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. 4 to the captioned Funds's
Registration Statement on Form N1-A. Changes have been marked in
accordance with Regulation 310.
Very Truly Yours
/s/Aristides M. Matsis
President
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON 10/28/99
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. 4 /_X_/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY /X/
ACT OF 1940
Amendment No. 4
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)
ANNUAL REGISTRATION STATEMENT PURSUANT TO RULE 485
It is proposed that this filing will become effective on October
28,1999
A Rule 24f-2 Notice for the year ended June 30, 1999 was filed on
August 25,1999
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
3a. Risk Return Chart
and Table . . . Table
3b. Principal Risks . . Fund Risks
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 6/30/99;
Statement of Assets and Liabili-
ties 6/30/99; Notes to Finan-
cial Statement 6/30/99
PART C
OTHER INFORMATION
Item 24. Financial Statements
and Exhibits
(a) Financial Statements
Schedule of Investments 6/30/99
Statement of Assets and Liabilities 6/30/99
(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;
<PAGE>
(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
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, 08/25/99
/S/ ARISTIDES M. MATSIS President
and Treasurer
Director, Vice 08/25/99
/S/ EDITH B. MATSIS President and
Secretary
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 August, 1999.
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, 08/25/99
/S/ ARISTIDES M. MATSIS President
and Treasurer
Director, Vice 08/25/99
/S/ EDITH B. MATSIS President and
Secretary
EAST END MUTUAL FUNDS, INC.
Capital Appreciation Series
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 August 25, 1999, 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 East End
Mutual Funds, Inc., 736 West End Avenue, Ste. 3A, New York, New
York 10025, or by calling 1 800 289-6336.
As with all mutual funds the Securities and Exchange Commission
has not approved or disapproved these securities or passed on the
adequacy of this prospectus. Any representation to the contrary
is a criminal offense.
Prospectus dated: October 28,1999
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
Costs ................................................. 3
Financial Highlights .................................. 4
Risk Return Chart and Table ........................... 5
Investment Objective of the Fund ...................... 6
Investment Policies of the Fund ....................... 6
Other Investment Policies and their Risks ............. 8
Investment Risks ...................................... 8
Portfolio Turnover .................................... 11
Who Should Invest ..................................... 12
How the Fund is Managed ............................... 12
Brokerage Allocation .................................. 14
Fund Service Providers ................................ 14
How to Invest in the Fund ............................. 15
How Net Asset Value is Determined ..................... 16
Plan of Distribution .................................. 18
How to Sell (Redeem) Your Shares ...................... 18
General Information ................................... 20
Dividends and Distributions ........................... 20
Taxation .............................................. 21
Retirement Plans ...................................... 23
This table describes the fees and expenses that you may pay if
you buy and hold Shares of the Fund.
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 . . . . . . . . 1.00%
12b-1 Fees . . . . . . . . .00
Other Expenses . . . . . . . . 1.67
Total Fund Operating Expenses . . . . . . 2.67%
(1) Although not contractually obligated to do so, the Manager
waived certain amounts during the past fiscal year. The Fund
actually paid for the fiscal year ended June 30,1999 1.67% in
expenses and the Manager paid Fund expenses amounting to 2.74%
of assets.
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.
2
EXAMPLE
The following Example is intended to help you compare the cost of
investing in Shares of the Fund with the cost of investing in
other mutual funds. The example assumes that you invest $10,000
in the Fund's shares for the time periods indicated and then
redeem all of your Shares at the end of those periods. The
Example also assumes that your investment has a 5% return each
year and that operating expenses are before waiver as shown in
the Table and remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 Year $60 3 Years $361 5 Years $906 10 years $3,357
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.
3
FINANCIAL HIGHLIGHTS
EAST END MUTUAL FUNDS,INC. - CAPITAL APPRECIATION SERIES
Selected Data for a Share of Stock
Year Year Year Oct 2,1995
End End End to
June 30, June 30, June 30, June 30,
1999 1998 1997 1996
Net Asset Value
Beginning of Period $ 9.500 $ 10.340 $ 13.730 $ 10.480
Income From Invest-
ment Operations:
Net Investment
Loss (0.130) (0.290) (0.370) (0.007)
Net Realized and
Unrealized Gain
(Loss) on Invest-
ments 0.790 (0.550) (2.083) 3.335
Total From Invest-
ment Operations 0.660 (0.840) (2.453) 3.328
Less Distributions:
Distributions from
Net Realized Gain 0.937 0.078
Total Distributions 0.937 0.078
Net Asset Value
End of Period $10.160 $ 9.500 $10.340 $13.730
Total Return(%) 6.947 (8.124) (17.870) 31.760
Ratios/supple-
mental Data:
Expenses(After
Reimbursement)
to Average Net
Assets(%) 2.668 3.057 4.840 2.770 *
Net Investment
Loss to Average
Net Assets(%) (1.411) (2.658) (3.670) (0.910)*
Portfolio Turn-
over Rate(%) 77.364 86.840 26.980 65.810
Net Assets, End
of Period($) 224,490 209,872 235,139 284,414
Data:
* annualized
4
RISK RETURN CHART AND TABLE
The bar chart shows variability of the Fund's shares as a percent
change of net asset value on a fiscal year basis. Within the
period shown in the chart, the Fund's Capital Appreciation Series
Shares highest annual return was 31.76% for the year ending June
30,1996, its lowest return was -17.87% for the year ending June
30,1997. Within the period shown in the Chart the Fund's Shares
highest return was 24.82% for the quarter ending March 31,1996
and its lowest return was -21.96% for the quarter ending on
September 30,1998. The Fund's return was 31.76% on fiscal year
end June 30,1996, -17.87% in 1997, -8.12% in 1998 and 6.95% in
1999. The start of operations for the Fund was October 2,1995.
The Fund's total return over its last fiscal year ending June
30,1999 relative to the Standard and Poor's 600 a broad based un
managed market index with similar investment objectives as the
Fund were as follows: the Fund's fiscal one year return was 6.95%
and the Standard and Poor's 600 Index over the same period was -
3.13%.
Past performance does not necessarily predict future performance.
This information provides you with historical performance
information so that you can analyze whether the Fund's investment
risks are balanced by its potential rewards.
PRINCIPAL RISKS OF THE FUND
There are risks common to all mutual funds. The following is a
summary description of these risk factors. A complete description
of the risks can be found in "Principal Risks of Investing in the
Fund". For example a fund's share price may decline and an
investor could lose money if his cost was above his sale price.
Also there is no assurance that a fund will achieve its
investment objective. An investment in the Fund does not
necessarily constitute a balanced investment program for any one
investor. All fund's face the risk that some of the companies
they have invested in or do business with may not be year 2000
ready. The risk posed by the fact that the : (1) value of equity
securities rise and fall, (2) smaller market capitalization
companies tend to have fewer share holders, less liquidity, more
volatility, unproven business records, limited product or service
base and limited access to capital and (3) foreign economic,
political or regulatory conditions may be less favorable than
those of the United States.
5
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 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.
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.
6
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.
7
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.
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-
8
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 transferable 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.
9
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.
The "Year 2000" problem is the potential for computer errors or
failures because certain computer systems may be unable to
interpret dates after December 31,1999. The year 2000 problem may
cause systems to process information incorrectly and could
disrupt businesses that rely on computers, like the Fund. The
Fund has contingency plans to minimize this risk.
While it is impossible to determine in advance all of the risks
to the Fund, the Fund could experience interruptions in basic
10
financial and operational functions. Fund shareholders could
experience errors or disruptions in Fund share transactions or
Fund communications. The Funds service providers are making
changes to their computer systems to attempt to fix any Year 2000
problems. In addition they are working to gather information from
third-party providers to determine their Year 2000 readiness.
Year 2000 problems would also increase the risks of the Fund's
investments. To assess the potential effect of the Year 2000
problem the investment advisor is reviewing information regarding
the Year 2000 readiness of issuers of securities the Fund may
purchase.
The financial impact of these issues for the Fund is still being
determined. There can be no assurance that potential Year 2000
problems would not have a material adverse effect ion the Fund.
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
77.36%. 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
11
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 does not provide 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 is responsible for the day-to-day
management of the Fund's portfolio also president, treasurer and
a director of the Fund and the Manager. Mr. Aristides M. Matsis
is a private investor in stocks, bonds and real estate for the
past thirty five years. Since 1993, Mr. Aristides M. Matsis
has been registered with the U.S. Securities and Exchange
Commission as an investment advisor and has managed a series of
private investment trusts with similar investment objectives as
the Fund since 1987 and the assets of the Fund since
1995.
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%
12
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 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.
13
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
14
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 included with 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., 736 West End Avenue, Suite 3A, New York, New
York 10025 . The amount of your first purchase must be $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:
15
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 Inc.
Write your shareholder account number on the check.
mail the form to East End Mutual Funds, Inc.,
736 West End Avenue, Suite 3A, New York, New York 10025.
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.
16
Taxation 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. 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
17
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 one half of one
percent (0.50%) 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 this must be done
in writing by the shareholder.
By Mail
Sale requests should be mailed to:
East End Mutual Funds, Inc.
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 Mutual Funds, Inc.
736 West End Avenue, Suite 3A
New York, NY 10025-6245
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:
18
1. Your name as shown on the statement and account number
2. The number of shares to be sold (redeemed) or dollar amount.
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 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 may be obtained from your bank or stock broker.
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. The Company reserves this right because of the expense
to the Fund of maintaining very small accounts.
19
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
20
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 East End Mutual Funds, Inc., 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.
21
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.
22
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. There is a
initial setup and an annual maintenance fee. 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.
23
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 28,1999
This Statement of Additional Information is not a
prospectus. It contains information in addition to that set forth
in the Fund's prospectus, dated October 28,1999 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 . . . . . 2
Investment Restrictions . . . . . . . 5
Distribution Plan . . . . . . . . 7
Distributions of Dividends. . . . . . . 7
Directors and Officers . . . . . . . 8
Control Persons and Principal
The Investment Manager . . . . . . . 9
Execution of Portfolio Transactions . . . . .11
Additional Purchase and Redemption Information . . .12
Tax Information . . . . . . . . 13
Description of Predecessor Company
and Management . . . . . . . 16
Independent Auditors . . . . . . . 16
Measuring Performance . . . . . . . 16
THE COMPANY
East End Mutual Funds, Inc. (the "Fund") 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
2
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.
3
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
4
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.
The portfolio turnover rates for the fiscal periods ending June
30, were 77.364% in 1999, 86.84% in 1998, 26.980%.in 1997 and
65.10% in 1996.
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.
5
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.
6
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.
7
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:* 58, Chairman of the Board, Director,
President and Treasurer of the Fund. His address is 736 West End
Avenue, New York, New York 10025. In 1963 He founded the Matsis
Group, a company that once owned and operated restaurants. He is
an active private investor and is the manager of private
investment portfolios since 1987 of private investment trusts
with an investment objective and policies similar to those of the
Fund. He has been managing the Fund since 1995.
Edith B. Matsis: 39, Vice Chairman of the Board, Director, Vice
President and Secretary of the Fund. Her address is 736 West End
Avenue, New York, New York 10025. She is the wife of Aristides
Matsis, received a Bachelor of Business degree from Saint
Joseph's College, Maasin, Southern Leyte, Phillipines - with a
major in business administration. She manages the investor
relations and office of the Fund.
8
* An "interested person" of the Fund as defined in the
Investment Company Act of 1940.
Frederick M. Fisher, D.D.S., is an Independent Director. His
address is 1498 Third Avenue, New York, New York 10028. Dr.
Fisher is in the private practice of dentistry in New York City,
New York.
Jeffrey W. Newcomer, D.P.M., is an Independent Director. His
address is 74 Ashton Place, Buffalo, New York 14220. Dr. Newcomer
is in private practice in Buffalo, New York.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Mr. Aristides M. Matsis is a control person of the Company and
principal shareholder of the Fund.
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.
Aristides M. Matsis, is a Director, President, Vice President ,
Secretary and Treasurer. He owns all of the Manager's
outstanding voting securities.
9
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. There are no limitations by any state at this
time.
10
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.
A management fee of $6,148 was accrued but none paid for the year
ended June 30,1999. Effective July 1,1999 the Manager has
voluntarily agreed to reimburse the Fund for expenses in excess
of 2% of net assets and waived accrued organization costs to
date.
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
11
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.
For the years ended June 30, the total brokerage commissions paid
by the Fund to brokers and dealers in 1999 was $384, 1998 $612,
1997 $288.00 and 1996 $612.00.
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.
12
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 qualifies 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.
13
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.
14
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.
Principal shareholders
As of June 30, 1999 Aristides M. Matsis an officer of the Fund
owned 98.22 % of its shares.
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).
15
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.
16
Performance information:
The Prospectus contains a brief description of how performance is
calculated.
Quotations of average annual total return for a Fund will be
expressed in terms of the average annual compounded rate of
return of a hypothetical investment in such Fund over periods of
1, 5 and 10 years (up to the life of the Fund). These are the
annual rate of return that would equate to the initial amount
invested to the ending redeemable value. These rates of return
are calculated pursuant to the following formula; P(1+ T)n = ERV
(Where P = a hypothetical initial payment of $1000, T = the
average annual total return, n = the number of years and ERV =
the ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the period). All total return figures reflect
the deduction of a proportional share of fund expenses on an
annual basis, and assume that all dividends and distributions are
reinvested when paid.
The average annual total return of the Fund, computed as of June
30,1999 is as follows; one year 6.947%
Financial Statements:
The following audited financial statements for the period ended
June 30,1999 are hereby incorporated into the SAI by reference to
the Funds Annual reports dated June 30,1999. Copies of such
reports accompany this Statement of Additional Information.
Documents Incorporated by Reference To the Annual Report:
Schedules of Investments as of June 30,1999
Statements of Operations for the period ended June 30,1999
Statements of Assets and Liabilities as of June 30,1999
Statements of Changes in Net Assets for the periods ended June
30,1999, 1998, 1997 and 1996.
Financial Highlights for each period indicated
Notes to Financial Statements
Reports of Independent Accountants
The portions of such Annual Reports that are not specifically
listed above are not incorporated by reference into this
Statement of Additional Information and are not part of the
Registration Statement.
17
EAST END MUTUAL FUNDS, INC. - CAPITAL APPRECIATION SERIES
Schedule of Investments
June 30,1999
COMMON STOCKS - 93.3% Shares Value
Cable Equipmemt - 4.9%
General Instrument * 260 $ 11,050
Computer Peripherals - 4.8%
Citrix Systems * 190 10,735
Computer Software - 24.1%
BMC Software * 200 10,800
Checkpoint Systems * 200 10,725
Comverse Technologies * 140 10,570
Oracle Corp * 290 10,766
Seibel Systems * 170 11,284
54,145
Drug Distribution - 1.6%
McKesson HBOC 111 3,566
Financial Services - 5.4%
Knight Trimark Group * 200 12,063
Medical Equipment - 4.7%
VISX Inc. * 130 10,294
Medical Products - 6.8%
Biomatrix * 500 10,781
Theragenics 660 4,579
15,360
Pharmaceuticals - 4.9%
Allergan Inc. 100 11,100
Semiconductors - 10.7%
Intel Corp 270 16,065
MMC Networks * 180 8,055
24,130
Telecommunication Equipment -25.3%
Lucent Technologies 328 22,120
Nortel Networks 168 14,532
Qualcomm Inc. 70 10,045
Tellabs Inc. * 150 10,134
56,831
Total Investments - 93.2% 209,264
Cash and Other Assets Less Liabilities - 6.8% 15,226
$ 224,490
* Non dividend producing security
The accompanying notes are an integral part of these financial
statements
18
EAST END MUTUAL FUNDS, INC. - CAPITAL APPRECIATION SERIES
Statement of Operations
Year Ended June 30,1999
INVESTMENT INCOME
Income
Dividends $ 2,588
Total income 2,588
Expenses
Investment management fees (Note 2) 2,027
Custodian fees 2,659
Registration fees 880
Printing and postage 54
Audit fees 4,500
Insurance 1,179
Taxes 100
Writedown of organization costs (Note 2) 28,989
Other expenses 241
Total expenses before reimbursement 40,629
Waiver of organization costs by manager (Note 2) (28,989)
Reimbursement of expenses by manager (Note 2) ( 6,148)
Expenses after reimbursement 5,492
Net investement loss ( 2,904)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 1,835
Change in net unrealized appreciation 15,687
Net realized and unrealized gain on investments $ 17,522
Net increase in net assets resulting from
operations 14,618
The accompanying notes are an integral part of these financial
statements
19
EAST END MUTUAL FUNDS, INC. - CAPITAL APPRECIATION SERIES
Statement of Assets and Liabilities
Year Ended June 30,1999
ASSETS
Investments in securities at value
(cost - $202,206)(Notes 1 & 2) $ 209,264
U.S. Government securities money market 21,178
Cash at custodian to pay for investments 142,923
Receivable for investments sold 22
Dividend receivable 143
Total Assets 373,530
LIABILITIES
Payable for investment purchases 148,524
Due to manager 516
Total liabilities 149,040
NET ASSETS $ 224,490
Net assets consist of:
Capital paid in 218,097
Accumulated net realized investment loss ( 664)
Net unrealized appreciation of investments 7,057
NET ASSETS $ 224,490
NET ASSET VALUE PER SHARE
(based on 22,094 shares outstanding -
shares authorized with $.001 per
share par value) $ 10.16
The accompanying notes are an integral part of these financial
statements
20
EAST END MUTUAL FUNDS, INC. - CAPITAL APPRECIATION SERIES
Statement of Changes in Net Assets
Year Ended Year Ended
June 30 June 30
1999 1998
INCREASE (DECREASE) IN NET ASSETS
From Operations:
Net investment loss $ ( 2,904) $ ( 6,107)
Net realized gain on investments 1,835 16,584
Change in net unrealized (depre-
ciation) appreciation on investments 15,687 ( 29,403)
Net increase (decrease) in net
assets resulting from operations 14,618 ( 18,926)
Distributions to shareholders
from net investment income
Net realized gain
Total distributions
Share Transactions
Net proceeds from sales of shares 5,173
Reinvestmenmt of distributions
Cost of shares redeemed ( 11,514)
Net decrease in net assets
resulting from share transactions ( 6,341)
Total increase (decrease)
in net assets 14,618 ( 25,267)
Net Assets
Beginning of year 209,872 235,139
End of year $ 224,490 $ 209,872
Other Information
Shares:
Sold 479
issued in reinvestment of
distributions
Redeemed ( 1,117)
Net increase (decrease) ( 638)
The accompanying notes are an integral part of these financial
statements
21
EAST END MUTUAL FUNDS, INC. CAPITAL APPRECIATION SERIES
Financial Highlights
Selected Data for a Share of Capital stock Outstanding
Throughout Each Period
Year Year Year Oct 2,1995
End End End to
June 30, June 30, June 30, June 30,
1999 1998 1997 1996
Net Asset Value
Beginning of Period $ 9.500 $ 10.340 $ 13.730 $ 10.480
Income From Invest-
ment Operations:
Net Investment
Loss (0.130) (0.290) (0.370) (0.007)
Net Realized and
Unrealized Gain
(Loss) on Invest-
ments 0.790 (0.550) (2.083) 3.335
Total From Invest-
ment Operations 0.660 (0.840) (2.453) 3.328
Less Distributions:
Distributions from
Net Realized Gain 0.937 0.078
Total Distributions 0.937 0.078
Net Asset Value
End of Period $10.160 $ 9.500 $10.340 $13.730
Total Return(%) 6.947 (8.124) (17.870) 31.760
Ratios/supple-
mental Data:
Expenses(After
Reimbursement)
to Average Net
Assets(%) 2.668 3.057 4.840 2.770 *
Net Investment
Loss to Average
Net Assets(%) (1.411) (2.658) (3.670) (0.910)*
Portfolio Turn-
over Rate(%) 77.364 86.840 26.980 65.810
Net Assets, End
of Period($) 224,490 209,872 235,139 284,414
Data:
* annualized
The accompanying notes are an integral part of these financial
statements
22
East End Mutual Funds, Inc. - Capital Appreciation Series
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization: East End Mutual Funds, Inc. - Capital
Appreciation Series (the "Fund") is a series of East End Mutual
Funds, Inc. (the "Company"), a Maryland Corporation, is a
diversified, open end management investment company registered
under the Investment Company Act of 1940, as amended.
The following is a summary of significant accounting
policies followed by the Fund.
Security Valuation: 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 which approximates market value.
Securities Transactions and Investment Income: Security
transactions are recorded on the dates the transactions are
entered into (the trade dates). Realized gains and losses on
security transactions are determined on the identified cost
basis. Dividend income is recorded on the ex-dividend date.
Interest income is determined on the accrual basis. Discount on
fixed income securities is amortized.
Dividends and Distributions to Shareholders: The Fund
records all dividends and distributions payable to shareholders
on the ex-dividend date.
Permanent book and tax differences relating to shareholder
distributions may result in reclassifications to paid in capital
and may affect the per share allocations between net investment
income and realized and unrealized gain/loss. Undistributed net
investment income and accumulated undistributed net realized
gain/loss on investment transactions may include temporary book
and tax differences which reverse in subsequent periods. Any
taxable income or gain remaining at fiscal year end is
distributed in the following year.
Federal Income Taxes: It is the Fund's intention to qualify as
a regulated investment company and distribute all of its taxable
income. Accordingly, no provision for Federal income taxes will
be required in the financial statements.
23
East End Mutual Funds, Inc. - Capital Appreciation Series
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30,1999
2. MANAGEMENT FEE AND TRANSACTIONS WITH AFFILIATES
Under the terms of the investment management agreement, the
Manager has agreed to provide the Fund investment management
services and be responsible for the day to day operations 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 average daily net assets, .75% in excess of
$500 million of average daily net assets. The fee will be
accrued daily and paid monthly. A management fee of $1,143
was accrued and paid for the six month period ending December 31,
1998.
The Manager has voluntarily agreed to reimburse the Fund for
expenses in excess of 2% of daily net assets plus any custodian
fees. Total expenses after reimbursement for the year ended June
30,1999 were 2.668% of net assets. The Manager reimbursed the
Fund by advancing fees and expenses totaling $6,148 for the year
ended June 30,1999
The Manager has waived the reimbursement of organizational
expenses due from the Fund and the Fund has fully amortized those
expenses for the year ended June 30,1999.
The Fund has adopted a Distribution Plan (the "Plan") pursuant
to Rule 12b-1 under the Investment Company Act of 1940. The Plan
provides that the Fund may finance activities which are
primarily intended to result in the sale of the Fund's shares.
The Fund may incur distribution expenses of up to 0.50% of
average daily net assets. No distribution fee was accrued for
the year ending June 30,1999.
Certain officers and directors of the Fund are officers and
directors of the Manager.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-
term securities) for the year ended June 30,1999 were $ 148,524
and $ 142,751 respectively.
At June 30,1999 net realized appreciation for Federal income
tax purposes aggregated $7,057 of which $22,443 related to
unrealized appreciation of securities and $15,386 related to
unrealized depreciation of securities. The cost of investments on
June 30,1999 for Federal income tax purposes was $202,206.
24
INTERNAL CONTROL LETTER
To the Board of Directors of
East End Mutual Funds, Inc.
In planning and performing our audit of the financial statements
of East End Mutual Funds, Inc. for the period ended June 30,1999,
we considered its internal control structure including procedures
for safeguarding securities, in order to determine our auditing
procedures for the purpose of expressing our opinion on the
financial statements and to comply with the requirements of Form
N-SAR, not to provide assurance on the internal control
structure.
The management of East End Mutual Funds, Inc. is responsible for
establishing and maintaining an internal control structure. In
fulfilling this responsibility, estimates and judgements by
management are required to assess the expected benefits and
related costs of internal control structure policies and
procedures. Two of the objectives of an internal control
structure are to provide management with reasonable but not
absolute assurance that assets are safeguarded against loss from
unauthorized use or disposition and that transactions are
executed in accordance with management's authorization and
recorded properly to permit preparation of financial statements
in conformity with generally accepted accounting principals.
Because of inherent limitations in any internal control
structure, errors or irregularities may occur and not be
detected. Also, projection of any evaluation of the structure to
future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not
necessarily disclose all matters in the internal control
structure that might be material weaknesses under standards
established by the American Institute of Certified Public
Accountants. A material weakness is a condition in which the
design or operation of the specific internal control structure
elements does not reduce to a relatively low level the risk that
errors or irregularities in amounts that would be material in
relation to the financial statements being audited may occur and
not be detected within timely period by employees in the normal
course of performing their assigned functions. However, we noted
no matters involving the internal control structure, including
procedures for safeguarding securities, that we consider to be
material weaknesses as defined above.
This report is intended solely for the information and use of
management and the Securities and Exchange Commission.
Abington, Pennsylvania Sanville & Company
August 3,1999 Certified Public Accountants
17e-1 PROCEDURES
For purposes of this section 17(e)(20(A) of the ACT {15 U.S.C.
80a-17(e)(2)(A)}. A commission , fee or other remuneration shall
be deemed as not exceeding the usual and customary brokers
commission if: (a) The commission, fee or other remuneration
received or to be received is reasonable and fair compared to
the commission or fee or other remuneration received by other
brokers in connection with other transactions involving similar
securities being purchased or sold on a securities exchange
during a comparable period of time.
The majority of the independent Directors of the East End Mutual
Funds Inc. having reviewed the transactions of the Fund in each
of the past four quarters, are of the opinion that the
commissions, fees and other remuneration by the broker dealers
executing the trades of the Fund are reasonable and fair compared
to commissions and fees and other remuneration received by other
broker dealers in connection with other transactions involving
similar securities being purchased or sold on a securities
exchanges during this period of time.
In Witness Whereof, I have hereunto set my hand this 25th. day
of August, 1999
/s/ Edith B. Matsis
-----------------
Secretary
26
MINUTES OF A SPECIAL MEETING OF THE BOARD
TO APPROVE FIDELITY BOND OF
EAST END MUTUAL FUNDS, INC.
MINUTES of the meeting, duly called, of the Board of Directors of
East End Mutual Funds, Inc. a Maryland corporation, held on the
25th day of June 1999 at 736 West End Avenue, Suite 3A New
York, New York at 6:30PM.
The President of the Corporation called the meeting to order.
The Secretary called the roll and the following Independent
Directors were found present: Editha B. Matsis , Dr. Fred Fisher
and Dr. Jeffrey Newcomer.
The Secretary reported that Notice of the time and place of
holding the meeting was given to each Director by mail in
accordance with the By-Laws.
On motion duly made and carried, the notice was ordered filed.
The President then stated that a quorum was present and the
meeting was ready to transact business.
The minutes of the preceding meeting of the Board, were read and
adopted.
The President presented his report.
WHEREAS this Corporation must pursuant to Rule 17g-1 of the 1940
Act approve the fidelity bond originally issued by Travelers
Insurance in the amount of $50,000 in favor of East End Mutual
Funds, Inc. solely, of which the premium has been prepaid to
September, 14, of 1999.
Now therefore it is resolved that the Corporation by the majority
of its Independent Directors unanimously approves said bond.
On motion duly made and carried, the same was received and
ordered to be filed.
There being no further business before the meeting, on motion
duly made, seconded and carried, the meeting was adjourned.
IN WITNESS WHEREOF, I have hereunto set my hand on this 28 th.
day of August 1999.
/s/ Aristides M. Matsis
president, director
/s/ Edith B. Matsis
vice president, director
27
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and
Board of Directors of the
East End Mutual Funds, Inc.
Capital Appreciation Series
We have audited the accompanying statement of assets and
liabilities of East End Mutual Funds, Inc. - Capital Appreciation
Series, including the schedule of investments owned, as of June
30, 1996 and the related statements of operations,changes in net
assets, and the financial highlights for the year end June 30,
1999. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements based on
our
audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities
owned as of June 30, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of East End Mutual Funds, Inc. -
Capital Appreciation Series as of June 30, 1999 the results of
its operations, the changes in net assets, and the financial
highlights in conformity with generally accepted accounting
principles.
Abington, Pennsylvania
Sanville & Company
Certified Public Accountants
August 3, 1996
