Letter of Transmittal
U.S. Securities and Exchange Commission
Filing Desk
450 5th. St., N.W.
Washington, DC 20549
Re: East End Mutual Funds, Inc.
CIK No. 0000920261
File Nos. 811-8408
Commissioners:
Filed herewith on EDGAR in accordance with the provisions of Regulation
S-T is post Effective Amendment No. 1 to the captioned Funds's
Registration Statement on Form N1-A. Changes have been marked in
accordance with Regulation 310 and copies of the Articles of
Incorporation , By-Laws and Investment Managemet agreement are included
as Exhibits in accordance with Regulation 102(c).
Very Truly Yours
Martin V.Miller
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON 10/28/96
FILE NO: 811-8408
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. /____/
Post-Effective Amendment No. 1 /_X_/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY /X/
ACT OF 1940
Amendment No. 1
(Check appropriate box or boxes.)
EAST END MUTUAL FUNDS, INC.
(Exact name of Registrant as Specified in Charter)
736 West End Avenue, Suite 3A
New York, New York 10025-6245
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code:
212-666-0289
ARISTIDES M. MATSIS, 736 WEST END AVENUE, SUITE 3A
NEW YORK, NEW YORK 10025-6245
(Name and Address of Agent for Service)
Please send copy of communications to:
MARTIN V. MILLER, ESQUIRE
10 East Court Street
Doylestown, Pennsylvania 18901
215-345-7110
ANNUAL REGISTRATION STATEMENT PURSUANT TO RULE 485
It is proposed that this filing will become effective immediately
upon filing.
A Rule 24f-2 Notice for the year ended June 30, 1996 was filed on
August 27,1996
FORM N-1A
CROSS REFERENCE SHEET
Form N-1A Part A
ITEM NO. PROSPECTUS LOCATION
1. Cover Page . . Cover Page
2. Synopsis . . . Shareholder Transaction
Expenses
3. Condensed Financial
Information . . Per Share Table
4. General Description of
Registrant . . Investment Objective of the
Fund; Investment Policies of
the Fund; Other Investment
Policies; Investment Risks;
Who Should Invest; General
Information; Dividends and
Distributions; Taxation
5. Management of the
Fund . . . . Management's Experience;
How the Fund is Managed;
Fund Service Providers
5A. Management Discussion of
Fund Performance Management Discussion of
Fund Performance
6. Capital Stock and
Other Securities . General Information
7. Purchase of Securities
Being Offered . . How to Invest in the Fund;
How Net Asset Value is Determined
Plan of Distribution;
8. Redemption or
Repurchase How to Sell (Redeem) Your Shares
FORM N-1A PART B
LOCATION IN STATEMENT OF ADDITIONAL INFORMATION
ITEM NO.
9. Pending Legal
Proceedings . . . None
10. Cover Page . . . Cover Page
11. Table of Contents . . Table of Contents
12. General Information and The Company; Description of
History . . . Predecessor Company and the
Management; Independent
Auditors
13.Investment Objectives Investment Objective and
and Policies . . .Policies; Investment
Restrictions
14. Management of the Fund . . Investment Manager; Directors
and Officers
15. Control Persons and Control Persons and Principal
Principal Holders Holders of Securities
of Securities . .
16. Investment Advisory The Investment Manager
and Other Independent Auditors
Services . . . See item "Fund Service
Providers" in Prospectus
17. Brokerage Allocation Execution of Portfolio
Transactions
18. Capital Stock and Other
Securities . . See "General Information" in
Prospectus
19. Purchase, Redemption and Additional Purchase and
Pricing of Securities Redemption Information
Being Offered . . Distribution Plan
FORM N-1A PART B (Continued)
20. Tax Status . . . Tax Information
Tax Distributions of Dividends
21. Underwriters . . Not Applicable
22. Calculations of Performance
Data Measuring Performance
23. Financial Statements . Independent Auditors' Report;
Schedule of Investments 6/30/96;
Statement of Assets and Liabilities
6/30/96; Notes to Financial Statement
6/30/96
PART C
OTHER INFORMATION
Item 24. Financial Statements
and Exhibits
(a) Financial Statements
Schedule of Investments 6/30/96
Statement of Assets and Liabilities 6/30/96
(b) Exhibits Exhibit No.
(1) copies of the Charter as now
in effect;
Articles of Incorporation 1*
(2) copies of the existing bylaws
or instruments corresponding
thereto;
Copy of Bylaws 2*
(3) copies of any voting trust None
agreement with respect to
more than 5 percent of any
class of equity securities
of the Registrant;
(4) copies of all instruments Article VI
defining the rights of holders Section (e)
of the Securities being of Exhibit
registered including where No. 1
applicable, the relevant
portion of the Articles of
Incorporation or bylaws of the
Registrant;
(5) copies of all investment
advisory contracts relating to
the management of the assets
of the Registrant;
Form of Investment Management 5*
Agreement between East End
Mutual Funds, Inc. with
respect to The Capital
Appreciation Series and East
End Investment Management Company;
(6) copies of each underwriting or
16*****
distribution contract between
the Registrant and a principal
underwriter, and specimens or
copies of all agreements between
principal underwriters and dealers;
(7) copies of all bonus, profit None
sharing, pension or other similar
arrangements wholly or partly for
the benefit of directors or
officers of the Registrant in
their capacity as such; any such
plan that is not set forth in a
formal document, furnish a
reasonably detailed description thereof;
(8) copies of all custodian
agreements and depository
contracts under Section 17(f)
of the 1940 Act with respect
to securities and similar
investments of the Registrant,
including the schedule of remuneration;
Form of Custodian Agreement 8***
between East End Mutual Funds,
Inc. and The Provident Bank;
(9) copies of all other material contracts
not made in the ordinary course
of business which are to be
performed in whole or in part at
or after the date of the filing of
the Registration Statement;
(a) Transfer Agency and Service 9(a)***
Agreement between East End
Mutual Funds, Inc. and
East End Investment Management
Company;
(b) Pricing of Portfolio 9(b)***
Agreement between East End
Mutual Funds, Inc. and
East End Investment Management
Company;
(c) Administration Agreement for 9(c)***
Reporting and Accounting
Services between East End Mutual
Funds, Inc. and East End
Investment Management Company.
(10) an opinion and consent of counsel 10****
as to the legality of the securities
being registered, indicating whether
they will, when sold, be legally
issued, fully paid and non-assessable;
(11) copies of any other opinions,
appraisals or rulings and consents
to use thereof relied on in the
preparation of this Registration
Statement and required by Section 7
of the 1933 Act.
(a) Independent Auditors Report
11(a)*****
(b) Consent of Independent Public
11(b)*****
Accountants
(12) all financial statements None
omitted from Item 23;
(13) copies of any agreements or None
understandings made in
consideration for providing the
initial capital between or among
the Registrant, the underwriter,
adviser, promoter, or initial
stockholders and written assurances
from promoters or initial shareholders
that their purchases were made for
investment purposes without any
present intention of redeeming or
reselling;
(14) copies of the model plan used in the
establishment of any retirement plan
in conjunction with which Registrant
offers its securities, any instructions
thereto and any other documents making
up the model plan. Such form(s) should
disclose the costs and fees charged in
connection therewith;
Master Retirement Plan 14(a)***
Master Retirement Plan - Profit Sharing
Adoption Agreement 14(b)***
Master Retirement Plan - Money Purchase
Adoption Agreement 14(c)***
Simplified Employee Pension Plan
Adoption Agreement 14(d)***
Self Directed Individual Retirement
Account 14(e)***
Standardized Paired Profit Sharing
Plan with Trust Agreement 14(f)***
(15) copies of any plan entered into
by Registrant pursuant to Rule 12b-1
under the 1940 Act, which describes
all material aspects of the
financing of distribution of
Registrant's shares, and any agreements
with any person relating to implement-
ation of such Plan;
Form of Plan of Distribution 15(a)**
to be adopted by East End Mutual (b)(ii) ***
Funds, Inc. with respect to the
Capital Appreciation Series;
Form of Agreement Pursuant to 15(b)***
Plan of Distribution between
Form of Selling
East End Mutual Funds, Inc. with Agreement 15(b)(ii)
respect to the Capital Appreciation *****
Series and East End Investment
Management Company;
(16) Schedule for computation 16 *****
of each performance quotation
provided in the Registration
Statement in response to Item 22
(which need not be audited);
* These Exhibits were filed with Registration Statement - 6/2/94.
** This Exhibit was filed with Pre-Effective Amendment No. 2 - 9/14/94.
*** This Exhibit was filed with Pre-Effective Amendment No. 3 - 1/25/95.
**** This Exhibit was filed with Post-Effective Amendment No.4 - 5/4/95
*****This Exhibit was filed with Post-Effective Amendment No.1 10/28/96
Item 25. Persons Controlled by or Under Common Control With Registrant
See Caption "Control Persons and Principal Holders of Securities" in the
Statement of Additional Information
Item 26. Number of Holders of Securities
(a) Title of Class
Common Capital Stock, $.001 par value
(b) Number of Record Holders
3
Item 27. Indemnification
(a) General. The Articles of Incorporation (the "Articles") of
the Corporation provide that to the fullest extent permitted by
Maryland statutory and decisional law and the Investment Company Act
of 1940, no director or officers of the Corporation shallbe personally
liable to the Corporation or its shareholders for money damages.
The Articles further provide that the Corporation shall indemnify
(1) its directors and officers, whether serving the corporation,
or at its request, any other entity, to the full extent permitted or
required by the general laws of the State of Maryland now or
hereafter in force, including the advancing of expenses under
the procedures and to the full extent permitted by law, and
(2) its other employees and agents,to such extent as shall
be authorized by the Board of Directors, the Corporation's
By-Laws and permitted by law. The foregoing rights indemnifi-
cation are not exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors
may take such action as is necessary to carry out the indemnification
provisions and is expressly empowered to adopt, approve, and amend,
from time to time, such By-Laws, resolutions or contracts
implementing such provisions or such further indemnification arrangements
as may be permitted by law.
The Articles further provide that no amendment of the Articles of
Incorporation shall limit or eliminate the right to indemnification
provided, with respect to acts or omissions occurring prior to such
amendment. Nothing contained in the Articles shall be construed to
authorize the Corporation to indemnify any officer or director of the
Corporation against any liability to the Corporation or to any hold-
ers of securities of the Corporation to which he or she is subject
by reason of willful malfeasance,bad faith,gross negligence,
or reckless disregard of the duties involved in the conduct of his
or her office. Any indemnification by the Corporation shall be
consistent with the requirements of law, including the Investment
Company Act of 1940.
The By-Laws of the Corporation provide that the Corporation shall
indemnify any individual who is a present or former director or
officer of the Corporation and who, by reason of his or her position
was, is or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter collectively
referred to as a "Proceeding") against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by such
director or officer in connection with such Proceeding, to the
fullest extent that such indemnification may be lawful under Maryland
law.
(b) Disabling Conduct. The By-Laws provide that nothing therein
shall be deemed to protect any director or officer against any
liability to the Corporation or its shareholders to which such
director or officer 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 (such conduct
hereinafter referred to as "Disabling Conduct").
The By-Laws provide that no indemnification of a director or officer
may be made unless: (1) there is a final decision on the merits by a
court or other body before whom the Proceeding was brought that the
director or officer to be indemnified was not liable by reason of
Disabling Conduct; or (2) in the absence of such a decision, there is
a reasonable determination, based upon a review of the facts, that the
director or officer to be indemnified was not liable by reason of
Disabling Conduct, which determination shall be made by: (i) the
vote of a majority of a quorum of directors who are neither "int-
erested persons" of the Corporation as defined in Section 2(a)(19)
of the Investment Company Act of 1940, nor parties to the Proceeding;
or (ii) an independent legal counsel in a written opinion.
(c) Standard of Conduct. Under Maryland law, the Corporation may not
indemnify any director if it is proved that: (1) the act or omission
of the director was material to the cause of action adjudicated in
the Proceeding and (i) was committed in bad faith or (ii) was
the result of active and deliberate dishonesty; or (2) the director
actually received an improper personal benefit; or (3) in the case
of a criminal proceeding, the director had reasonable cause to
believe that the act or omission was unlawful. No indemnification
may be made under Maryland law unless authorized for a specific
proceeding after a determination has been made, in accordance with
Maryland law, that indemnification is permissible in the circum-
stances because the requisite standard of conduct has been met.
(d) Required Indemnification. Maryland law requires that a director
or officer who is successful, on the merits or otherwise, in the
defense of any Proceeding shall be indemnified against reasonable
expenses incurred by the director or officer in connection with
the Proceeding. In addition, under Maryland law, a court of appro-
priate jurisdiction may order indemnification under certain cir-
cumstances.
(e) Advance Payment. The By-Laws provide that the Corporation may
pay any reasonable expenses so incurred by any director or officer
in defending a Proceeding in advance of the final disposition there-
of to the fullest extent permissible under Maryland law. In accord-
ance with the By-Laws, such advance payment of expenses shall be
made only upon the undertaking by such director or officer to repay
the advance unless it is ultimately determined that such director
or officer is entitled to indemnification, and only if one of the
following conditions is met: (1) the director or officer to be
indemnified provides a security for his undertaking; (2) the Corp-
oration shall be insured against losses arising by reason of any
lawful advances; or (3) there is a determination, based on a review
of readily available facts,that there is reason to believe that the
director or officer to be indemnified ultimately will be entitled to
indemnification, which determination shall be made by:(i) a majority
of a quorum of directors who are neither "interested persons" of the
Corporation, as defined in Section 2(a)(19) of the Investment Company
Act of 1940, nor parties to the Proceeding; or (ii) an independent
legal counsel in a written opinion.
(f) Insurance. The By-Laws provide that, to the fullest extent
permitted by Maryland law and Section 17(h) of the Investment Company
Act of 1940, the Corporation may purchase and maintain insurance on
behalf of any officer or director of the Corporation, against any
liability asserted against him or her and incurred by him or her in and
arising out of his or her position, whether or not the Corporation
would have the power to indemnify him or her against such liability.
(g) Public Policy Presumption under the Securities Act of 1933 and
Undertaking Pursuant to Rule 484(b)(1) under the 1933 Act. Insofar
as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the Registrant's By-Laws or otherwise,
the Registrant has been advised that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy
as expressed in the Act and is,therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by a controlling
precedent, submit to a court of appropriate jurisdiction the question
of whether indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Aristides M.Matsis and Michael A.Matsis are principals in Matsis Associates
which is a company that was engaged in the business of owning and
operating restaurants.In addition, both have been managing a trust and in
connection therewith have been investing and reinvesting the trust assets.
Item 29. Principal Underwriter
The Fund does not have a principal underwriter
Item 30. Location of Accounts and Records
The books and records of the Fund, are maintained at East End
Investment Management Company, 736 West End Avenue, Suite 3A, New York,NY
10025.
Item 31. Management Services
There are no management service contracts not described in Part A
or Part B of this Form N-1A
Item 32. Undertakings
(a) Registrant agrees that the Directors of East End Mutual,
Funds, Inc. will promptly call a meeting of shareholders for the purpose of
acting upon questions of removal of a director or directors, when requested
in writing to do so by the record holders of not less than 10% of the
outstanding shares.
(b) Registrant agrees to file a post-effective amendment, using
financial statements which need not be certified within 4 to 6 months from the
effective date of Registrant's 1933 Act Registration Statement.
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 Registration to the Statement to be signed on its behalf by the
undersigned, hereunto duly authorized in New York, New York, on the 25th. day
of October, 1996.
EAST END MUTUAL FUNDS, INC.
BY: /s/ Aristides Matsis
President
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:
NAME TITLE DATE
Director, 10/25/96
/S/ ARISTIDES M. MATSIS President
and Treasurer
Director, Vice 10/25/96
/S/ MICHAEL A. MATSIS President and
Secretary
Director 10/25/96
/S/ FREDERICK M. FISHER
STATEMENT OF ADDITIONAL INFORMATION
EAST END MUTUAL FUNDS, INC.
Capital Appreciation Series
736 West End Avenue, Suite 3A
New York, NY 10025-6245
Tel. No.: 1-800-289-6336
Dated: October 28, 1996
This Statement of Additional Information is not a
prospectus. It contains information in addition to that set forth
in the Fund's prospectus, dated June 30,1996 It is intended to
provide you with more detailed information regarding the
activities and operations of the Fund, and should be read in
conjunction with the prospectus, a copy of which may be obtained
from East End Mutual Funds, Inc. without charge at the address
stated above or by calling the above number.
TABLE OF CONTENTS
Page
The Company . . . . . . . . 3
Investment Objective and Policies . . . . . 3
Investment Restrictions . . . . . . . 7
Distribution Plan . . . . . . . . 9
Distributions of Dividends. . . . . . . 10
Directors and Officers . . . . . . . 11
Control Persons and Principal
Holders of Securities . . . . . . 13
The Investment Manager . . . . . . . 13
Execution of Portfolio Transactions . . . . .16
Additional Purchase and Redemption Information . . .17
Tax Information . . . . . . . . 19
Description of Predecessor Company
and Management . . . . . . . 23
Independent Auditors . . . . . . . 23
Measuring Performance . . . . . . . 23
THE COMPANY
East End Mutual Funds, Inc. (the "Company") is an open-
end, diversified management investment company. The Company
currently offers shares of the Capital Appreciation series only.
Prior to its organization as a corporation, the Company was
organized and operated as a private investment trust.
East End Investment Management Company (the "Manager")
manages the portfolio of assets of the Capital Appreciation
series.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are
described in detail in the Fund's prospectus. The following
discussion supplements the Prospectus discussion.
"When Issued" Securities
The Fund may, from time to time, purchase securities on
a "when-issued" basis. The price of such securities is fixed at
the time when the purchase is made, but delivery and payment for
the "when-issued" securities take place at a later date.
Normally, the settlement date, when payment is made, occurs
within one month of the date of purchase. While "when-issued"
securities may be sold prior to the settlement date, it is the
intention to purchase such securities for the purpose of
acquiring them unless a sale appears more advantageous. At the
time a commitment is made to purchase a security on a "when-
issued" basis, the transaction will be recorded and the value of
the security reflected in the Fund's per share net asset value.
The market value of the "when-issued" securities may be more or
less than the purchase price at the time of settlement. The
Manager does not believe that the Fund's per share net asset
value will be adversely affected by its purchase of securities on
a "when-issued" basis. The Fund will establish a segregated
account with its custodian bank in which it will maintain cash
and high-grade liquid debt securities equal in value to the
commitments for "when-issued" securities. Such securities either
will be acquired or, if appropriate, will be sold on or before
the settlement date. To the extent that assets in the Fund are
held in cash pending settlement of the purchase of "when-issued"
securities, the Fund will earn income on these assets.
By taking a position in the "when-issued" securities
before the settlement date, the Manager will secure its allotment
of a security on behalf of the Fund at a known price and quantity
instead of taking a chance that the securities will be available
later, on the open market, at a price and quantity that suits the
Manager.
Short Term Trading
In seeking the Fund's objective, the Manager will
buy or sell portfolio securities whenever the Manager believes it
is appropriate to do so. In deciding whether it is appropriate
to sell portfolio securities, the Manager does not consider how
long the Fund has owned the security. From time to time, the
Fund securities will be purchased with a view of realizing short-
term trading profits. By executing short-term sales, the Manager
limits its exposure to losses which may be greater than the costs
and expenses of trading involved. Changes in the securities held
in the Fund's portfolio is known as "portfolio turnover" and
generally involves some expenses to the Fund. These expenses may
include brokerage commissions or dealer mark-ups and other
transaction costs on both the sale of the securities and the
reinvestment of the proceeds in other securities. If sales of
the portfolio securities cause the Fund to realize short term
capital gains, such gains will be taxable as ordinary income. As
a result of the Fund's investment policies, under certain market
conditions the Fund's portfolio turnover rate may be greater than
that of other mutual funds. Portfolio turnover rate for a fiscal
year is the ratio of the lesser of purchases or sales of
securities to the monthly average of the value of securities--
excluding securities whose maturities at acquisition were one
year or less. The Fund's portfolio turnover rate is not a
limiting factor when the Manager considers a change in the Fund's
portfolio.
Foreign Securities
Since foreign securities are normally denominated and
traded in foreign currencies, the values of the Fund's assets may
be affected favorably or unfavorably by currency exchange rates
and exchange control regulations. Exchange rates with respect to
certain currencies may be particularly volatile and the Fund's
policy is not to invest in securities denominated in those
currencies. There may be less information publicly available
about a foreign company than a U.S. company and while foreign
companies are not generally subject to accounting, auditing and
financial reporting standards and practices comparable to those
in the U.S., the American Depository Receipts and U.S.investment
companies which invest in the securities of issuers located in
particular foreign countries ("country funds") are subject to
such U.S. reporting and accounting standards and practices.
Foreign income taxes may be withheld at the source on payment of
dividends of the foreign issuer.
The securities of some foreign companies are less
liquid and at times more volatile than securities of comparable
U.S. companies. Foreign brokerage commissions and other fees are
also generally higher than in the U.S.
In addition, with respect to certain foreign countries,
there is a possibility of nationalization or expropriation of
assets, confiscatory taxation, political or financial instability
and diplomatic developments which could affect the value of
investments in those countries. In certain countries, legal
remedies available to investors may be more limited than those
available with respect to investments in the U.S. or other
countries. The laws of some foreign countries may limit the
Fund's ability to invest in securities of certain issuers located
in those countries. Special tax consideration apply to foreign
securities. The Fund intends to invest only in the American
Depository Receipts, the shares of foreign companies whose shares
are directly listed on U.S. exchanges and in the shares of
country funds to eliminate or minimize some of the foregoing
risks.
Securities Loans
The Fund may make secured loans of its portfolio
securities amounting to no more than 25% of its total assets,
thereby realizing additional income. The risks of lending
portfolio securities, as with other extensions of credit, consist
of possible delay in recovery of the securities or possible loss
of rights in the collateral should the borrower fail
financially. As a matter of policy, securities loans are made to
broker dealers pursuant to agreements requiring that the loans
continuously be secured by collateral consisting of cash or short
term debt obligations at least equal at all times to the value of
the securities on loan. The borrower pays to the Fund an amount
equal to any dividends and interest received on securities lent.
The Fund retains all or a portion of the interest received on
investment of the cash collateral or receives a fee from the
borrower. Although voting rights, or rights to consent, with
respect to the loaned securities pass to the borrower, the Fund
retains the right to call the loans on reasonable notice at any
time, and it will do so to enable the Fund to exercise voting
power on any matters materially affecting the investment. The
Fund may also call such loans to sell the securities. This
practice allows the Fund to have interest income it would not
have had otherwise.
INVESTMENT RESTRICTIONS
The following investment restrictions have been adopted
by the Fund and (unless otherwise noted) are fundamental and
cannot be changed without the affirmative vote of a majority of
the Fund's outstanding voting securities. The Fund may not:
1. With respect to 75% of its total assets, invest in
the securities of any one issuer (other than those issued or
guaranteed as to principal and interest by the U.S. Government
and its agencies and instrumentalities), if immediately after and
as a result of such investment (a) more than 5% of the total
assets of the Fund would be invested in the securities of such
issuer or (b) more than 10% of any class of the outstanding
voting securities of any issuer would be held.
2. Make loans to others, except (a) by the purchase
of debt securities which are either publicly distributed or
customarily purchased by institutional investors, and (b) by
lending of up to 25% of its portfolio securities.
3. (a) Borrow money other than from a bank for
temporary or emergency purposes and then only in an amount not in
excess of 5% of its total assets (at the lower of cost or fair
market value): any such borrowing will be made only if
immediately thereafter there is asset coverage of at least 300%
of all borrowings; (b) mortgage, pledge or hypothecate any of
its assets except in connection with permissible borrowings.
4. Purchase securities on margin or underwrite
securities.
5. Invest in oil, gas or mineral exploration or
development leases and programs, or real estate. (This does not
preclude investments in marketable securities of issuers engaged
in such activities.)
6. Invest in commodities or commodity contracts.
7. Invest more than 25% of the market value of its
total assets in the securities of companies engaged in one
industry. (This restriction does not apply to securities of the
U.S. Government, its agencies and instrumentalities.)
8. Issue senior securities except that the Fund shall
not be prohibited from making any permitted borrowings, mortgages
or pledges.
9. Engage in the short sales of securities.
10. Invest more than 5% of its total assets in
securities of any one issuer which, together with predecessors,
has not had a record of at least three years of continuous
operation.
11. Invest in the securities of other investment
companies, except as such securities may be acquired as part of a
merger, consolidation or acquisition of assets and except as to
investments in foreign country funds which are registered
investment companies.
12. Invest in securities with legal or contractual
restrictions on resale, or securities which are not readily
marketable.
13. Invest in any issuer for purposes of exercising
control or management.
Investment restrictions, 1 through 9 are fundamental
policies and may not be changed without shareholder approval.
Investment restrictions 10 through 13 may be changed
without shareholder approval.
The percentage limitations set forth in the investment
restrictions described above, are considered at the time that
securities are purchased.
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan pursuant to
Rule 12b-1 under the Investment Company Act of 1940. The purpose
of the plan is to permit the Fund to compensate dealers for
services provided and for advertising, promotion and other
distribution expenses. The 12b-1 fee will be capped at the annual
rate of .50% of the Fund's average net assets, subject to the
right of the Fund's Board of Directors to reduce the amount of
payments or to suspend the Plan for such periods as they may
determine.
Subject to these limitations, the amount of such
payments and the specific purposes for which they are made shall
be determined by the Board of Directors of the Fund.
Continuance of the plan is subject to annual approval
by the Board of Directors of the Company, including a majority of
the Board of Directors who are not interested persons of the
Company and who have no direct or indirect interest in the Plan
or related agreements (the "Rule 12b-1 Directors"), cast in
person at meeting called for that purpose. All material
amendments to the Plan must likewise be approved by the Board of
Directors, including a majority of the Rule 12b-1 Directors. The
Plan may not be amended in order to increase materially the costs
the Fund may bear for distribution pursuant to the Plan without
being approved by a majority of the outstanding voting securities
of the Fund. The Plan terminates automatically in the event of
its assignment and may be terminated without penalty, at any
time, by a vote of a majority of the outstanding voting
securities of the Fund or by a vote of the majority of the Rule
12b-1 Directors.
DISTRIBUTIONS OF DIVIDENDS
Distributions to Shareholders
The Fund intends to declare and pay dividends and other
distributions, as stated in its Prospectus. In order to avoid
the payment of any federal excise tax, the Fund must declare on
or before December 31 of each year distributions at least equal
to 98% of its ordinary income for that calendar year and at least
98% of the excess of any capital gains over capital losses
realized in the 12 month period ending October 31 of that year,
together with any undistributed amounts of ordinary income and
capital gains from the previous calendar year on which no federal
income tax was paid.
Distributions by the Fund result in the reduction of
the net asset value of the Fund's shares. Should a distribution
reduce the net asset value below the shareholder's cost basis,
such distribution would, nevertheless, be taxable to the
shareholder as ordinary income or capital gain as described
above, even though, from an investment standpoint, it may
constitute a partial return of capital. In particular, investors
should be careful to consider the tax implications of buying
shares just prior to a distribution. The price of shares
purchased at that time includes the amount of the forthcoming
distribution. Those investors purchasing shares just prior to a
distribution will then receive a partial return of their
investment upon such distribution, which will, nevertheless, be
taxable to them.
DIRECTORS AND OFFICERS
The Directors are responsible for the overall
management of the Fund, including general supervision and review
of the investment activities. The Officers, who administer the
Fund's daily operations, are appointed by the Board of
Directors. The current Directors and Officers of the Company and
their affiliations and principal occupations for the past five
years are set forth below. The Company does not have any plans
in effect which provide profit sharing, pension or retirement
benefits for the Directors and Officers or which provides them
with health insurance benefits. At present, none of the
Directors will receive any fees or other compensation for serving
as Directors. The Company may determine in the future to pay
fees to the non-interested directors as well as their expenses.
Aristides M. Matsis:* Chairman of the Board and a Director,
President and Treasurer of the Company. His address is 736 West
End Avenue, New York, New York 10025. He was a founder and a
principal of the Matsis Group, a company that owns and operates
restaurants. He is an active private investor and is the manager
of private investment portfolios including the management, over
the past five years, of a private investment trust with an
investment objective and policies similar to those of the Fund.
Michael A. Matsis:* Vice Chairman of the Board and a Director,
Vice President and Secretary of the Company. His address is 302
East 91st. Street, New York, New York 10028. He is the son of Mr.
Aristides Matsis. He received a Bachelor of Science degree from
the University of Albany with a major in finance. Since 1985, he
has been a principal of the Matsis Group, a company that owned
and operated restaurants. He is a registered investment advisor
with the U.S. Securities and Exchange Commission. He was
qualified as a registered representative with the National
Association of Securities Dealers, Inc. and the State of New York
and has been employed as such by several stock brokerage
companies. Over the past five years he and Mr. Aristides M.
Matsis provided investment advice to a private investment trust
with an investment objective and policies similar to those of the
Fund.
_______________
* An "interested person" of the Fund as defined in the
Investment Company Act of 1940.
Frederick M. Fisher, D.D.S., Director. His address is 1498 Third
Avenue, New York, New York 10028. Dr. Fisher is in the private
practice of dentistry in New York, New York.
Jeffrey W. Newcomer,D.P.M., Director. His address is 74 Ashton
Place, Buffalo, New York. Dr. Newcomer is in private practice in
Buffalo, New York.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Mr. Aristides M. Matsis, will provide the Company with
its initial capital. As a result, he will, at the time that the
Company becomes operational, own 100% of the shares of the Fund
at its inception and be a control person of the Company.
THE INVESTMENT MANAGER
Investment management services are provided to the Fund
by East End Investment Management Company (the "Manager")
pursuant to an investment management agreement dated June 28,
1995. The Investment Management Agreement will remain in effect
until June 28,1996 unless sooner terminated, and shall continue
in effect thereafter for periods not exceeding one year so long
as such continuation is approved at least annually by (1) the
vote of a majority of the Directors of the Company including by a
majority of the non-interested Directors cast in person at a
meeting called for the purpose of voting on such approval or (2)
by a majority of the Fund's outstanding voting securities. The
Agreement may be terminated at any time, without penalty, by the
Fund or the Manager upon sixty days written notice, and is
automatically terminated in the event of its assignment as
defined in the Investment Company Act.
Mr. Aristides M. Matsis, is a Director and is President
and Treasurer and Mr. Michael A. Matsis is a Director, Vice
President and Secretary, of the Manager. Mr. Aristides M. Matsis
owns 85% of the Manager's outstanding voting securities and Mr.
Michael A. Matsis, 15%.
The Fund is responsible for the Fund's operating
expenses including, but not limited to: the costs of portfolio
securities purchased or sold (including brokerage commissions and
referral fees to brokers, if any, for referring institutional
investors) and any losses incurred in connection with such
transactions; fees payable to or the reimbursement of expenses
incurred on behalf of the Fund by the Manager under the
Investment Management Agreement; Plan of Distribution payments;
the expenses of organizing the Company and the Fund; filing fees
and expenses relating to the registration and qualification of
the Fund's shares and the Company under federal and/or state
securities laws and maintaining such registrations and
qualifications; fees payable to the Company's Directors who are
non-interested Directors and all expenses incurred in connection
with services, including travel expenses; taxes and governmental
fees; costs of liability, fidelity and other insurance
(including directors and officers liability insurance and errors
and omissions insurance); expenses arising out any claim for
damages or other relief asserted against the Company or the Fund;
legal fees and expenses and accounting and auditing expenses;
charges of the custodian; charges of the transfer agent, pricing
agent and other agents; the expenses of setting in type, printing
and mailing prospectuses, statements of additional information,
proxy materials and shareholder reports to existing shareholders;
any extraordinary expenses (including any expenses the Company
may incur as a result of its involvement in any action, suit or
proceeding or its legal obligation to provide indemnification to
its officers, directors, employees and agents); fees, voluntary
assessments and other expenses incurred in connection with
membership in investment company trade organizations; the costs
of printing, mailing and tabulating proxies and the costs of
meetings of shareholders, the Board and any committees of the
Board; the cost of educational materials, informative literature
and other publications provided by the Company to its Directors
and Officers in connection with the performance of their duties.
The Manager has agreed that if, in any fiscal year, the
Fund shall qualify its shares for sale in any jurisdiction, the
applicable statutes or regulations of which expressly limit the
amount of the Fund's total annual expenses, the Manager shall
defer its annual investment management fee to the extent that the
Fund's total annual expenses as a percentage of average net
assets (other than brokerage commissions, other capital items,
interest, taxes, extraordinary items and other excludable items,
charges, costs and expenses) exceed the percentage limitations
imposed on the Fund by the most stringent regulations of any such
jurisdiction, so long as the Fund remains so qualified in such
jurisdiction. California presently limits expenses to 2 1/2% of
the first $30 million of the average net assets of the Fund, 2%
of the next $70 million and 1 1/2% of all in excess of $100
million. Because the Fund does not charge a sales charge at the
time Fund shares are purchased, California law permits the amount
of the distribution fee payable by the Fund (see "Distribution
Plan," page 9) to be excluded from total annual expenses.
To the extent the Manager performs a service or assumes
an operating expense for which the Fund is obligated but cannot,
at the time, pay (other than services which the Manager is
obligated to perform under the Investment Management Agreement)
or defers its fee as the result of the application of a state
expense limitation requirement, the Manager is entitled to seek
reimbursement from the Fund within the following three years for
the Managers' costs incurred in rendering such service, assuming
such expense or deferring its fee.
EXECUTION OF PORTFOLIO TRANSACTIONS
Pursuant to the Investment Management Agreement, the
Manager determines which securities are to be purchased and sold
by the Company on behalf of the Fund and which broker-dealers are
eligible to execute the Fund's transactions, subject to the
instructions of and review by the Company's Board of Directors.
Purchases and sales of securities in the over-the-counter market
will generally be executed directly with a "market maker" unless,
in the opinion of the Manager or the Fund, a better price and
execution can otherwise be obtained by using a broker for the
transaction. Where possible, purchase and sale transactions will
be effected through broker-dealers (including banks) which
specialize in the types of securities which the Fund will be
holding, unless better executions are available elsewhere.
Securities may also be purchased from a broker-dealer
acting as dealer and from underwriters. Dealers and underwriters
usually act as a principal for their own account.
Purchases from dealers will include the spread between the bid
and asked price and purchases from underwriters will include a
concession paid by the issuer to the underwriter.
Investment decisions for the Fund are made independently
from those of other client accounts of the Manager.
Nevertheless, it is possible that at times identical securities
will be selected for investment by the Fund and for one or more
of such client accounts. To the extent that any client account
and the Fund are in the market for the same security at the same
time, the number of shares or amount of securities being sought
for the Fund may not be obtainable or, if obtainable, then at a
higher price. Similarly, the Fund may not be able to obtain as
high a price for, or to sell the number of shares or amount of
securities desired, at the same time.
The Fund does not deem it practicable and in its best
interests to solicit competitive bids for commission rates on
each transaction. However, consideration is regularly given to
information concerning the prevailing level of commissions
charged on comparable transactions by qualified brokers in
general.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Payments to shareholders for shares of the Fund
redeemed directly from the Fund will be made as promptly as
possible but no later than seven days after receipt by the
Fund's Transfer Agent of the written request in proper form,
with the appropriate documentation as stated in the Fund's
Prospectus, except that the right of redemption may be suspended
or the date of payment postponed during any period when (a)
trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange commission or such
exchange is closed for other than weekends or holidays; (b) an
emergency exists as determined by the Securities and Exchange
Commission making sales or purchases of portfolio securities or
valuation of the Fund not reasonably practicable; or (c) for such
other period as the Securities and Exchange Commission may permit
for the protection of the Fund's shareholders. At various times,
the Fund may be requested to redeem shares for which it has not
yet received confirmation of good payment; in this circumstance,
the Fund may delay the redemption until payment for the purchase
of such shares has been collected and confirmed to the Fund.
The Fund intends to pay cash (U.S. dollars) for all
shares redeemed, but, under abnormal conditions which make
payment in cash unwise, the Fund may make payment partly in its
portfolio securities. Although the Fund does not anticipate that
it will make any part of a redemption payment in securities, if
such payment were made the investor may incur brokerage costs in
converting such securities to cash. The Fund has elected to be
governed by Rule 18f-1 under the 1940 Act, which contains a
formula for determining the minimum redemption amounts that must
be paid in cash. Any portfolio securities issued for an "in
kind" redemption will be readily marketable.
The redemption proceeds may be more or less than the
investor's cost, depending on the market value of the Fund's
portfolio securities at the time of redemption.
TAX INFORMATION
Taxation of the Fund
The Fund intends to qualify and elect to be treated as
a regulated investment company under subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code") for each taxable
year by complying with all applicable requirements regarding the
source of its income, the diversification of its assets, and the
timing of its distributions. The Fund's policy is to distribute
to its shareholders all of its net investment income and any net
realized capital gains for each calendar year in a manner which
complies with the distribution requirements of the Code so as to
avoid being subject to any federal income or excise taxes.
However, the Board of Directors may elect to pay any applicable
excise taxes if it determines that payment is, under the
circumstances, in the best interests of the Fund.
In order to qualify as a regulated investment company
the Fund must, among other things, (a) derive at least 90% of its
gross income from dividends, interest, payments with respect to
loans of stock and securities, gains from the sale or other
disposition of stock or securities, or other income derived with
respect to the business of investing in stock; (b) derive less
than 30% of its gross income from the sale or other disposition
of stock or securities held less than three months; and (c)
diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of its assets is
represented by cash, cash items, U.S. Government securities,
securities of other regulated investment companies and other
securities (provided that the securities of any one issuer shall
not exceed 5% of the Fund's assets or 10% of the voting
securities of the issuer), and (ii) not more than 5% of the
Fund's assets is invested in the securities of any one issuer
(other than U.S.Government securities or the securities of other
regulated investment companies). As such, and by complying with
the applicable provisions of the Code, the Fund will not be
subject to federal income tax on taxable income (including
realized capital gains) which is distributed to shareholders in
accordance with the timing requirements of the Code.
Investment income received by the Fund from sources
within foreign countries may be subject to foreign income taxes
withheld at the source.
Taxation of Shareholders
Distributions of net investment income and net realized
capital gains will be taxable to shareholders whether made in
cash or reinvested in shares. In determining amounts of net
realized capital gains to be distributed, any capital loss
carryover from prior years will be applied against capital
gains. Shareholders receiving distributions in the form of
additional shares will have a cost basis for federal income tax
purposes in each share so received equal to the net asset value
of a share of the Fund on the reinvestment date. Fund
distributions will also be included in individual and corporate
shareholders income on which the alternative minimum tax may be
imposed.
Distributions of net investment income (which includes
the excess of net short-term capital gain over net long-term
capital loss) will be taxed as ordinary income. A portion of the
net investment income distributions is expected to qualify for
the corporate received deduction, subject to the satisfaction by
the corporate shareholder of certain holding and debt financing
restrictions. The portion of the distribution deducted by the
corporate shareholder must be included in its adjusted
alternative minimum taxable income.
Any distributions of Fund's net long-term capital gain
in excess of its short-term capital loss is treated as long-term
capital gain regardless of the length of time the Fund's shares
have been held by the shareholder. The maximum federal income tax
rate on long-term capital gains income for individuals is
currently 28% as contrasted with a federal income tax rate of
39.6% on ordinary income distributions. For corporate
shareholders, long-term capital gains income is taxed at the same
rate as ordinary income.
Sales and redemptions of shares of the Fund may result
in gains and losses for tax purposes to the extent of the
difference between the proceeds from the shares redeemed and the
shareholder's adjusted tax basis for such shares. Any loss
realized upon the redemption of shares within six months from
their date of purchase will be treated as a long-term capital
loss to the extent of distributions of long-term capital gain
dividends during such six month period. All or a portion of a
loss realized upon the redemption of shares may be disallowed to
the extent shares are purchased (including shares acquired by
means of reinvested dividends) within 30 days before or after
such redemption.
Backup Withholding
The Fund or the securities dealer effecting a sale of
Fund shares by a shareholder will be required to file information
reports with the Internal Revenue Service ("IRS") with respect to
distributions, redemptions and other payments made to the
shareholders. In addition, the Fund will be required to withhold
20% of federal income tax on distributions, redemptions and other
payments made to accounts of individual or other tax exempt
shareholders who (i) have not furnished their correct taxpayer
identification numbers and certain required certifications on the
account application, or (ii) with respect to which the Fund or
the securities dealer has been notified by the IRS that the
number furnished is incorrect or that the account is otherwise
subject to withholding. The Fund will inform investors of the
source of their dividends and distributions at the time they are
paid, and will promptly after the cost of each calendar year
advise investors of the tax status of such distributions and
dividends.
Miscellaneous
The above discussion is not intended to be a complete
discussion of all applicable federal tax consequences of an
investment in the Fun. Distributions and the transactions
referred to in the preceding paragraphs may be subject to state
or local income taxes, and the treatment thereof may differ from
the federal income tax treatment. In particular, under the laws
of certain states, distributions of net investment income are
taxable to shareholders as dividends, even though a portion of
such distributions may be derived from interest on U.S.
Government obligations which, if received directly by such
shareholders, would be exempt from state income tax. Given the
passive nature of the income realized and distributed by the
Fund, as a very general rule, a shareholder should only be
subject to tax on Fund distributions or redemption payments in
the state in which the shareholder resides (or has its commercial
domicile in the case of a non-individual).
DESCRIPTION OF THE PREDECESSOR COMPANY
AND THE MANAGEMENT
The Manager's prior experience during the past five
years was to manage a portfolio of securities of a private
investment trust, with similar objectives as the Fund, and to
manage the trust's affairs and investments. The officers and
managers of the trust are now the officers and managers of the
assets of the Fund. The furnishing of the prior performance
record of the Manager is material to the investors of the Fund
since they will be relying on the managers' past results to make
informed decisions on the future prospects of the Fund and
whether they wish to invest in the Fund.
INDEPENDENT AUDITORS
Sanville & Company, Philadelphia, Pennsylvania, has
been selected as independent public accountants for East End
Mutual Funds, Inc. The financial statements included in the
Prospectus have been included in reliance on the report of
Sanville & Company, given on the authority of said firm as
experts in auditing and accounting.
MEASURING PERFORMANCE
Performance information provides you with a method of
measuring and monitoring your investments. East End Mutual
Funds, Inc. may quote the performance of the Capital Appreciation
Series in advertisements or shareholder communications.
Understanding performance measures:
Total return for the Capital Appreciation Series may be
calculated on an average annual total return basis or an
aggregate total return basis. Average annual total return
reflects the average annual percentage change in value of an
investment over the measuring period. Aggregate total return
reflects the total percentage change in value of an investment
over the measuring period. Both measures assume the reinvestment
of dividends and distributions.
Performance comparisons:
Yield and total return of the Capital Appreciation
Series may be compared to those of mutual funds with similar
investment objectives and to bond, stock or other relevant
indices or to rankings prepared by independent services or other
financial or industry publications that monitor mutual fund
performance.
Total return and yield data, as reported in national
financial publications such as Money Magazine, Forbes, Barron's,
The Wall Street Journal, Investor's Business Daily and The New
York Times, as well as in publications of a local or regional
nature, may be used for comparison.
The performance of The Capital Appreciation Series may
also be compared to data prepared by Lipper Analytical Services,
Inc.; Morningstar and Value Line Mutual Fund Service and total
returns for the Capital Appreciation Series may be compared to
indices such as the Dow Jones Industrial Average, the Standard &
Poor's 500 Stock Index, and NASDAQ Composite Index.
EAST END MUTUAL FUNDS, INC.
Capital Appreciation Series
736 West End Avenue, Suite 3A
New York, New York 10025-6245
Tel. No. 1 800-289-6336
The East End Mutual Funds, Inc. Capital Appreciation
Series (the "Fund") is series of East End Mutual Funds, Inc.
(the "Company"), an open-end, diversified, management investment
company registered as such under the Investment Company Act of
1940. The Company may, from time to time, issue additional
series, which will have different investment objectives from
those of the Fund.
This Prospectus sets forth basic information about the
Fund that prospective investors should know before investing. It
should be read and retained for future reference. A Statement of
Additional Information, dated October 28, 1996, has been filed
with the U. S. Securities and Exchange Commission and is
incorporated in its entirety by reference and is available,
without charge, upon written request to the Fund at the address
above, or by calling the telephone number set out above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated: October 28,1996
This document shall not be an offer to sell or a solicitation of
an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities law of any such state.
PAGE
Shareholder Transaction Expenses . . . . . 2
Investment Objective of the Fund . . . . . 3
Investment Policies of the Fund . . . . . 3
Other Investment Policies and their Risks 5
Portfolio Turnover . . . . . . . 7
Investment Risks 7
Who Should Invest . . . . . . 8
How the Fund is Managed . . . . . . 8
Brokerage Allocation 9
Fund Service Providers . . . . . . .10
How to Invest in the Fund . . . . . .11
How Net Asset Value is Determined . . . . .12
Plan of Distribution . . . . . . .13
How to Sell (Redeem) Your Shares . . . . .13
General Information . . . . . . . 15
Dividends and Distributions . . . . . 15.
Taxation . . . . . . . . . 16
Retirement Plans . . . . . . . .17
Maximum Sales Load Imposed on Purchases . . None
Maximum Sales Load Imposed on Reinvested Dividends . None
Deferred Sales Load . . . . . None
Redemption Fees . . . . . . None
Exchange Fee . . . . . . None
Annual Fund Operating Expenses
(As a Percentage of Average Net Assets)
Management Fees . . . . . . . . .79%
12b-1 Fees . . . . . . . . .39
Other Expenses . . . . . . . . 1.59
Total Fund Operating Expenses . . . . . . 2.77%
The purpose of this table is to assist you in understanding the
various costs and expenses that you would bear, directly or
indirectly, as an investor of the Fund.
The following example illustrates the expenses that you
would incur on a $1,000 investment over various periods, assuming
(1) a 5% annual rate of return and (2) redemption at the end of
each period:
1 Year $28 3 Years $86 5 Years $146 10 years $310
This example should not be considered a representation of
past or future expenses or performance. Actual expenses may be
higher or lower than those shown.
CONDENSED FINANCIAL INFORMATION
Audited- October 2,1995-June 30,1996
1. Investment income: $ 3,093
2. Expenses, after reimbursement: 4,617
3. Net investment loss: (1,524)
4. Dividends from net investment loss: (0.007)
5. Net realized and unrealized gains on securities: 63,250
6. Distributions from net realized gains on securities: 0.078
7. Net increase in net asset value: 3.328
8. Net asset value at the beginning of the period: 10.48
9. Net asset value at the end of the period: 13.73
10.Expenses to average net assets: 2.07%
11.Net investment income to average net assets: (0.91)%
12.Portfolio turnover rate: 65.81%
13.Number of shares outstanding at end of 6/30/96: 10,612
14.Total return: 31.76%
MANAGEMENTS EXPERIENCE
Commencing January 1, 1989 through December 31, 1994, the
principals of East End Investment Management Company, the Fund's
investment adviser, managed multiple portfolios, one of which was
a portfolio of common stocks having substantially similar
objectives, policies, techniques and restrictions as that which
will be used to manage the Fund and comparable to the estimated
size of the Fund. The cumulative total return of the managed
portfolio was 98.39%. Had the Fund's estimated expenses been
applicable,the return would have been 88.10%. The period 1989
through 1993 was one of economic growth, recession and recovery
with gains and losses in the stock market, while 1994 exhibited
losses in stocks and bonds as the Federal Reserve Bank raised
interest rates.
Prior to January 1, 1989, that portfolio had different
investment objectives, policies, techniques and restrictions.
Cumulative total returns are historical, include the change in
share price, the reinvestment of dividends and capital gains. Of
course, there can be no assurance that similar results may be
achieved in the future and there is always the risk of loss as
well as gain. The Manager's prior experience is provided to
investors so that they may make an informed investment decision.
Cumulative total return, expenses and fees were
calculated in the same manner for the managed account as it will
be for the Fund which is: beginning period net asset value was
subtracted from the ending period net asset value (including all
income and the deduction of fees accrued to the end of the
period), the results divided by the beginning net asset value.
Market values were calculated at the close of trading, 4:00 p.m.,
E.D.T.
INVESTMENT OBJECTIVE OF THE FUND
The investment objective of the Fund is to provide
capital appreciation. Income is a secondary objective. While
current income will be considered in making Fund investments, it
will be of secondary importance. The Fund's investment objective
may not be changed without shareholder approval.
No assurance can be given that the Fund will attain its
objective or that shareholders will be protected from the risk of
loss that is inherent in equity investing. Investors may wish to
reduce the potential risk of investing in the Fund by purchasing
shares on a regular, periodic basis (dollar cost averaging)
rather than making an investment in one lump sum.
INVESTMENT POLICES OF THE FUND
The East End Investment Management Company, the Fund's
Manager (hereafter sometimes the "Manager") seeks capital growth
and secondarily income by investing up to 95% of the Fund's
assets principally in the common stock of companies which, in the
Manager's judgment, are exhibiting and are expected to continue
achieving above average growth in sales and earnings. The
management of those companies selected will have plans to
introduce or will have introduced new products, services or
marketing innovations that are unique and perceived as needed in
the marketplace. However, there is always the risk that the new
products or services that are introduced will not be well
received or that a marketing innovation will be unsuccessful.
Such companies will generally have equity market
capitalizations of between $50 million and $10 billion. The Fund
may invest up to 15% of its assets in companies which have equity
market capitalizations of less than $50 million. The securities
of such companies are generally more volatile and speculative and
may cause the Fund's portfolio to fluctuate up or down in value,
more so than the Standard & Poor's Composite Index.
The Manager generally expects the companies selected to
gain market share within their industry and to maintain yearly
gains in sales growth. Two major elements of the disciplined
selection process are (1) above average earnings growth and (2)
better than average relative price performance of the company's
stock. Both fundamental and technical market research are used
to locate emerging new potential leaders in an industry.
The Fund may invest in securities traded on the New
York Stock Exchange, NASDAQ, the American Stock Exchange and in
the over-the-counter market.
When the Manager perceives that the relative risks and rewards of
holding equities are less than for debt instruments, as for
example when the risk of holding U.S.Treasury bonds is offset by
the probable rewards of falling long-term interest rates or when
equities are deemed to be overvalued., the investment manager may
invest in obligations of the U.S. Government, its agencies and
instrumentalities, obligations of foreign governments and
corporate bonds with investment grade ratings by Standard &
Poor's Corporation ("Standard & Poors"). Up to 50% of the Fund's
assets may be invested in the debt instruments described.
Obligations of certain agencies and instrumentalities
of the U.S. Government, such as those of the Government National
Mortgage Association, are supported by the full faith and credit
of the U.S. Treasury; others, such as the Export-Import Bank of
the United States, are supported by the right of the issuer to
borrow from the Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the discretionary
authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S.
Government would provide financial support to U.S. Government-
sponsored instrumentalities, if it is not obligated to do so by
law.
The Manager may also invest up to 10% of the Fund's
portfolio in a diversified group of high yielding, below
investment grade corporate debt securities. No investments will
be made in securities that are rated below CCC by Standard &
Poor's nor in unrated securities. Securities rated less than BBB
by Standard & Poor's are classified as non-investment grade debt
securities or "junk bonds". These securities generally have a
higher yield but also present higher risks than investment grade
bonds. The risks include higher likelihood of default by the
issuer, greater price volatility, difficulty in disposing of or
valuing the securities under certain market conditions, and the
possible adverse effects of economic recession, interest rate
increases and changes in public perceptions of the market for
these investments. These securities are predominantly
speculative. Such securities are considered as speculative by
the major credit rating agencies.
Investing for Defensive Purposes
During periods when the Manager deems it advisable for
the Fund's portfolio to be more conservatively positioned as when
significant adverse market or economic circumstances require
immediate action to avoid losses, the investment adviser will
invest in short-term liquid and high-grade debt securities that
present minimal credit and interest rate risk.
Such investments will include bank obligations,
commercial paper (which are unissued promissory notes issued by
corporations) and obligations issued or guaranteed by the United
States Government, its agencies or instrumentalities or by
foreign governments.
Bank obligations include U.S. dollar-denominated
certificates of deposit, bankers' acceptances and short-term time
deposits, issued or supported by the credit of United States
Government or issued or supported by the credit of a foreign
government.
Commercial paper purchased by the Fund may include, in
addition to that issued by U.S. corporations, obligations issued
by Canadian corporations and Canadian counterparts of U.S.
corporations and Europaper, which is U.S. dollar-denominated
commercial paper of a foreign issuer.
Investment may also be made in debt obligations
guaranteed by foreign governments.
The investment policies of the Fund are, as described
above, not fundamental and may be changed without shareholder
approval.
OTHER INVESTMENT POLICIES AND THEIR RISKS
The Fund may also engage, subject to the limitations
set forth, in the following investment practices, each of which
may involve certain special risks. See "Risk Factors", p.7.
Percentage investment limitations will be considered only at the
time of investment. The Statement of Additional Information
contains more detailed information about some of these investment
practices, including limitations designed to reduce risk. The
following investment policies may be changed without shareholder
approval.
Lending Portfolio Securities
The Fund may lend its investment securities
constituting up to 25% of its total assets to qualified
institutional investors for the purpose of realizing additional
income. A loan of portfolio securities may be either short-term
(less than nine months) or long-term. The risk of lending
portfolio securities consists of possible delays in receiving the
securities or possible loss of rights in the collateral should
the borrower fail financially. Loans of securities by the Fund
will be collateralized by cash, letters of credit, or securities
issued or guaranteed by the U.S. Government or its agencies. The
collateral will equal, at all times, at least 100% of the current
market value of the loaned securities. The Fund will have the
right to obtain the return of the loaned securities on five-days
notice.
"When-Issued" Securities
The Fund may occasionally purchase securities on a
"when-issued" basis, for payment and delivery at a future date,
typically 15 to 45 days after the commitment to purchase. It is
anticipated that such "when-issued" securities will principally
be equity securities. The price is generally fixed on the date
of commitment to purchase and the value of the security is
thereafter reflected in the Fund's net asset value. At the time
of settlement, the market value of the security may be more or
less than the purchase price. When the Fund purchases "when-
issued" securities, a segregated account will be established and
maintained with the Fund's custodian in an amount equal, at
least, to the when-issued commitments consisting of cash or high-
quality liquid debt instruments.
Warrants
The Fund also may invest up to 5% of its net assets in
warrants. A reason for investing in warrants is to permit the
Fund to participate in an anticipated increase in the market
value of a security without having to purchase the security to
which the warrants relate. Warrants convey no rights to
dividends or voting rights, but only an option to purchase equity
securities of the issuer at a fixed price. If such securities
appreciate, the warrants may be exercised and sold at a gain, but
a loss will be incurred if such securities decrease in value or
the term of the warrant expires before it is exercised. The 5%
limitation does not include warrants acquired by the Fund in
units or attached to other securities.
FOREIGN INVESTMENTS
The purchase of foreign securities allows the Manager
the flexibility to invest globally when the U.S. market lacks
sufficient investment opportunities. The securities of certain
foreign issuers are listed directly on one or more national
securities exchanges or on NASDAQ. These securities may be
bought and sold in the same manner as the securities of U.S.
issuers traded there. The securities of other foreign issuers
are represented by American Depository Receipts ("ADRs"). ADRs
are certificates issued by a U.S. depository bank or trust
company and represent the right to receive securities of a
foreign issuer deposited with such depository bank or a non-U.S.
branch of such depository bank. ADRs are traded on one or more
national security exchanges, on NASDAQ or in the over-the-counter
market. Investment in ADRs has certain advantages over direct
investment in foreign securities traded in foreign markets as
for example:
(i) ADR's are U.S. dollar denominated investments which are
easily transferrable and for which market quotations are readily
available; and
(ii) Issuers whose securities are represented by ADRs are
subject to the same auditing, accounting and financial reporting
standards as domestic issuers.
Fee structures differ widely among ADRs. The depository bank
charges an issuance fee when an ADR is created and a similar
charge, called a cancellation fee, is levied when the underlying
shares are sold back into the local market. Certain depository
banks charge fees other than the issuance and cancellation fees,
for example, dividend fees and rights issuance fees as well.
ADRs may be sponsored by the issuing depository bank or
unsponsored. Unsponsored ADRs are riskier. The information
available about them may not be current or may be incomplete,
they are less liquid and since most of them are traded in the
over-the-counter market, the spread between the bid and asked
prices are wider, meaning higher transaction costs. The Fund may
invest up to 25% of its net assets in U.S. dollar denominated
American Depository Receipts, both sponsored and unsponsored.
Foreign investments may be affected favorably or
unfavorably by changes in currency exchange rates and by currency
control regulations. There may be less publicly available
information about a foreign company than about a U.S. company.
Securities of some foreign companies are less liquid or more
volatile than securities of U.S. companies. Investments in
foreign securities can involve other risks different from those
affecting U.S. investments, including local political and
economic developments, expropriation and nationalization of
assets and imposition of withholding taxes on dividends or
interest payments.
Closed-End Investment Companies
The Fund may also invest up to 10% of its total assets
in shares of closed-end investment companies that invest in the
securities of issuers located in particular countries. Shares of
certain closed-end investment companies may at times be acquired
only at market prices representing premiums to their net asset
values. If the Fund acquires shares of closed-end investment
companies, shareholders would bear both their proportionate share
of expenses of the Fund (including management and advisory fees)
and, indirectly, the expenses of such closed-end investment
companies.
PORTFOLIO TURNOVER
Although investments are generally made for the long
term, the Manager retains the right to trade securities actively
for short-term trading profits, irrespective of how long they
have been held, if the objective of the Fund would be better
served. The annual portfolio turnover of the Fund for the fiscal
year was 65.81%. A turnover rate of 100% would occur, for
example, if the value of all of the securities held in the Fund's
portfolio were replaced within a one-year period. A high
turnover rate involves correspondingly higher brokerage
commission expenses which would have to be borne directly by a
fund. It may also affect the character of capital gains, if any,
realized and distributed by a fund since short-term capital gains
are taxable as ordinary income.
The Fund is subject to certain types of risks. It is
subject to the risks of the securities markets in which the
portfolio securities of the Fund are traded. Securities markets
are cyclical and the prices of the securities traded in such
markets rise and fall at various times. These cyclical periods
may extend over significant periods of time.
The Fund is also subject to the risk that the Manager
will not be successful in managing the Fund's portfolio at
times. The Manager will make decisions on buying, selling or
holding portfolio securities based upon the skills of the Manager
in interpreting the available economic, financial and market
data.
Investors should also be aware that certain of the
investment policies of the Fund described above under Other
Investment Policies may be deemed aggressive and will entail
greater than average risk to the extent such policies are
implemented. Risks associated with such policies are set forth
above under the descriptions for such policies.
Certain fundamental investment restrictions which are
described in the Statement of Additional Information have been
adopted with respect to the Fund. These restrictions are deemed
to be fundamental and may not be changed without shareholder
approval.
WHO SHOULD INVEST
The Fund is intended for investors who are seeking
growth of capital and income. Although the Fund's Manager may
consider current income when making Fund portfolio investments,
it is of secondary importance. Investors should not consider the
Fund a substitute for fixed income investments.
HOW THE FUND IS MANAGED
The business affairs of the Fund are managed under the
general supervision of the Company's Board of Directors. The
Company's officers, its employees and the Manager are responsible
for the day-to-day operations of the Fund.
East End Investment Management Company, 736 West End
Avenue, Suite 3A, New York, NY 10025 (the "Manager") serves as
the Fund's investment manager. The Manager has not provided
investment management services to any other mutual funds. Under
the terms of the Investment Management Agreement, the Manager,
for the fee described below, manages the investment and
reinvestment of the assets contained in the Fund's portfolio and
continuously reviews, supervises and administers the Fund's
investment program. The Manager is subject to the authority of
the Company's Board of Directors.
Messrs. Aristides M. Matsis and Michael A. Matsis will
be primarily responsible for the day-to-day management of the
Fund's portfolio. Mr. Aristides M. Matsis is president,
treasurer and a director and Mr. Michael A. Matsis is vice
president, secretary and a director, of the Company and of the
Manager. Mr. Aristides M. Matsis, from 1963 to 1993, and Michael
A. Matsis, from 1987 to 1993, are principals of The Matsis Group
which owned and operated a chain of restaurants. Mr. Aristides
M.Matsis is a private investor in stocks, bonds and real estate.
Mr. Michael A. Matsis graduated from the University of Albany
with a degree in business and finance in 1985. Thereafter, he was
employed in the brokerage business as a registered
representative. Since 1993, he has been registered with the U.S.
Securities and Exchange Commission as an investment advisor and,
together with Mr. Aristides M. Matsis, he has managed a series of
private investment trusts. Over the past five years, Messrs.
Matsis have been managing a private investment account with an
investment objective and policies similar to those of the Fund.
The Manager will receive a fee, payable monthly, for
the performance of its services at an annual rate of 1% on the
first $500 million of the average net assets of the Fund and 3/4
of 1% on average net assets in excess of $500 million. The fee
will be accrued daily for the purpose of determining the offering
and redemption price of the Fund's shares.
The rate of the management fee to be paid with respect
to the Fund is higher than that paid by most other investment
companies.
The Fund shall bear all of its expenses and all
expenses of the Fund's organization, operation and business not
specifically assumed or agreed to be paid by the Manager. The
Manager will pay or provide for the payment of the cost of such
office space, office equipment and office services as are
adequate for the Fund's needs; provide competent personnel to
perform all of the Fund's executive, administrative and clerical
functions not performed by Company employees or agents on behalf
of the Fund; and authorize persons who are officers, directors
and employees of the Manager who may be designated as directors,
officers, and committee members of the Company to serve in such
capacities at no cost to the Company or the Fund.
The Fund pays all of its other costs and expenses
including, among others, interest; taxes; fees and expenses of
directors who are non-interested persons; administrative and
distribution expenses related directly to the issuance and
redemption of Fund shares; expenses of reporting or qualifying
shares for sale; charges of custodians and transfer and other
agents; costs of preparing, printing and mailing reports and
notices to shareholders; charges for legal and auditing services,
and other fees and expenses of every kind not expressly assumed
by the Manager. See the Statement of Additional Information for
a detailed listing of such costs and expenses.
The Manager may elect, from time to time, to defer the
receipt of some part or all of its management fee or advance
money for expenses in order to keep the Fund's annual operating
expenses at or below the maximum allowed by any applicable state
expense limitation or to maintain the Fund's expense level at or
below a set amount as determined by the Manager. Any management
fee or portion thereof thus deferred and expenses advanced will
be subject to recoupment by the Manager and reimbursement by the
Fund, at any time within the three years following the deferral
or advancement; provided, the Fund is able to make such
reimbursement and remain in compliance with any applicable state
expense limitation and further provided, that such payment would
not adversely affect the Fund's tax status or have any other
adverse tax impact on the Fund or its shareholders. Any
deferrals will be shown on the Fund's books as a contingent
liability until such time as it is extinguished or expires. The
liability of the Fund to make such reimbursement which, as noted,
is a contingent liability, takes place at the time the
advancement or deferral of expenses occurs.
BROKERAGE ALLOCATION
The Investment Management Agreement authorizes the
Manager to select brokers and dealers for the placing of
brokerage orders.
In placing brokerage orders, the Manager will use its
best efforts to obtain the most favorable prices and executions.
The determination of what may constitute the most favorable price
and execution in a brokerage order involves a number of factors,
including the overall direct net economic result to the Fund
(involving both price paid or received, and any commissions or
other costs paid), and the efficiency with which the transaction
is effected. The sale of Fund shares may be considered when
determining the firms which are to execute brokerage transactions
for the Fund.
The Manager is authorized to pay a brokerage
commission in excess of that which another broker might have
charged for effecting the same transaction, in recognition of the
value of brokerage and research services provided by the broker.
Investment decisions for the Fund will be made
independently from those for other accounts that may be managed,
from time to time, by the Manager. Investments for such other
accounts may also be made in the same securities as the Fund.
When a purchase or sale of the same security is made
contemporaneously on behalf of the Fund and another account,
available investments or opportunities for sales will be executed
in a manner which the Manager deems to be equitable. In some
instances, this procedure may affect the price paid or received
by the Fund or the size of the investment position obtained or
sold by the Fund.
FUND SERVICE PROVIDERS
The Fund could not function without the services
provided by certain companies. In addition to the investment
management services provided by the Manager, some of the
additional services provided by East End Investment Management
Company and by others are listed below.
Custodian; Provident Bank
Provident Bank, Cincinnati, Ohio 45202 (the
"Custodian") holds the investments and other assets that the Fund
owns. The Custodian is responsible for receiving and paying for
securities purchased; delivering against payment for securities
sold; receiving and collecting income from investments; making
payments covering expenses of the Fund, and performing other
administrative duties, all as directed by persons authorized by
the Fund. The Custodian does not exercise any supervisory
function in such matters as the purchase and sale of portfolio
securities, payment of dividends, or payment of expenses of the
Fund. Portfolio securities of the Fund purchased in the United
States are maintained in the custody of the Custodian, and may be
entered in the Federal Reserve Book Entry System, or the security
depository system of The Depository Trust Company.
Transfer and Administrative Services, Accounting Services
and Portfolio Pricing Services; East End Investment Management
Company
East End Investment Management Company, 736 West End
Avenue, Suite 3A, New York, New York 10025. provides transfer
agency, administrative and portfolio pricing services for the
Fund. Its function is to maintain, accurately, the account
records of the Fund and of all shareholders in the Fund as well
as to administer the distribution of income earned as a result of
investing in the Fund. East End Investment Management Company
also provides accounting services to the Fund including portfolio
accounting services, expense accrual and payment services,
valuation and financial reporting services, tax accounting
services and compliance control services.
HOW TO INVEST IN THE FUND
Initial Investments
To open a new account complete and return, by mail, a
New Account Application (a New Account Application Form is at the
back of this Prospectus) and any required legal documentation
together with your check or money order. The completed New
Account Application, together with your check or money order and
any additional documentation required should be mailed to East
End Mutual Funds, Inc., c/o Provident Bank, P.O.Box 691205,
Cincinatti, OH 45269-1205 . The amount of your purchase must be
equal to or greater than the minimum initial investment
requirement of $1,000. If you need assistance with the account
registration form or have any questions, please call our Investor
Information Department at 1-800-289-6336. Note: For other types
of account registrations (such as for corporations, partnerships,
trusts or other organizations), please call the Investor
Information Department to determine which additional forms you
will need.
Your Fund shares will be purchased at the next
determined net asset value after your investment has been
received.
Subsequent Investments
Subsequent investments must be in the amount of $250 or
more. To make a subsequent investment:
Detach and complete the stub attached to your account
receipt or statement from your previous investment.
Make your check or money order payable to East End
Mutual Funds,Inc.
Write your shareholder account number on the check.
Mail your check and investment form to East End Mutual Funds,
Inc., Provident Bank, P.O. Box 691205, Cincinatti, OH 45269-1205.
All investments must be made in U.S. dollars and to
avoid fees and delays, your check should be drawn only on a U.S.
bank. A charge may be imposed if any investment check is not
honored. The Company reserves the right, in its sole discretion,
to withdraw all or any part of the offering made by this
prospectus or to reject purchase orders, when in the judgment of
management, such withdrawal or rejection is in the best interest
of the Fund. The Fund also reserves the right at any time to
waive or increase the minimum investment requirements applicable
to initial or subsequent investments. No share purchase
application is binding till accepted by the Fund.
Stock certificates will not be issued. All investor
accounts are maintained on a "book-entry" basis. Following any
investment, the investor will receive a printed confirmation
stating the amount invested, the per share price at which the
investment was made, and the number of shares purchased.
HOW NET ASSET VALUE IS DETERMINED
The price of the Fund's shares is based on the net
asset value of the Fund, which is determined once daily as of
4:00 p.m. East Coast time on each day that the New York Stock
Exchange is open for business. The per share net asset value of
the Fund is determined by dividing the total value of its
securities and other assets, less liabilities, by the total
number of its shares outstanding. In determining net asset value,
securities are valued at the last reported sales price or in the
case of securities where there is no reported last sale, the
closing bid price. Securities for which market quotations are
not readily available are valued at their fair values as
determined in good faith by or under the supervision of the
Company's Board of Directors in accordance with methods which
have been authorized by the Board. Short term debt obligations
with maturities of 60 days or less are valued at amortized cost
as reflecting fair value, unless the Manager determines
conditions indicate otherwise.
Taxpayer Identification Numbers
Shareholders are required by law to provide the Fund with
their correct social security or other taxpayer identification
number ("TIN"), regardless of whether they file tax returns.
Failure to do so may subject a shareholder to penalties. Failure
by a shareholder to provide a correct TIN or properly to complete
the New Account Application, could result in backup withholding
by the Fund of an amount of income tax equal to 31% of any
distributions, redemptions or other payments made to the
shareholder's account. Any taxes so withheld may be credited
against taxes owed on the shareholder's federal income tax
return. Once withholding is established, all withheld amounts
will be paid to the Internal Revenue Service, from whom such
shareholder should seek any refund. If withholding is commenced
with respect to any shareholder account, the shareholder should
consult with the shareholder's attorney or tax advisor or contact
the Internal Revenue Service directly.
If a shareholder is a non-resident of the United States or
other foreign entity, a completed Form W-8 should be provided to
the Fund in order to avoid backup withholding on distributions,
redemptions or other payments made by the Fund. Payments made to
the account of such a shareholder by the Fund may be subject to
federal income tax withholding of up to 30% of the amount of such
payment in lieu of backup withholding. The amount of backup
withholding will change if the tax code so requires in the
future.
A shareholder which is an exempt recipient must furnish
its TIN. Exempt recipients include: certain corporations, tax-
exempt pension plans, Keogh and IRA accounts, governmental
agencies, financial institutions and registered securities and
commodities dealers.
For further information regarding backup withholding,
see Section 3406 of the Internal Revenue Code and consult with a
tax advisor.
Information for Clients of Brokers or Other Financial
Organizations
If you are a client of a securities broker or other
financial organization, you should note that they may charge
their clients a separate fee for administrative services in
connection with investments in Fund shares and may impose account
minimums and other requirements. If you are investing through a
securities broker or other financial organization, please refer
to their program materials for any additional special provisions
or conditions that may be different from those described in this
Prospectus (for example, some or all of the services and
privileges described may not be available to you). Securities
brokers and other financial organizations have the responsibility
of transmitting purchase orders and funds, and of crediting their
customers' accounts following redemptions, in a timely manner in
accordance with their customer agreements and this Prospectus.
PLAN OF DISTRIBUTION
The Fund has adopted a Distribution Plan pursuant to
which the Fund may incur distribution expenses of up to .50% per
annum of the Fund's average daily net assets.
The Plan of Distribution provides that the Fund may
finance activities which are primarily intended to result in the
sale of the Fund's shares including, but not limited to, direct
mail promotions; television, radio, newspaper, magazine and other
types of mass media advertising; compensation of persons engaged
in the marketing and sale of Fund shares; costs of preparing
printing and distributing prospectuses and reports to prospective
shareholders; costs involved in preparing, printing and
distributing sales literature, and the Fund's costs of obtaining
information, analyses and reports with respect to market and
promotional activities on behalf of the Fund that the Manager
deems advisable.
HOW TO SELL (REDEEM) YOUR SHARES
You may sell (redeem) your shares at any time. You may
request the sale of your shares by mail.
By Mail
Sale requests should be mailed to:
East End Investment Management Company
736 West End Avenue, Suite 3A
New York, NY 10025-6245
Should you wish to send your redemption request by overnight
courier, the request for redemption should be sent to:
East End Investment Management Company
736 West End Avenue, Suite 3A
New York, NY 10025
The selling price of the shares being redeemed will be the Fund's
per share net asset value next calculated after receipt of all
required documents in Good Order.
Good Order means that the request must include:
1. Your account number.
2. The number of shares to be sold (redeemed).
3. The signatures of all account owners exactly as they are
registered on the account.
4. Required signature guarantees.
5. Any supporting legal documentation that is required in
the case of estates, trusts, corporations or partnerships
and certain other types of accounts.
Signature Guarantees -
A signature guarantee of each owner is required to redeem
shares for all size transactions and in the following additional
situations: (i) if you change the ownership on your account; and
(ii) if a change of address request is made, a redemption will
not be processed until a signature guarantee is received in
proper form.
Signature guarantees are designed to protect both you
and the Fund from fraud. To obtain a signature guarantee you
should visit a commercial bank, trust company, broker-dealer or
other member of a national securities exchange, or other eligible
guarantor institution. (Notaries public cannot provide signature
guarantees.) Guarantees must be signed by an authorized person
at one of these institutions, and be accompanied by the words
"Signature Guarantee."
Redemption at the Option of the Fund
If the value of the shares in a shareholder's account
is less than $1,000, the Company may notify the shareholder that,
unless the shareholder's Fund account is increased to $1,000 in
value, it will redeem all the shareholder's shares and close the
account by paying the shareholder the redemption proceeds and any
dividends and distributions declared and unpaid at the date of
redemption. The Company will give the shareholder thirty days
after it sends the notice to bring the account up to $1,000
before any action is taken. This minimum balance requirement
does not apply to IRAs and other tax-sheltered investment
accounts. This right of redemption shall not apply if the value
of a shareholder's account drops below $1,000 as the result of
market action.
The Company reserves this right because of the expense
to the Fund of maintaining very small accounts.
GENERAL INFORMATION
East End Mutual Funds, Inc. was organized on December
22, 1993 as a corporation under the laws of the State of Maryland
and is registered with the U.S. Securities and Exchange
Commission as an open-end, diversified, management investment
company of the series type. It is authorized to issue two
million shares of $.001 par value common capital stock. The
Company's Articles of Incorporation permit its Board of Directors
to classify any unissued shares into one or more classes.
Pursuant to this provision, the Board has authorized the issuance
of one million shares of the Fund. While the Fund is currently
the only series of the Company, the Board of Directors may, from
time to time, issue other series, the assets and liabilities of
which will be separate and distinct from any other series.
Shares issued with respect to the Fund have no
preemptive, conversion or subscription rights. Each whole share
will be entitled to one vote as to any matter on which a vote is
authorized and each fractional share shall be entitled to a
proportionate fractional vote. Shareholders have equal and
exclusive rights as to dividends and distributions, as declared
by the Company with respect to the Fund, and to the net assets of
the Fund upon liquidation or dissolution. The shareholders of
the Fund, as a separate series of the Company, vote separately on
matters affecting only the Fund (e.g. approval of the Investment
Management Agreement, a change in investment policy); all series
of the Company will vote as a single class where the interests of
each class in the matters to be acted upon are identical.
DIVIDENDS AND DISTRIBUTIONS
The Company currently intends to distribute all of the
Fund's net investment income and net capital gains, if any, at
least annually. Such distribution will consist of substantially
all of the net investment income for the calendar year plus
substantially all of the net long and short term capital gains
for the twelve month period ending on December 31 of such
calendar year. A second distribution, if required to avoid the
imposition of tax on the Fund, will be declared and paid
following the end of the Fund's Taxable year and will include any
undistributed net investment income and net capital gain for such
taxable year, to the extent deemed necessary by the Company. The
amount and frequency of distributions by the Company with respect
to the Fund are not guaranteed and are subject to the discretion
of the Company's Board of Directors.
Dividends paid by the Company with respect to the Fund
are derived from its net investment income. The Fund's net
investment income is made up to dividends received from the
stocks it holds, as well as interest accrued and paid on money
market instruments and other fixed-income obligations held in its
portfolio.
The Fund realizes capital gains when it sells a security
for more than it paid for it. The Fund may make distributions of
its net realized capital gains (after any reductions for capital
loss carry forwards), generally, once a year. Gains on
securities sales held for 90 days or less shall not exceed 30% of
the Fund's income including capital gains as long as such sale
is considered as a disqualification as a regulated investment
company under the Internal Revenue Code.
You must elect one of the following distribution
options. You may make such election on your New Account
Application form.
1. Automatic Reinvestment Option - All dividends
and capital gains distributions will be re-invested in additional
Fund shares.
2. Cash Option - all dividends and capital gains
distributions will be paid in cash.
If you do not elect one of the above Options, Option
number 1 will be selected for you automatically. You may change
your Option by writing to the Transfer Agent, East End Investment
Management Company, 736 West End Avenue, Suite 3A, New York, NY
10025.
The election is effective for dividends and
distributions with a record date seven or more business days
after the date the Transfer Agent is notified of the election.
TAXATION
As with any investment, you should consider the tax
implications of an investment in the Fund. The following is only
a short summary of the important tax considerations generally
affecting the Fund and its shareholders. You should consult your
tax adviser with specific reference to your own tax situation.
Federal Taxes. The Fund intends to qualify and maintain its
qualification as a "regulated investment company" under the
Internal Revenue Code (hereafter the "Code"), meaning that to the
extent a fund's earnings are passed on to shareholders as
required by the Code, the Fund itself is not required to pay
federal income taxes on the earnings.
In order to so qualify, at least 90% of the investment
company taxable income of the Fund will be paid as dividends.
Investment company taxable income includes taxable interest and
dividends. To the extent you receive such a dividend based on
either investment company taxable income or a distribution of the
excess of net short-term capital gain over net long-term capital
loss, you would treat that dividend or distribution as ordinary
income in determining your gross income for tax purposes, whether
or not you received payment in the form of cash or additional
shares. Unless you are exempt from federal income taxes, the
dividends and short-term capital gain distributions you receive
from the Fund will be taxable to you as ordinary income.
Any distribution you receive of net long-term capital
gain over net short-term capital loss will be taxed as long-term
capital gain no matter how long you have held Fund shares. If
you hold shares for six months or less, and during that time
receive a distribution that is taxable as long-term capital gain,
any loss you might realize on the sale of those shares will be
treated as a long-term capital loss to the extent of the
distribution.
Before you purchase shares of the Fund, you should
consider the effect of both dividends and capital gain
distributions that are expected to be declared or that have been
declared but not yet paid. When a Fund makes these payments, its
share price will be reduced by the amount of the payment, so
that you will in effect have paid full price for the shares and
then received a portion of your price back as a taxable dividend
distribution.
The Fund will notify you annually as to the tax status
of dividend and capital gains distributions paid by the Fund.
Such dividends and capital gains may be subject to state and
local taxes.
In the event a shareholder fails to furnish and certify
a taxpayer identification number (See "Taxpayer Identification
Numbers," p.12), or the Internal Revenue Service notifies the
Fund that a shareholder's taxpayer identification number is
incorrect, or that withholding is otherwise required, the Fund
will commence withholding on such shareholder's account.
Any dividends declared by a fund in October, November
or December of a particular year and payable to shareholders of
record during those months will be deemed to have been paid by
the Fund and received by shareholders on December 31st., of that
year, as long as the dividends are actually paid in January of
the following year.
Shareholders in the Fund may realize a taxable gain or
loss when redeeming shares of the Fund depending on the
difference in the prices at which the shareholder purchased and
sold the shares.
State and Local Taxes Generally. Because your state and local
taxes may be different than the federal taxes described above,
you should see your tax adviser regarding these taxes.
RETIREMENT PLANS
You may open a new Self-Directed Individual Retirement
Account (IRA) through the Fund, or rollover an existing plan.
The initial setup fee is $5.00 plus an annual maintenance of
$10.00. A prototype Individual Retirement Account and custody
agreement is available, which provides that the Fund's Custodian
Bank will hold the investments in your plan for safekeeping and
furnish necessary administrative services.
These fees are in addition to the usual charges paid
by the Fund and will be deducted automatically from the
participants account. Retirement Plan fees may change.
New or Rollover, Simplified Employer Pension Plans
(SEP), Keogh, 401(K), Qualified Profit Sharing or Money Purchase
Pension Plans are available for employers and their employees.
Existing retirement plans may be transferred from any mutual
fund, bank, insurance company or broker to this Fund.
If your employer offers a retirement plan that allows
you to make your own investment decisions, you may purchase
shares of the Fund for your plan.
Shares of the Fund may be purchased for your existing
Self-Directed Retirement Plan through your broker.
Shares purchased directly through the Fund
have no sales charges; when purchased through a broker, a fee
may be charged.
New accounts may be opened by completing the attached
application. Shares may be purchased for existing accounts by
contacting your broker or plan administrator. The Fund's CUSIP
number is 272117102
Additional information can be obtained by calling 1-800
289-6336, during business hours, East Coast time.
