall automatically
terminate at the time of such change unless the continuance of this
Agreement after such change shall have been specifically 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 Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called for
the purpose of voting on such approval.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall 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 Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
12. 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. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUND 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
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
<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)(2)(v)
NEW ENGLAND VALUE FUND
ADVISORY AGREEMENT
AGREEMENT made the 30th day of August, 1996, and amended this 1st day of
May, 1998, by and between NEW ENGLAND FUNDS TRUST I, a Massachusetts business
trust (the "Fund"), with respect to its New England Value Fund series (the
"Series"), and NEW ENGLAND FUNDS MANAGEMENT, L.P., a Delaware limited
partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting pursuant
to delegation from the Manager) will perform certain services for the Series;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own expense,
to furnish such services (either directly or pursuant to delegation to
other parties as permitted by Sections 1(b) and (c) hereof) and to assume
the obligations herein set forth, for the compensation herein provided;
provided, however, that the Manager shall have no obligation to pay the
fees of any Sub-Adviser (as defined in Section 1(b) hereof), to the extent
that the Fund has agreed, under any contract to which the Fund and the
Sub-Adviser are parties (a "Sub-Advisory Agreement") to pay such fees. The
Manager shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written agreement
with such Sub-Adviser that meets the requirements of Section 15 of the
Investment Company Act of 1940 and the rules thereunder (the "1940 Act")
applicable to contracts for service as investment adviser of a registered
investment company (including without limitation the requirements for
approval by the trustees of the Fund and the shareholders of the Series),
subject, however, to such exemptions as may be granted by the Securities
and Exchange Commission. Any Sub-Adviser may (but need not) be affiliated
with the Manager. If different Sub-Advisers are engaged to provide
Portfolio Management Services with respect to different segments of the
portfolio of the Series, the Manager shall determine, in the manner
described in the prospectus of the Series from time to time in effect,
what portion of the assets belonging to the Series shall be managed by
each Sub-Adviser.
(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to one
or more other parties (each such party, an "Administrator") selected by
the Manager. Any Administrator may (but need not) be affiliated with the
Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional investment
research as shall be necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the Series' investment objectives and policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon from
time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities selected to perform such services and exclusive of any
managerial functions described in Section 4);
(c) compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator; and
(d) supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Series'
investment policies, restrictions and guidelines, if the Manager has
delegated to one or more Sub-Advisers any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred to
in sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants retained by the
Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is a
party;
(i) taxes and fees payable by the Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the
Fund, including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and trustees of the Fund;
(m) interest, including interest on borrowings by the Fund;
(n) the costs of services, including services of counsel, required
in connection with the preparation of the Fund's registration statements
and prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation in an amount equal to the annual rate of 0.75% of the first $200
million of the average daily net assets of the Series, 0.70% of the next $300
million of the average daily net assets of the Series, and 0.65% over $500
million of such assets, respectively (or such lesser amount as the Manager may
from time to time agree to receive) minus any fees payable by the Fund, with
respect to the period in question, to any one or more Sub-Advisers pursuant to
any Sub-Advisory Agreements in effect with respect to such period. Such
compensation shall be payable monthly in arrears or at such other intervals, not
less frequently than quarterly, as the Board of Trustees of the Fund may from
time to time determine and specify in writing to the Manager. The Manager hereby
acknowledges that the Fund's obligation to pay such compensation is binding only
on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding interest, taxes, portfolio
brokerage commissions, distribution-related expenses and extraordinary expenses)
for any fiscal year exceeds the lowest applicable percentage of average net
assets or income limitations prescribed by any state in which shares of the
Series are qualified for sale, the Manager shall pay such excess. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Fund shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Fund or belonging to the Series are to
be calculated, that figure shall be calculated by reference to the average daily
net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager; that the
Manager, any such affiliated person or any such organization may have an
interest in the Fund; and that the existence of any such dual interest shall not
affect the validity hereof or of any transactions hereunder except as otherwise
provided in the Agreement and Declaration of Trust of the Fund, the partnership
agreement of the Manager or specific provisions of applicable law.
10. 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 Fund 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 Fund who are not interested persons of the
Fund or the Manager, 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 Manager either by vote of the Board of Trustees of
the Fund 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;
(d) this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to the
provisions of the Fund's Distribution Agreement relating to the Series
with said principal underwriter, this Agreement shall automatically
terminate at the time of such change unless the continuance of this
Agreement after such change shall have been specifically 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 Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called for
the purpose of voting on such approval.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall 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 Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
12. 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. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUND TRUST I,
on behalf of its New England Value Fund series
By: /s/ Henry L.P. Schmelzer
----------------------------
Name: Henry L.P. Schmelzer
Title: President
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
<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 Value 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)(2)(vi)
NEW ENGLAND STAR WORLDWIDE FUND
ADVISORY AGREEMENT
AGREEMENT made the 30th day of August, 1996, and amended this 1st day of
May, 1998, by and between NEW ENGLAND FUNDS TRUST I, a Massachusetts business
trust (the "Fund") with respect to its New England Star Worldwide Fund series
(the "Series"), and NEW ENGLAND FUNDS MANAGEMENT, L.P., a Delaware limited
partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting pursuant
to delegation from the Manager) will perform certain services for the Series;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own expense,
to furnish such services (either directly or pursuant to delegation to
other parties as permitted by Sections 1(b) and (c) hereof) and to assume
the obligations herein set forth, for the compensation herein provided;
provided, however, that the Manager shall have no obligation to pay the
fees of any Sub-Adviser (as defined in Section 1(b) hereof), to the extent
that the Fund has agreed, under any contract to which the Fund and the
Sub-Adviser are parties (a "Sub-Advisory Agreement") to pay such fees. The
Manager shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written agreement
with such Sub-Adviser that meets the requirements of Section 15 of the
Investment Company Act of 1940 and the rules thereunder (the "1940 Act")
applicable to contracts for service as investment adviser of a registered
investment company (including without limitation the requirements for
approval by the trustees of the Fund and the shareholders of the Series),
subject, however, to such exemptions as may be granted by the Securities
and Exchange Commission. Any Sub-Adviser may (but need not) be affiliated
with the Manager. If different Sub-Advisers are engaged to provide
Portfolio Management Services with respect to different segments of the
portfolio of the Series, the Manager shall determine, in the manner
described in the prospectus of the Series from time to time in effect,
what portion of the assets belonging to the Series shall be managed by
each Sub-Adviser.
(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to one
or more other parties (each such party, an "Administrator") selected by
the Manager. Any Administrator may (but need not) be affiliated with the
Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional investment
research as shall be necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the Series' investment objectives and policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon from
time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities selected to perform such services and exclusive of any
managerial functions described in Section 4);
(c) compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator; and
(d) supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Series'
investment policies, restrictions and guidelines, if the Manager has
delegated to one or more Sub-Advisers any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred
to in sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants retained by the
Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is a
party;
(i) taxes and fees payable by the Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the
Fund, including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and trustees of the Fund;
(m) interest, including interest on borrowings by the Fund;
(n) the costs of services, including services of counsel, required
in connection with the preparation of the Fund's registration statements
and prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation in an amount equal to the annual rate of 1.05% of the Series's
average daily net assets (or such lesser amount as the Manager may from time to
time agree to receive) minus any fees payable by the Fund, with respect to the
period in question, to any one or more Sub-Advisers pursuant to any Sub-Advisory
Agreements in effect with respect to such period. Such compensation shall be
payable monthly in arrears or at such other intervals, not less frequently than
quarterly, as the Board of Trustees of the Fund may from time to time determine
and specify in writing to the Manager. The Manager hereby acknowledges that the
Fund's obligation to pay such compensation is binding only on the assets and
property belonging to the Series.
8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding interest, taxes, portfolio
brokerage commissions, distribution-related expenses and extraordinary expenses)
for any fiscal year exceeds the lowest applicable percentage of average net
assets or income limitations prescribed by any state in which shares of the
Series are qualified for sale, the Manager shall pay such excess. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Fund shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Fund or belonging to the Series are to
be calculated, that figure shall be calculated by reference to the average daily
net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager; that the
Manager, any such affiliated person or any such organization may have an
interest in the Fund; and that the existence of any such dual interest shall not
affect the validity hereof or of any transactions hereunder except as otherwise
provided in the Agreement and Declaration of Trust of the Fund, the partnership
agreement of the Manager or specific provisions of applicable law.
10. 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 Fund 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 Fund who are not interested persons of the
Fund or the Manager, 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 Manager either by vote of the Board of Trustees of
the Fund 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;
(d) this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to the
provisions of the Fund's Distribution Agreement relating to the Series
with said principal underwriter, this Agreement shall automatically
terminate at the time of such change unless the continuance of this
Agreement after such change shall have been specifically 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 Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called for
the purpose of voting on such approval.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall 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 Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
12. 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. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUND 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
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
<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 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)(2)(vii)
NEW ENGLAND GOVERNMENT SECURITIES FUND
ADVISORY AGREEMENT
AGREEMENT made the 30th day of August, 1996, and amended this 1st day of
May, 1998, by and between NEW ENGLAND FUNDS TRUST I, a Massachusetts business
trust (the "Fund"), with respect to its New England Government Securities Fund
series (the "Series"), and NEW ENGLAND FUNDS MANAGEMENT, L.P., a Delaware
limited partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting pursuant
to delegation from the Manager) will perform certain services for the Series;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own expense,
to furnish such services (either directly or pursuant to delegation to
other parties as permitted by Sections 1(b) and (c) hereof) and to assume
the obligations herein set forth, for the compensation herein provided;
provided, however, that the Manager shall have no obligation to pay the
fees of any Sub-Advisor (as defined in Section 1(b) hereof), to the extent
that the Fund has agreed, under any contract to which the Fund and the
Sub-Advisor are parties (a "Sub-Advisory Agreement") to pay such fees. The
Manager shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written agreement
with such Sub-Adviser that meets the requirements of Section 15 of the
Investment Company Act of 1940 and the rules thereunder (the "1940 Act")
applicable to contracts for service as investment adviser of a registered
investment company (including without limitation the requirements for
approval by the trustees of the Fund and the shareholders of the Series),
subject, however, to such exemptions as may be granted by the Securities
and Exchange Commission. Any Sub-Adviser may (but need not) be affiliated
with the Manager. If different Sub-Advisers are engaged to provide
Portfolio Management Services with respect to different segments of the
portfolio of the Series, the Manager shall determine, in the manner
described in the prospectus of the Series from time to time in effect,
what portion of the assets belonging to the Series shall be managed by
each Sub-Adviser.
(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to one
or more other parties (each such party, an "Administrator") selected by
the Manager. Any Administrator may (but need not) be affiliated with the
Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional investment
research as shall be necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the Series' investment objectives and policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon from
time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities selected to perform such services and exclusive of any
managerial functions described in Section 4);
(c) compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator; and
(d) supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Series'
investment policies, restrictions and guidelines, if the Manager has
delegated to one or more Sub-Advisers any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred to
in sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants retained by the
Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is a
party;
(i) taxes and fees payable by the Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the
Fund, including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and trustees of the Fund;
(m) interest, including interest on borrowings by the Fund;
(n) the costs of services, including services of counsel, required
in connection with the preparation of the Fund's registration statements
and prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation in an amount equal to the annual rate of 0.650% of the first $200
million of the average daily net assets of the Series, 0.625% of the next $300
million of the average daily net assets of the Series, and 0.600% over $500
million of such assets, respectively (or such lesser amount as the Manager may
from time to time agree to receive) minus any fees payable by the Fund, with
respect to the period in question, to any one or more Sub-Advisers pursuant to
any Sub-Advisory Agreements in effect with respect to such period. Such
compensation shall be payable monthly in arrears or at such other intervals, not
less frequently than quarterly, as the Board of Trustees of the Fund may from
time to time determine and specify in writing to the Manager. The Manager hereby
acknowledges that the Fund's obligation to pay such compensation is binding only
on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding interest, taxes, portfolio
brokerage commissions, distribution-related expenses and extraordinary expenses)
for any fiscal year exceeds the lowest applicable percentage of average net
assets or income limitations prescribed by any state in which shares of the
Series are qualified for sale, the Manager shall pay such excess. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Fund shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Fund or belonging to the Series are to
be calculated, that figure shall be calculated by reference to the average daily
net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager; that the
Manager, any such affiliated person or any such organization may have an
interest in the Fund; and that the existence of any such dual interest shall not
affect the validity hereof or of any transactions hereunder except as otherwise
provided in the Agreement and Declaration of Trust of the Fund, the partnership
agreement of the Manager or specific provisions of applicable law.
10. 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 Fund 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 Fund who are not interested persons of the
Fund or the Manager, 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 Manager either by vote of the Board of Trustees of
the Fund 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;
(d) this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to the
provisions of the Fund's Distribution Agreement relating to the Series
with said principal underwriter, this Agreement shall automatically
terminate at the time of such change unless the continuance of this
Agreement after such change shall have been specifically 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 Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called for
the purpose of voting on such approval.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall 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 Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
12. 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. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUND 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
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
<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 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)(2)(viii)
NEW ENGLAND STRATEGIC INCOME FUND
ADVISORY AGREEMENT
AGREEMENT made the 30th day of August, 1996, and amended this 1st day of
May, 1998, by and between NEW ENGLAND FUNDS TRUST I, a Massachusetts business
trust (the "Fund"), with respect to its New England Strategic Income Fund series
(the "Series"), and NEW ENGLAND FUNDS MANAGEMENT, L.P., a Delaware limited
partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting pursuant
to delegation from the Manager) will perform certain services for the Series;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own expense,
to furnish such services (either directly or pursuant to delegation to
other parties as permitted by Sections 1(b) and (c) hereof) and to assume
the obligations herein set forth, for the compensation herein provided;
provided, however, that the Manager shall have no obligation to pay the
fees of any Sub-Adviser (as defined in Section 1(b) hereof), to the extent
that the Fund has agreed, under any contract to which the Fund and the
Sub-Adviser are parties (a "Sub-Advisory Agreement") to pay such fees. The
Manager shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written agreement
with such Sub-Adviser that meets the requirements of Section 15 of the
Investment Company Act of 1940 and the rules thereunder (the "1940 Act")
applicable to contracts for service as investment adviser of a registered
investment company (including without limitation the requirements for
approval by the trustees of the Fund and the shareholders of the Series),
subject, however, to such exemptions as may be granted by the Securities
and Exchange Commission. Any Sub-Adviser may (but need not) be affiliated
with the Manager. If different Sub-Advisers are engaged to provide
Portfolio Management Services with respect to different segments of the
portfolio of the Series, the Manager shall determine, in the manner
described in the prospectus of the Series from time to time in effect,
what portion of the assets belonging to the Series shall be managed by
each Sub-Adviser.
(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to one
or more other parties (each such party, an "Administrator") selected by
the Manager. Any Administrator may (but need not) be affiliated with the
Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional investment
research as shall be necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the Series' investment objectives and policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon from
time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities selected to perform such services and exclusive of any
managerial functions described in Section 4);
(c) compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator; and
(d) supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Series'
investment policies, restrictions and guidelines, if the Manager has
delegated to one or more Sub-Advisers any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred to
in sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants retained by the
Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is a
party;
(i) taxes and fees payable by the Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the
Fund, including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and trustees of the Fund;
(m) interest, including interest on borrowings by the Fund;
(n) the costs of services, including services of counsel, required
in connection with the preparation of the Fund's registration statements
and prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation in an amount equal to the annual rate of 0.65% of the first $200
million of the average daily net assets of the Series and 0.60% over $200
million of such assets, respectively (or such lesser amount as the Manager may
from time to time agree to receive) minus any fees payable by the Fund, with
respect to the period in question, to any one or more Sub-Advisers pursuant to
any Sub-Advisory Agreements in effect with respect to such period. Such
compensation shall be payable monthly in arrears or at such other intervals, not
less frequently than quarterly, as the Board of Trustees of the Fund may from
time to time determine and specify in writing to the Manager. The Manager hereby
acknowledges that the Fund's obligation to pay such compensation is binding only
on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding interest, taxes, portfolio
brokerage commissions, distribution-related expenses and extraordinary expenses)
for any fiscal year exceeds the lowest applicable percentage of average net
assets or income limitations prescribed by any state in which shares of the
Series are qualified for sale, the Manager shall pay such excess. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Fund shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Fund or belonging to the Series are to
be calculated, that figure shall be calculated by reference to the average daily
net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager; that the
Manager, any such affiliated person or any such organization may have an
interest in the Fund; and that the existence of any such dual interest shall not
affect the validity hereof or of any transactions hereunder except as otherwise
provided in the Agreement and Declaration of Trust of the Fund, the partnership
agreement of the Manager or specific provisions of applicable law.
10. 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 Fund 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 Fund who are not interested persons of the
Fund or the Manager, 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 Manager either by vote of the Board of Trustees of
the Fund 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;
(d) this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to the
provisions of the Fund's Distribution Agreement relating to the Series
with said principal underwriter, this Agreement shall automatically
terminate at the time of such change unless the continuance of this
Agreement after such change shall have been specifically 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 Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called for
the purpose of voting on such approval.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall 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 Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
12. 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. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUND 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
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
<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 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)(2)(ix)
NEW ENGLAND BOND INCOME FUND
ADVISORY AGREEMENT
AGREEMENT made the 30th day of August, 1996, and amended this 1st day of
May, 1998, by and between NEW ENGLAND FUNDS TRUST I, a Massachusetts business
trust (the "Fund"), with respect to its New England Bond Income Fund series (the
"Series"), and NEW ENGLAND FUNDS MANAGEMENT, L.P., a Delaware limited
partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting pursuant
to delegation from the Manager) will perform certain services for the Series;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own expense,
to furnish such services (either directly or pursuant to delegation to
other parties as permitted by Sections 1(b) and (c) hereof) and to assume
the obligations herein set forth, for the compensation herein provided;
provided, however, that the Manager shall have no obligation to pay the
fees of any Sub-Adviser (as defined in Section 1(b) hereof), to the extent
that the Fund has agreed, under any contract to which the Fund and the
Sub-Adviser are parties (a "Sub-Advisory Agreement") to pay such fees. The
Manager shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written agreement
with such Sub-Adviser that meets the requirements of Section 15 of the
Investment Company Act of 1940 and the rules thereunder (the "1940 Act")
applicable to contracts for service as investment adviser of a registered
investment company (including without limitation the requirements for
approval by the trustees of the Fund and the shareholders of the Series),
subject, however, to such exemptions as may be granted by the Securities
and Exchange Commission. Any Sub-Adviser may (but need not) be affiliated
with the Manager. If different Sub-Advisers are engaged to provide
Portfolio Management Services with respect to different segments of the
portfolio of the Series, the Manager shall determine, in the manner
described in the prospectus of the Series from time to time in effect,
what portion of the assets belonging to the Series shall be managed by
each Sub-Adviser.
(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to one
or more other parties (each such party, an "Administrator") selected by
the Manager. Any Administrator may (but need not) be affiliated with the
Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional investment
research as shall be necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the Series' investment objectives and policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon from
time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities selected to perform such services and exclusive of any
managerial functions described in Section 4);
(c) compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator; and
(d) supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Series'
investment policies, restrictions and guidelines, if the Manager has
delegated to one or more Sub-Advisers any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred to
in sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants retained by the
Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is a
party;
(i) taxes and fees payable by the Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the
Fund, including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and trustees of the Fund;
(m) interest, including interest on borrowings by the Fund;
(n) the costs of services, including services of counsel, required
in connection with the preparation of the Fund's registration statements
and prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation in an amount equal to the annual rate of 0.500% of the first $100
million of the average daily net assets of the Series and 0.375% over $100
million of such assets, respectively (or such lesser amount as the Manager may
from time to time agree to receive) minus any fees payable by the Fund, with
respect to the period in question, to any one or more Sub-Advisers pursuant to
any Sub-Advisory Agreements in effect with respect to such period. Such
compensation shall be payable monthly in arrears or at such other intervals, not
less frequently than quarterly, as the Board of Trustees of the Fund may from
time to time determine and specify in writing to the Manager. The Manager hereby
acknowledges that the Fund's obligation to pay such compensation is binding only
on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding interest, taxes, portfolio
brokerage commissions, distribution-related expenses and extraordinary expenses)
for any fiscal year exceeds the lowest applicable percentage of average net
assets or income limitations prescribed by any state in which shares of the
Series are qualified for sale, the Manager shall pay such excess. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Fund shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Fund or belonging to the Series are to
be calculated, that figure shall be calculated by reference to the average daily
net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager; that the
Manager, any such affiliated person or any such organization may have an
interest in the Fund; and that the existence of any such dual interest shall not
affect the validity hereof or of any transactions hereunder except as otherwise
provided in the Agreement and Declaration of Trust of the Fund, the partnership
agreement of the Manager or specific provisions of applicable law.
10. 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 Fund 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 Fund who are not interested persons of the
Fund or the Manager, 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 Manager either by vote of the Board of Trustees of
the Fund 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;
(d) this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to the
provisions of the Fund's Distribution Agreement relating to the Series
with said principal underwriter, this Agreement shall automatically
terminate at the time of such change unless the continuance of this
Agreement after such change shall have been specifically 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 Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called for
the purpose of voting on such approval.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall 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 Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
12. 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. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUND 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
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
<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 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)(2)(x)
NEW ENGLAND MUNICIPAL INCOME FUND
ADVISORY AGREEMENT
AGREEMENT made the 30th day of August, 1996, and amended this 1st day of
May, 1998, by and between NEW ENGLAND FUNDS TRUST I, a Massachusetts business
trust (the "Fund"), with respect to its New England Municipal Income Fund series
(the "Series"), and NEW ENGLAND FUNDS MANAGEMENT, L.P., a Delaware limited
partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting pursuant
to delegation from the Manager) will perform certain services for the Series;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own expense,
to furnish such services (either directly or pursuant to delegation to
other parties as permitted by Sections 1(b) and (c) hereof) and to assume
the obligations herein set forth, for the compensation herein provided;
provided, however, that the Manager shall have no obligation to pay the
fees of any Sub-Adviser (as defined in Section 1(b) hereof), to the extent
that the Fund has agreed, under any contract to which the Fund and the
Sub-Adviser are parties to (a "Sub-Advisory Agreement") to pay such fees.
The Manager shall, unless otherwise expressly provided or authorized, have
no authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written agreement
with such Sub-Adviser that meets the requirements of Section 15 of the
Investment Company Act of 1940 and the rules thereunder (the "1940 Act")
applicable to contracts for service as investment adviser of a registered
investment company (including without limitation the requirements for
approval by the trustees of the Fund and the shareholders of the Series),
subject, however, to such exemptions as may be granted by the Securities
and Exchange Commission. Any Sub-Adviser may (but need not) be affiliated
with the Manager. If different Sub-Advisers are engaged to provide
Portfolio Management Services with respect to different segments of the
portfolio of the Series, the Manager shall determine, in the manner
described in the prospectus of the Series from time to time in effect,
what portion of the assets belonging to the Series shall be managed by
each Sub-Adviser.
(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to one
or more other parties (each such party, an "Administrator") selected by
the Manager. Any Administrator may (but need not) be affiliated with the
Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional investment
research as shall be necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the Series' investment objectives and policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon from
time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities selected to perform such services and exclusive of any
managerial functions described in Section 4);
(c) compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator; and
(d) supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Series'
investment policies, restrictions and guidelines, if the Manager has
delegated to one or more Sub-Advisers any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred to
in sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants retained by the
Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is a
party;
(i) taxes and fees payable by the Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the
Fund, including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and trustees of the Fund;
(m) interest, including interest on borrowings by the Fund;
(n) the costs of services, including services of counsel, required
in connection with the preparation of the Fund's registration statements
and prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation in an amount equal to the annual rate of 0.500% of the first $100
million of the average daily net assets of the Series and 0.375% over $100
million of such assets, respectively (or such lesser amount as the Manager may
from time to time agree to receive) minus any fees payable by the Fund, with
respect to the period in question, to any one or more Sub-Advisers pursuant to
any Sub-Advisory Agreements in effect with respect to such period. Such
compensation shall be payable monthly in arrears or at such other intervals, not
less frequently than quarterly, as the Board of Trustees of the Fund may from
time to time determine and specify in writing to the Manager. The Manager hereby
acknowledges that the Fund's obligation to pay such compensation is binding only
on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding interest, taxes, portfolio
brokerage commissions, distribution-related expenses and extraordinary expenses)
for any fiscal year exceeds the lowest applicable percentage of average net
assets or income limitations prescribed by any state in which shares of the
Series are qualified for sale, the Manager shall pay such excess. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Fund shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Fund or belonging to the Series are to
be calculated, that figure shall be calculated by reference to the average daily
net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager; that the
Manager, any such affiliated person or any such organization may have an
interest in the Fund; and that the existence of any such dual interest shall not
affect the validity hereof or of any transactions hereunder except as otherwise
provided in the Agreement and Declaration of Trust of the Fund, the partnership
agreement of the Manager or specific provisions of applicable law.
10. 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 Fund 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 Fund who are not interested persons of the
Fund or the Manager, 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 Manager either by vote of the Board of Trustees of
the Fund 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;
(d) this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to the
provisions of the Fund's Distribution Agreement relating to the Series
with said principal underwriter, this Agreement shall automatically
terminate at the time of such change unless the continuance of this
Agreement after such change shall have been specifically 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 Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called for
the purpose of voting on such approval.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall 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 Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
12. 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. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUND 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
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
<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 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)(2)(xi)
NEW ENGLAND STAR SMALL CAP FUND
ADVISORY AGREEMENT
AGREEMENT made the 31st day of December, 1996, and amended this 1st day of
May, 1998, by and between NEW ENGLAND FUNDS TRUST I, a Massachusetts business
trust (the "Fund"), with respect to its New England Star Small Cap Fund series
(the "Series"), and NEW ENGLAND FUNDS MANAGEMENT, L.P., a Delaware limited
partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting pursuant
to delegation from the Manager) will perform certain services for the Series;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof.
The Manager hereby accepts such employment and agrees, at its own expense,
to furnish such services (either directly or pursuant to delegation to
other parties as permitted by Sections 1(b) and (c) hereof) and to assume
the obligations herein set forth, for the compensation herein provided;
provided, however, that the Manager shall have no obligation to pay the
fees of any Sub-Adviser (as defined in Section 1(b) hereof), to the extent
that the Fund has agreed, under any contract to which the Fund and the
Sub-Adviser are parties (a "Sub-Advisory Agreement") to pay such fees. The
Manager shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
(b) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services
(and assumption of related expenses) to one or more other parties (each
such party, a "Sub-Adviser"), pursuant in each case to a written agreement
with such Sub-Adviser that meets the requirements of Section 15 of the
Investment Company Act of 1940 and the rules thereunder (the "1940 Act")
applicable to contracts for service as investment adviser of a registered
investment company (including without limitation the requirements for
approval by the trustees of the Fund and the shareholders of the Series),
subject, however, to such exemptions as may be granted by the Securities
and Exchange Commission. Any Sub-Adviser may (but need not) be affiliated
with the Manager. If different Sub-Advisers are engaged to provide
Portfolio Management Services with respect to different segments of the
portfolio of the Series, the Manager shall determine, in the manner
described in the prospectus of the Series from time to time in effect,
what portion of the assets belonging to the Series shall be managed by
each Sub-Adviser.
(c) The Manager may delegate any or all of its responsibilities
hereunder with respect to the provision of Administrative Services to one
or more other parties (each such party, an "Administrator") selected by
the Manager. Any Administrator may (but need not) be affiliated with the
Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional investment
research as shall be necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the Series' investment objectives and policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon from
time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
entity or entities selected to perform such services and exclusive of any
managerial functions described in Section 4);
(c) compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator; and
(d) supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Series'
investment policies, restrictions and guidelines, if the Manager has
delegated to one or more Sub-Advisers any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred to
in sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants retained by the
Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
(h) brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is a
party;
(i) taxes and fees payable by the Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the
Fund, including registering and qualifying its shares with Federal and
State regulatory authorities;
(l) expenses of meetings of shareholders and trustees of the Fund;
(m) interest, including interest on borrowings by the Fund;
(n) the costs of services, including services of counsel, required
in connection with the preparation of the Fund's registration statements
and prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to like
authority.
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to others,
so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation in an amount equal to the annual rate of 1.05% of the average daily
net assets of the Series (or such lesser amount as the Manager may from time to
time agree to receive) minus any fees payable by the Fund, with respect to the
period in question, to any one or more Sub-Advisers pursuant to any Sub-Advisory
Agreements in effect with respect to such period. Such compensation shall be
payable monthly in arrears or at such other intervals, not less frequently than
quarterly, as the Board of Trustees of the Fund may from time to time determine
and specify in writing to the Manager. The Manager hereby acknowledges that the
Fund's obligation to pay such compensation is binding only on the assets and
property belonging to the Series.
8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding interest, taxes, portfolio
brokerage commissions, distribution-related expenses and extraordinary expenses)
for any fiscal year exceeds the lowest applicable percentage of average net
assets or income limitations prescribed by any state in which shares of the
Series are qualified for sale, the Manager shall pay such excess. Solely for
purposes of applying such limitations in accordance with the foregoing sentence,
the Series and the Fund shall each be deemed to be a separate fund subject to
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Fund or belonging to the Series are to
be calculated, that figure shall be calculated by reference to the average daily
net assets of the Fund or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any affiliated
person of the Manager, any organization in which the Manager may have an
interest or any organization which may have an interest in the Manager; that the
Manager, any such affiliated person or any such organization may have an
interest in the Fund; and that the existence of any such dual interest shall not
affect the validity hereof or of any transactions hereunder except as otherwise
provided in the Agreement and Declaration of Trust of the Fund, the partnership
agreement of the Manager or specific provisions of applicable law.
10. 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 Fund 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 Fund who are not interested persons of the
Fund or the Manager, 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 Manager either by vote of the Board of Trustees of
the Fund 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;
(d) this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to the
provisions of the Fund's Distribution Agreement relating to the Series
with said principal underwriter, this Agreement shall automatically
terminate at the time of such change unless the continuance of this
Agreement after such change shall have been specifically 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 Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called for
the purpose of voting on such approval.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall 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 Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
12. 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. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the meaning
defined in the Fund's Agreement and Declaration of Trust as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to any
shareholder of the Fund or to any other person, firm or organization, for any
act or omission in the course of, or connected with, rendering services
hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEW ENGLAND FUND 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
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
<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 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.
