NVEST FUNDS TRUST III, 485APOS, 2000-12-22

NVEST FUNDS TRUST III
485APOS, 2000-12-22

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Registration Nos. 33-62061
811-7345
________________________________________________________________________________

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]

Pre-Effective Amendment No.
------ [_]

Post-Effective Amendment No. 12 [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [_]

Amendment No. 15 [X]
(Check appropriate box or boxes.)

NVEST FUNDS TRUST III
________________________________________________________________________________
(Exact Name of Registrant as Specified in Charter)

399 Boylston Street
Boston, Massachusetts 02116
________________________________________________________________________________
(Address of principal executive offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (617) 578-1132
--------------

John E. Pelletier, Esq.
Nvest Funds Distributor, L.P.
399 Boylston Street
Boston, MA 02116
________________________________________________________________________________
(Name and Address of Agent for Service)

Copy to:
John M. Loder, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
--------------------------------------------------------------------------------

It is proposed that this filing will become effective (check appropriate box):
[_] Immediately upon filing pursuant to paragraph (b)
[_] On (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] On (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

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Nvest Funds/sm/
Where The Best Minds Meet(R)

--------------------------------------------------------------------------------

Nvest

Large-Cap Equity
Nvest Equity Research Fund
Loomis, Sayles & Company, L.P.
All-Cap Equity
Nvest Mid Cap Growth Fund
Loomis, Sayles & Company, L.P.

[photo]

Prospectus
March 15, 2001

What's Inside
Goals, Strategies & Risks
Page X

Fund Fees & Expenses
Page X

Management Team
Page X

Fund Services
Page X

The Securities and Exchange Commission has not approved any Fund's shares or
determined whether this Prospectus is accurate or complete. Anyone who tells
you otherwise is committing a crime.

For general information on the Funds or any of their services and for assistance
in opening an account, contact your financial representative or call Nvest
Funds.

Nvest Funds
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399 Boylston Street, Boston, Massachusetts 02116
800-225-5478
www.nvestfunds.com

2
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<TABLE>
Table of Contents
<S> <C>
GOALS, STRATEGIES & RISKS

Nvest equity research Fund
Nvest mid cap Growth Fund

FUND FEES & EXPENSES

Fund Fees & Expenses

MORE ABOUT RISK

More About Risk

SUBADVISER'S PAST PERFORMANCE

subadviser's past performance

MANAGEMENT TEAM

Meet the Funds' Investment Adviser and Subadviser
Meet the Funds' Portfolio Managers

FUND SERVICES

Investing in the Funds
How Sales Charges are Calculated
Ways to Reduce or Eliminate Sales Charges
It's Easy to Open an Account
Buying Shares
Selling Shares
Selling Shares in Writing
Exchanging Shares
Restrictions on Buying, Selling and Exchanging Shares
How Fund Shares Are Priced
Dividends and Distributions
Tax Consequences
Compensation to Securities Dealers
Additional Investor Services
Glossary of Terms
</TABLE>

If you have questions about any of the terms used in this Prospectus, please
refer to the "Glossary of Terms."

To learn more about the possible risks of investing in the Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Funds may engage. Please read this section carefully
before you invest.

Fund shares are not bank deposits and are not guaranteed, endorsed or insured by
the Federal Deposit Insurance Corporation or any other government agency, and
are subject to investment risks, including possible loss of the principal
invested.

3
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Goals, Strategies & Risks
-------------------------

Nvest Equity Research Fund

----------------------------------------
Fund Focus
----------------------------------------
Stability Income Growth
----------------------------------------
High
----------------------------------------
Mod. X X X
----------------------------------------
Low
----------------------------------------

Adviser: Nvest Funds Management, L.P. ("Nvest Management")
Subadviser: Loomis, Sayles & Company, L.P. ("Loomis Sayles")
Managers: Lauriann Kloppenburg leads the Management Team
Category: Large-Cap Equity

Ticker Symbol: Class A Class B Class C

Investment Goal

The Fund seeks long-term capital growth.

The Fund's investment goal may be changed without shareholder approval.

Principal Investment Strategies

Under normal market conditions, the Fund invests substantially all of its assets
in equity securities, including common stocks, convertible securities, and
warrants. The Fund focuses on stocks of large capitalization companies, but may
invest in companies of any size.

Loomis Sayles industry research analysts, who are grouped in teams representing
the sectors of the Standard & Poor's Composite Index of 500 Stocks ("S&P 500"),
meet by team to determine which securities to buy and sell. The teams meet
regularly to compare fundamental trends across the various industries in the
sectors and use this information along with common valuation procedures to
determine which stocks they believe are best positioned to outperform the
industry or sector. Sell decisions are made when there is a deterioration in
fundamentals, a stock reaches a target price, or when a more attractive
opportunity is found. The Fund is "style neutral" - Loomis Sayles uses a
research-driven, company-by-company approach to identify stocks for the Fund,
and invests without regard to the "growth" or "value" aspects of the Fund's
overall portfolio. The Fund allocates its assets across industries and sectors
in weightings that are relatively similar to the S&P 500.

The Fund may:

Invest any portion of its assets in securities of Canadian issuers and up to 20%
of its assets in other foreign securities.

Engage in foreign currency hedging transactions; options and futures
transactions; and securities lending. The Fund may also invest in Rule 144A
securities.

Purchase money market or high quality debt securities for temporary defensive
purposes in response to adverse market, economic or political conditions. These
investments may prevent the Fund from achieving its goal.

Principal Investment Risks

4
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drops in a stock's value or periods of below-average performance in a given
stock or in the stock market as a whole. Growth stocks are generally more
sensitive to market movements than other types of stocks, primarily because
their stock prices are based heavily on future expectations. Rule 144A
securities may be more illiquid than other equity securities.

Foreign securities: May be affected by foreign currency fluctuations, higher
volatility than U.S. securities and limited liquidity. Political, economic and
information risks are also associated with foreign securities. These
investments may also be affected by the conversion of the currency of several
European countries to the "euro" currency. Investments in emerging markets
may be subject to these risks to a greater extent than those in more developed
markets.

Performance
No performance information is available for the Fund because it has not yet been
in operation for a full calendar year.

5
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Nvest Mid Cap Growth Fund

----------------------------------------
Fund Focus
----------------------------------------
Stability Income Growth
----------------------------------------
High X
----------------------------------------
Mod.
----------------------------------------
Low X X
----------------------------------------

Adviser: Nvest Funds Management, L.P. ("Nvest Management")
Subadvisor: Loomis, Sayles & Company, L.P. ("Loomis Sayles")
Managers: Christopher R. Ely, David L. Smith and Philip C. Fine
Category All-Cap Equity

Ticker Symbol: Class A Class B Class C

Investment Goal

The Fund seeks long-term capital growth from investments in common stocks or
their equivalent.

The Fund's investment goal may be changed without shareholder approval.

Principal Investment Strategies

Under normal market conditions, the Fund invests primarily in common stocks or
other equity securities of companies with market capitalizations that fall
within the capitalization range of companies included in the Russell Mid-Cap
Growth Index. However, the Fund is not limited to these companies and may
invest in companies of any size.

In deciding which securities to buy and sell, Loomis Sayles seeks to identify
companies that the portfolio managers believe have distinctive products,
technologies, or services, dynamic earnings growth, prospects for high levels of
profitability, and solid management. Loomis Sayles typically does not consider
current income.

The Fund may:

Invest any portion of its assets in securities of Canadian issuers and up to 20%
of its assets in other foreign securities.

Engage in foreign currency hedging transactions; options and futures
transactions; and securities lending. The Fund may also invest in real estate
investment trusts ("REITs") and Rule 144A securities.

Engage in active and frequent trading of securities. Frequent trading may
produce higher transaction costs and a higher level of taxable capital gains,
which may lower your return.

Principal Investment Risks

Equity securities: Because the Fund invests primarily in equity securities, its
major risks are those commonly associated with investing in stocks. This means
that you may lose money on your investment due to unpredictable drops in a
stock's value or periods of below-average performance in a given stock or in
the stock market as a whole Growth stocks are generally more sensitive to
market movements than other types of stocks, primarily because their stock
prices are based heavily on future expectations. Rule 144A securities may be
more illiquid than other equity securities.

6
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REITs: Subject to changes in underlying real estate values, rising interest
rates, limited diversification of holdings, higher costs and prepayment risk
associated with related mortgages, as well as other risks particular to
investments in real estate.

Performance
No performance information is available for the Fund because it has not yet been
in operation for a full calendar year.

7
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Fund Fees & Expenses
---------------------

Fund Fees & Expenses

The following tables describe the fees and expenses that you may pay if you buy
and hold shares of each Fund.

Shareholder Fees

(fees paid directly from your investment)
-------------------------------------------------------------------------------
Class A Class B Class C
-------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price)(1)(2) 5.75% None 1.00%(4)
-------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage
of original purchase price or redemption proceeds,
as applicable)(2) (3) 5.00% 1.00%
-------------------------------------------------------------------------------
Redemption fees None* None* None*
-------------------------------------------------------------------------------

(1) A reduced sales charge on Class A and Class C shares applies in some cases.
See "Ways to Reduce or Eliminate Sales Charges" within the section entitled
"Fund Services."

(2) Does not apply to reinvested distributions.

(3) A 1.00% contingent deferred sales charge applies with respect to certain
purchases of Class A shares greater than $1,000,000 redeemed within 1 year
after purchase, but not to any other purchases or redemptions of Class A
shares. See "How Sales Charges Are Calculated" within the section entitled
"Fund Services."

(4) Accounts established prior to December 1, 2000 will not be subject to the
1.00% front-end sales charge for exchange or additional purchases of Class
C shares.

*Generally, a transaction fee will be charged for expedited payment of
redemption proceeds such as by wire or overnight delivery.

Annual Fund Operating Expenses

(expenses that are deducted from Fund assets, as a percentage of average daily
net assets)

----------------------------------------------------------
Nvest Equity Research
Fund
----------------------------------------------------------
Class A Class B Class C
----------------------------------------------------------
Management fees 0.80% 0.80% 0.80%
----------------------------------------------------------
Distribution and/or 0.25% 1.00%* 1.00%*
service (12b-1) fees
----------------------------------------------------------
Other expenses** 1.21% 1.21% 1.21%
----------------------------------------------------------
Total annual fund 2.26% 3.01% 3.01%
operating expenses
----------------------------------------------------------
Fee Waiver and/or 0.56% 0.56% 0.56%
expense
reimbursement***
----------------------------------------------------------
Net Expenses 1.70% 2.45% 2.45%
----------------------------------------------------------

8
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---------------------------------------------------------------
Nvest Mid Cap Growth Fund
---------------------------------------------------------------
Class A Class B Class C
---------------------------------------------------------------
Management fees 0.95% 0.95% 0.95%
---------------------------------------------------------------
Distribution
and/or service
(12b-1) fees 0.25% 1.00%* 1.00%*
---------------------------------------------------------------
Other expenses** 0.54% 0.54% 0.54%
---------------------------------------------------------------
Total annual fund
operating expenses 1.74% 2.49% 2.49%
---------------------------------------------------------------
Fee Waiver and/or
expense
reimbursement*** 0.04% 0.04% 0.04%
---------------------------------------------------------------
Net Expenses 1.70% 2.45% 2.45%
---------------------------------------------------------------

* Because of the higher 12b-1 fees, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by rules
of the National Association of Securities Dealers, Inc.

** Other expenses are based on estimated amounts for the current fiscal year.

*** Nvest Management has given binding undertakings to the Funds to limit the
amount of each Fund's total annual fund operating expenses to 1.70%, 2.45% and
2.45% of such Fund's average daily net assets for Class A, B and C shares,
respectively. These undertakings are in effect until May 1, 2002 and will be
reevaluated on an annual basis.

Example

This example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds.

The example assumes that:

. You invest $10,000 in the Fund for the time periods indicated;

. Your investment has a 5% return each year; and

. A Fund's operating expenses remain the same.

Although your actual costs and returns may be higher or lower, based on these
assumptions your costs would be:

-----------------------------------------------------
Nvest Equity Research Fund
-----------------------------------------------------
Class Class Class
A B C
-----------------------------------------------------
(1) (2) (1) (2)
-----------------------------------------------------
1 year $ 738 $ 748 $248 $446 $346
-----------------------------------------------------
3 years $1,183 $1,171 $871 $962 $962
-----------------------------------------------------

-----------------------------------------------------
Nvest Mid Cap Growth Fund
-----------------------------------------------------
Class Class Class Class Class
A B B C C
-----------------------------------------------------
(1) (2) (1) (2)
-----------------------------------------------------
1 year $ 738 $ 748 $248 $446 $346
-----------------------------------------------------
3 years $1,087 $ 1,071 $771 $864 $864
-----------------------------------------------------

(1) Assumes redemption at end of period.

(2) Assumes no redemption at end of period.

9
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More About Risk

The Funds have principal investment strategies that come with inherent risks.
The following is a list of risks to which each Fund may be subject by investing
in various types of securities or engaging in various practices.

Market Risk (Both Funds) The risk that the market value of a security may move
up and down, sometimes rapidly and unpredictably, based upon change in an
issuer's financial condition as well as overall market and economic conditions.
IPO securities tend to involve greater market risk than other equity securities
due, in part, to public perception and the lack of public information and
trading history.

Management Risk (Both Funds) The risk that a strategy used by a Fund's portfolio
management may fail to produce the intended result.

Credit Risk (Both Funds) The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to honor a
financial obligation.

Currency Risk (Both Funds) The risk that fluctuations in the exchange rates
between the U.S. dollar and foreign currencies may negatively affect an
investment.

Emerging Markets Risk (Both Funds) The risk associated with developing
securities markets of smaller sizes or with short operating histories. Emerging
markets involve risks in addition to and greater than those generally associated
with investing in developed foreign markets. The extent of economic development,
political stability, market depth, infrastructure and capitalization, and
regulatory oversight in emerging market economies is generally less than in more
developed markets.

Risks of Options, Futures and Swap Contracts (Both Funds) These transactions are
subject to changes in the underlying security on which such transactions are
based. It is important to note that even a small investment in these types of
derivative securities can have a significant impact on a Fund's exposure to
stock market values, interest rates or the currency exchange rate. These types
of transactions will be used primarily for hedging purposes.

Leverage Risk (Both Funds) The risk associated with securities or practices
(e.g. borrowing) that multiply small index or market movements into large
changes in value. When a derivative security (a security whose value is based on
another security or index) is used as a hedge against an offsetting position
that a Fund also holds, any loss generated by the derivative security should be
substantially offset by gains on the hedged instrument, and vice versa. To the
extent that a Fund uses a derivative security for purposes other than as a
hedge, that Fund is directly exposed to the risks of that derivative security
and any loss generated by the derivative security will not be offset by a gain.

Information Risk (Both Funds) The risk that key information about a security is
inaccurate or unavailable.

Opportunity Risk (Both Funds) The risk of missing out on an investment
opportunity because the assets necessary to take advantage of it are invested in
less profitable investments.

Liquidity Risk (Both Funds) The risk that certain securities may be difficult or
impossible to sell at the time and at the price that the seller would like. This
may result in a loss or may otherwise be costly to a Fund. These types of risks
may also apply to restricted securities, Section 4(2) Commercial Paper, or Rule
144A Securities.

Correlation Risk (Both Funds) The risk that changes in the value of a hedging
instrument will not match those of the asset being hedged.

Valuation Risk (Both Funds) The risk that the Fund has valued certain securities
at a higher price than it can sell them for.

Political Risk (Both Funds) The risk of losses directly attributable to
government or political actions.

Euro Conversion Risk (Both Funds) Many European countries have adopted a single
European currency, the "euro." The consequences of this conversion for foreign
exchange rates, interest rates and the value of European

10
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securities are unclear presently. Such consequences may decrease the value
and/or increase the volatility of securities held by a Fund.

11
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Subadviser's Past Performance

Nvest Equity Research Fund

The returns shown below represent the returns derived from performance
data furnished by Loomis Sayles relating to a mutual fund and a private account
advised by Loomis Sayles (together, the "Research Accounts") with substantially
similar investment objectives, strategies and policies as the Nvest Equity
Research Fund.

The Research Accounts, and in particular the private account, have not been
subject to the same types of expenses to which the Equity Research Fund is
subject. In addition, the private account has not been subject to the
diversification requirements, investment limitations and other restrictions to
which the Equity Research Fund is subject under the Investment Company Act and
the Internal Revenue Code. The Research Accounts' performance results may have
been less favorable had all of the Research Accounts been subject to these
expenses or restrictions or to other restrictions applicable to investment
companies under relevant laws. In addition, the Equity Research Fund may be
subject to more frequent inflows and outflows of assets than the Research
Accounts, which may negatively impact performance. The information regarding
the performance of the Research Accounts does not represent the Equity Research
Fund's performance. Such information should not be considered a prediction of
the future performance of the Equity Research Fund. The Equity Research Fund is
newly organized and has no performance record of its own.

The table below shows the average annual total returns for each of the Research
Accounts for the period from ___________ (inception date of private account)
through December 31, 2000 (the mutual fund commenced operations on August 1,
2000). The Research Accounts are also compared against the S&P 500 Index. The
past performance data for the Research Accounts has been adjusted to reflect the
management fees and other expenses actually paid by the Research Accounts
and assumes the reinvestment of all dividends and distributions. The fees
and expenses paid by the Equity Research Fund will be higher than the fees and
expenses paid by the Research Accounts. The performance of the Research
Accounts would have been lower than that shown below if they had been subject to
the fees and expenses of the Equity Research Fund.

Avg Annual Total Returns (1)
For the period ending December 31, 2000
1 Year 5 Years Since Inception
Loomis Sayles Private Account
Loomis Sayles Research Fund
S&P 500

(1) Average Annual Total Returns: The Loomis Sayles Research Accounts consist of
all client accounts whose portfolios are managed using investment policies and
strategies substantially similar to those that will be used to manage the Fund.
The private account has been managed since _________. The Loomis Sayles Research
Fund has been managed since August 1, 2000. The private account is not subject
to expenses, and the performance information shown for the private account is
adjusted to give effect to the projected expenses for the Loomis Sayles Research
Fund's Institutional Class for the 2001 fiscal year. The Standard & Poor's
Composite Index of 500 Stocks is a commonly used benchmark of U.S. equity
securities. The index is unmanaged, has no operating costs, and is included in
the table to facilitate your comparison of the Loomis Sayles Research Accounts'
performance to a broad-based market index.

12
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Nvest Mid Cap Growth Fund

The returns shown below represent the returns derived from performance
data furnished by Loomis Sayles relating to a mutual fund and a group of private
accounts advised by Loomis Sayles (together, the "Mid Cap Accounts"), with
substantially similar investment objectives, strategies and policies as the
Nvest Mid Cap Growth Fund.

The Mid Cap Accounts, and in particular, the private accounts, have not been
subject to the same types of expense to which the Mid Cap Growth Fund is
subject. In addition, the private accounts have not been subject to the
diversification requirements, investment limitations and other restrictions to
which the Mid Cap Growth Fund is subject under the Investment Company Act and
the Internal Revenue Code. The Mid Cap Accounts' performance results may have
been less favorable had they been subject to these expenses or restrictions or
to other restrictions applicable to investment companies under relevant laws.
In addition, the Nvest Mid Cap Growth Fund may be subject to more frequent
inflows and outflows of assets than the Mid Cap Accounts, which may negatively
impact performance. The information regarding the performance of the Mid Cap
Accounts does not represent the Mid Cap Growth Fund's performance. Such
information should not be considered a prediction of the future performance of
the Mid Cap Growth Fund. The Mid Cap Growth Fund is newly organized and has no
performance record of its own.

The table below shows the average annual total returns for each of the Mid Cap
Accounts for the period from December 31, 1997 (inception date of mutual fund)
to December 31, 2000 (the private accounts have been managed since _______). The
Mid Cap Accounts are also compared against the Russell Mid Cap Growth Index. The
past performance data for the Mid Cap Accounts has been adjusted to reflect the
management fees and other expenses actually paid by the Mid Cap Accounts and
assumes the reinvestment of all dividends and distributions. The fees and
expenses paid by the Mid Cap Growth Fund will be higher than the fees and
expenses paid by the corresponding Mid Cap Accounts. The performance of the Mid
Cap Accounts would have been lower than that shown below if they had been
subject to the fees and expenses of the Mid Cap Growth Fund.

Avg Annual Total Returns (1)
For the period ending December 31, 2000
1 Year 5 Years Since Inception
Loomis Sayles Private Accounts
Loomis Sayles Aggressive Growth Fund
Russell Mid Cap Growth Index

(1) Average Annual Total Returns: The Loomis Sayles Mid Cap Accounts consist of
all client accounts where portfolios are managed using investment policies and
strategies substantially similar to those that will be used to manage the Fund.
The private accounts have been managed since __________. The Loomis Sayles
Aggressive Growth Fund has been managed since December 31, 1997. The Russell
Mid-Cap Growth Index is a market capitalization weighted index of medium
capitalization stocks determined by Russell to be growth stocks as measured by
their price-to-book ratios and forecasted growth values. The index is unmanaged,
has no operating costs, and is included in the table to facilitate your
comparison of the Loomis Sayles Mid Cap Accounts' performance to a broad-based
market index.

13
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Management Team
---------------

Meet the Funds' Investment Adviser and Subadviser

The Nvest Funds family includes 28 mutual funds with a total of over $__ billion
in assets under management as of December 31, 2000. Nvest Funds are distributed
through Nvest Funds Distributor, L.P. (the "Distributor"). This Prospectus
covers Nvest Equity Research Fund and Nvest Mid Cap Growth Fund (the "Funds" or
each a "Fund"), which along with Nvest Stock Funds, Nvest Bond Funds, Nvest Star
Funds, Kobrick Fund, Nvest AEW Real Estate Fund, Nvest Select Fund and Nvest
State Tax-Free Funds, constitute the "Nvest Funds." Nvest Cash Management Trust
Money Market Series and Nvest Tax Exempt Money Market Trust constitute the
"Money Market Funds."

Nvest Funds Management, L.P.

Nvest Management, located at 399 Boylston Street, Boston, Massachusetts 02116,
serves as the adviser to each of the Funds. Nvest Management is a subsidiary of
Nvest Companies, L.P. ("Nvest Companies"), which is a subsidiary of CDC Asset
Management. CDC Asset Management is the investment management arm of France's
Caisse des Depots et Consignations ("CDC"), a major diversified financial
institution. As of December 31, 2000, Nvest Companies' 18 principal subsidiary
or affiliated asset management firms, collectively had more than $___ billion in
assets under management. Nvest Management oversees, evaluates and monitors the
subadvisory services provided to each Fund. It also provides general business
management and administration to each Fund. Nvest Management does not determine
what investments will be purchased by the Funds. The subadviser listed below
make the investment decisions for the Funds.

The Funds pay combined advisory and subadvisory fees at an annual rate of 0.80%
for Equity Research Fund and 0.95% for Mid Cap Growth Fund, each expressed as a
percentage of each Fund's average daily net assets.

Subadviser

Loomis Sayles, located at One Financial Center, Boston, Massachusetts 02111,
serves as subadviser to the Funds. Loomis Sayles is a subsidiary of CDC Asset
Management - North America. Founded in 1926, Loomis Sayles is one of America's
oldest investment advisory firms with over $___ billion in assets under
management as of December 31, 2000. Loomis Sayles is well known for its
professional research staff, which is one of the largest in the industry.

Subadvisory Agreements

Each Fund has received an exemptive order from the Securities and Exchange
Commission (the "SEC"), which permits Nvest Management to amend or continue
existing subadvisory agreements when approved by the Fund's Board of Trustees,
without shareholder approval. The exemption also permits Nvest Management to
enter into new subadvisory agreements with subadvisers that are not affiliated
with Nvest Management, if approved by each Fund's Board of Trustees.
Shareholders will be notified of any subadviser changes.

Portfolio Trades

In placing portfolio trades, each Fund's adviser or subadviser may use brokerage
firms that market the Fund's shares or are affiliated with CDC Asset Management
- North America, Nvest Management, or Loomis Sayles. In placing trades, Loomis
Sayles will seek to obtain the best combination of price and execution, which
involves a number of judgmental factors. Such portfolio trades are subject to
applicable regulatory restrictions and related procedures adopted by each Fund's
Board of Trustees.

14
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Management Team
---------------

Meet the Funds' Portfolio Managers

EQUITY RESEARCH FUND

Lauriann Kloppenburg, Vice President and Director of Equity Research of Loomis
Sayles and Vice President of Loomis Sayles Funds, leads a team of Loomis Sayles
research analysts in managing the Fund. Ms. Kloppenburg, a Chartered Financial
Analyst, joined Loomis Sayles in 1982. She received her B.A. from Wellesley
College and has over 18 years of investment experience.

MID CAP GROWTH FUND

Christopher R. Ely

Christopher R. Ely has co-managed the Fund since its inception on March 15,
2001. Mr. Ely, Vice President of Loomis Sayles and of Loomis Sayles Funds,
joined the firm in 1996. He also co-manages the Loomis Sayles Small Cap Growth
Fund. Prior to 1996, Mr. Ely was Senior Vice President and Portfolio Manager at
Keystone Investment Management Company, Inc. He holds a B.A. from Brown
University and an M.B.A. from Babson College. He has 21 years of investment
management experience.

Philip C. Fine

Dr. Philip C. Fine has co-managed the Fund since its inception. Dr. Fine, Vice
President of Loomis Sayles and of Loomis Sayles Funds, joined the firm in 1996.
He also co-manages the Loomis Sayles Small Cap Growth Fund. Prior to 1996, Dr.
Fine was a Vice President and Portfolio Manager at Keystone Investment
Management Company, Inc. He received an A.B. and a Ph.D. from Harvard
University. He has 12 years of investment management experience.

David L. Smith

David L. Smith has co-managed the Fund since its inception. Mr. Smith, Vice
President of Loomis Sayles and of Loomis Sayles Funds, joined the firm in 1996.
He also co-manages the Loomis Sayles Small Cap Growth Fund. Prior to 1996, Mr.
Smith was a Vice President and Portfolio Manager at Keystone Investment
Management Company, Inc. He holds an M.B.A. from Cornell University and a B.A.
from the University of Massachusetts at Amherst. He has 14 years of investment
management experience.

15
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Fund Services
-------------

Investing in the Funds

Choosing a Share Class

Each Fund offers Classes A, B and C shares to the public. Each class has
different costs associated with buying, selling and holding Fund shares, which
allows you to choose the class that best meets your needs. Which class you
choose will depend upon the size of your investment and how long you intend to
hold your shares. Class B shares, Class C shares and certain shareholder
features may not be available to you if you hold your shares in a street name
account. Your financial representative can help you decide which class of
shares is most appropriate for you.

Class A Shares

. You pay a sales charge when you buy Fund shares. There are several ways to
reduce this charge. See the section entitled "Ways to Reduce or Eliminate
Sales Charges."

. You pay lower annual expenses than Class B and Class C shares, giving you the
potential for higher returns per share.

. You do not pay a sales charge on orders of $1 million or more, but you may
pay a charge on redemption if you redeem these shares within 1 year of
purchase.

Class B Shares

You do not pay a sales charge when you buy Fund shares. All of your money goes
to work for you right away.

You pay higher annual expenses than Class A shares.

You will pay a charge on redemptions if you sell your shares within 6 years of
purchase, as described in the section "How Sales Charges Are Calculated."

Your Class B shares will automatically convert into Class A shares after 8
years, which reduces your annual expenses.

We will not accept an order for $1 million or more of Class B shares. You may,
however, purchase $1 million or more of Class A shares, which will have no sales
charge as well as lower annual expenses. You may pay a charge on redemption if
you redeem these shares within 1 year of purchase.

Class C Shares

You do pay a sales charge when you buy Fund shares. There are several ways to
reduce this charge. See section entitled "Ways to Reduce or Eliminate Sales
Charges."

You pay higher annual expenses than Class A shares.

You will pay a charge on redemptions if you sell your shares within 1 year of
purchase.

Your Class C shares will not automatically convert into Class A shares. If you
hold your shares for longer than 8 years, you'll pay higher expenses than other
classes.

We will not accept an order for $1 million or more of Class C shares. You may,
however, purchase $1 million or more of Class A shares, which will have no sales
charge as well as lower annual expenses. You may pay a charge on redemption if
you redeem these shares within 1 year of purchase.

For expenses associated with Classes A, B and C shares, see the section entitled
"Fund Fees & Expenses" in this Prospectus.

16
<PAGE>

Certificates

Certificates will not be issued automatically for any class of shares. Upon
written request, you may receive certificates for Class A shares only.

17
<PAGE>

Fund Services
-------------

How Sales Charges Are Calculated

Class A Shares

The price that you pay when you buy Class A shares ("offering price") is their
net asset value plus a sales charge (sometimes called a "front-end sales
charge") which varies depending upon the size of your purchase.

--------------------------------------------------------------------------------
Class A Sales Charges
Your Investment As a % of offering price As a % of your investment
--------------------------------------------------------------------------------
Less than $ 50,000 5.75% 6.10%
--------------------------------------------------------------------------------
$ 50,000 - $ 99,999 4.50% 4.71%
--------------------------------------------------------------------------------
$ 100,000 - $249,999 3.50% 3.63%
--------------------------------------------------------------------------------
$ 250,000 - $499,999 2.50% 2.56%
--------------------------------------------------------------------------------
$ 500,000 - $999,999 2.00% 2.04%
--------------------------------------------------------------------------------
$1,000,000 or more* 0.00% 0.00%
--------------------------------------------------------------------------------

For purchases of Class A shares of the Funds of $1 million or more or purchases
by Retirement Plans (Plans under Sections 401(a) or 401(k) of the Internal
Revenue Code with investments of $1 million or more or that have 100 or more
eligible employees), there is no front-end sales charge, but a contingent
deferred sales charge of 1.00% may apply to redemptions of your shares within
one year of the date of purchase. See the section entitled "Ways to Reduce or
Eliminate Sales Charges."

Class B Shares

The offering price of Class B shares is their net asset value, without a front-
end sales charge. However, there is a contingent deferred sales charge ("CDSC")
on shares that you sell within 6 years of buying them. The amount of the CDSC,
if any, declines each year that you own your shares. The holding period for
purposes of timing the conversion to Class A shares and determining the CDSC
will continue to run after an exchange to Class B shares of another Nvest Fund.
The CDSC equals the following percentages of the dollar amounts subject to the
charge:

--------------------------------------------------------
Class B Contingent Deferred Sales Charges
--------------------------------------------------------
Year Since Purchase CDSC on Shares Being Sold
--------------------------------------------------------
1st 5.00%
--------------------------------------------------------
2/nd/ 4.00%
--------------------------------------------------------
3/rd/ 3.00%
--------------------------------------------------------
4/th/ 3.00%
--------------------------------------------------------
5/th/ 2.00%
--------------------------------------------------------
6/th/ 1.00%
--------------------------------------------------------
Thereafter 0.00%
--------------------------------------------------------

Class C Shares

The offering price of Class C shares is their net asset value plus a front-end
sales charge of 1.00% (1.01% of your investment). Class C shares are also
subject to a CDSC of 1.00% on redemptions made within one year of the date of
purchase. The holding period for determining the CDSC will continue to run after
an exchange to Class C shares of another Nvest Fund.

--------------------------------------------------------
Class C Contingent Deferred Sales Charges
--------------------------------------------------------
Year Since Purchase CDSC on Shares Being Sold
--------------------------------------------------------
1st 1.00%
--------------------------------------------------------
Thereafter 0.00%
--------------------------------------------------------

18
<PAGE>

How the CDSC Is Applied to Your Shares

The CDSC is a sales charge you pay when you redeem certain Fund shares. The
CDSC:

is calculated based on the number of shares you are selling;

is based on either your original purchase price or the current net asset value
of the shares being sold, whichever is lower;

is deducted from the proceeds of the redemption, not from the amount remaining
in your account; and

for year one applies to redemptions through the day one year after the date on
which your purchase was accepted, and so on for subsequent years.

A CDSC will not be charged on:

increases in net asset value above the purchase price; or

shares you acquired by reinvesting your dividends or capital gains
distributions.

To keep your CDSC as low as possible, each time that you place a request to sell
shares we will first sell any shares in your account that carry no CDSC. If
there are not enough of these shares available to meet your request, we will
sell the shares with the lowest CDSC.

Exchanges into Shares of a Money Market Fund

If you exchange shares of the Fund into shares of the Money Market Funds, the
holding period for purposes of determining the CDSC and conversion to Class A
shares stops until you exchange back into shares of another Nvest Fund. If you
choose to redeem those Money Market Fund shares, a CDSC may apply.

19
<PAGE>

Fund Services
-------------

Ways to Reduce or Eliminate Sales Charges

Class A or C Shares

Reducing Sales Charges

There are several ways you can lower your sales charge for Class A shares
utilizing the chart on the previous page, including:

. Letter of Intent -- allows you to purchase Class A shares of any Nvest Fund
over a 13-month period but pay sales charges as if you had purchased all
shares at once. This program can save you money if you plan to invest $50,000
or more over 13 months. Purchases in Class B and Class C shares may be used
toward meeting the letter of intent.

. Combining Accounts -- allows you to combine shares of multiple Nvest Funds
and classes for purposes of calculating your sales charge. You may combine
your purchases with those of qualified accounts of a spouse, parents,
children, siblings, grandparents, grandchildren, in-laws, individual
fiduciary accounts, sole proprietorships, single trust estates and any other
group of individuals acceptable to the Distributor.

These privileges do not apply to the Money Market Funds unless shares are
purchased through an exchange from another Nvest Fund.

Eliminating Sales Charges and CDSC

Class A shares may be offered without front-end sales charges or a CDSC, and
Class C shares may be offered without a front-end sales charge, to the following
individuals and institutions:

. Any government entity that is prohibited from paying a sales charge or
commission to purchase mutual fund shares;

. Selling brokers, sales representatives or other intermediaries under
arrangements with the Distributor;

. Fund Trustees and other individuals who are affiliated with any Nvest Fund or
Money Market Fund (this also applies to any spouse, parents, children,
siblings, grandparents, grandchildren and in-laws of those mentioned);

. Participants in certain Retirement Plans with at least 100 eligible employees
(one-year CDSC may apply);

. Non-discretionary and non-retirement accounts of bank trust departments or
trust companies only if they principally engage in banking or trust
activities; and

. Investments of $25,000 or more in Nvest Funds or Money Market Funds by
clients of an adviser or subadviser to any Nvest Fund or Money Market Fund.

Repurchasing Fund Shares

You may apply proceeds from redeeming Class A or Class C shares of the Funds
(without paying a front-end sales charge) to repurchase Class A or Class C
shares, respectively, of any Nvest Fund. To qualify, you must reinvest some or
all of the proceeds within 120 days after your redemption and notify Nvest Funds
or your financial representative at the time of reinvestment that you are taking
advantage of this privilege. You may reinvest your proceeds either by returning
the redemption check or by sending a new check for some or all of the redemption
amount. Please note: For federal income tax purposes, a redemption is a sale
that involves tax consequences, even if the proceeds are later reinvested.
Please consult your tax adviser for how a redemption would affect you.

If you repurchase Class A shares of $1 million or more within 30 days after you
redeem such shares, the Distributor will rebate the amount of the CDSC charged
on the redemption.

20
<PAGE>

Class A, B or C Shares

Eliminating the CDSC

As long as we are notified at the time you sell, the CDSC for any share class
will generally be eliminated in the following cases:

to make distributions from a retirement plan (a plan termination or total plan
redemption may incur a CDSC);

to make payments through a systematic withdrawal plan; or

due to shareholder death or disability.

If you think you may be eligible for a sales charge elimination or reduction,
contact your financial representative or Nvest Funds. Check the Statement of
Additional Information for details.

21
<PAGE>

Fund Services
-------------

It's Easy to Open an Account

To open an account with Nvest Funds:

1. Read this Prospectus carefully.

2. Determine how much you wish to invest. The following chart shows the
investment minimums for various types of accounts:

<TABLE>
<CAPTION>
Minimum to Open an
Minimum to Open an Account Using Investment Minimum for Existing
Type of Account Account Builder Accounts
<S> <C> <C> <C>
Any account other than those listed below $2,500 $100 $100
Accounts registered under the Uniform Gifts to
Minors Act or the Uniform Transfers to Minors Act $2,500 $100 $100
Individual Retirement Accounts ("IRAs") $ 500 $100 $100
Retirement plans with tax benefits such as
corporate pension, profit sharing and Keogh plans $ 250 $100 $100
Payroll Deduction Investment Programs for
SARSEP*, SEP, SIMPLE IRA, 403(b)(7) and $ 25 N/A $ 25
certain other retirement plans
</TABLE>

* Effective January 1, 1997, the Savings Incentive Match Plan for Employees of
Small Employers (SIMPLE) IRA became available replacing SARSEP plans. SARSEP
plans established prior to January 1, 1997 may remain active and continue to
add new employees.

3. Complete the appropriate parts of the account application, carefully
following the instructions. If you have any questions, please call your
financial representative or Nvest Funds at 800-225-5478. For more information
on Nvest Funds' investment programs, refer to the section entitled
"Additional Investor Services" in this Prospectus.

4. Use the following sections as your guide for purchasing shares.

Self-Servicing Your Account

Buying or selling shares is easy with the services described below:

Nvest Funds Personal Access Line(R)

800-225-5478, press 1

Nvest Funds Web Site

www.nvestfunds.com

You have access to your account 24 hours a day by calling the Personal Access
Line(R) from a touch-tone telephone or by visiting us online. Using these
customer service options, you may:

purchase, exchange or redeem shares in your existing accounts (certain
restrictions may apply);

review your account balance, recent transactions, Fund prices and recent
performance;

order duplicate account statements; and

obtain tax information.

22
<PAGE>

Please see the following pages for other ways to buy, exchange or sell your
shares.

23
<PAGE>

Fund Services
-------------

Buying Shares

<TABLE>
<CAPTION>
Opening an Adding to an
Account Account

Through Your Investment Dealer
<S> <C> <C>
. Call your investment dealer . Call your investment dealer
for information. for information.
By Mail

. Make out a check in U.S. dollars . Make out a check in U.S. dollars
the investment amount, payable to for the investment amount, payable to
"Nvest Funds." Third party checks "Nvest Funds." Third party checks
and "starter" checks will not be and "starter" checks will not be
accepted. accepted.
[envelope icon] . Mail the check with your completed . Fill out the detachable investment
application to Nvest Funds, P.O. Box slip from an account statement. If
8551, Boston, MA 02266-8551 no slip is available, include with
the check a letter specifying the
Fund name, your class of shares, your
account number and the registered
account name(s). To make investing
even easier, you can order more
investment slips by calling
800-225-5478.
By Exchange

. The exchange must be for a . The exchange must be for a
minimum of $1,000 or for all of minimum of $1,000 or for all
your shares. of your shares.

[exchange icon] . Obtain a current prospectus for . Call your investment dealer or
the Fund into which you are Nvest Funds at 800-225-5478 or visit
exchanging by calling your investment nvestfunds.com to request an exchange.
dealer or Nvest Funds at 800-225-5478
. Call your investment dealer or . See the section entitled
Nvest Funds to request an exchange. "Exchanging Shares" for more details.

. See the section entitled
"Exchanging Shares" for more details.

By Wire
. Call Nvest Funds at 800-225-5478 . Visit nvestfunds.com to add shares
to obtain an account number and wire to your account by wire.
transfer instructions. Your bank may
charge you for such a transfer.
[wire icon] . Instruct your bank to transfer
funds to State Street Bank & Trust
Company, ABA# 011000028, DDA#
99011538.
. Specify the Fund name, your class
</TABLE>

24
<PAGE>

<TABLE>
<S> <C> <C>
of shares, your account number and
the registered account name(s). Your
bank may charge you for such a
transfer.
Automatic Investing Through Investment Builder
. Indicate on your application that . Please call Nvest Funds at
you would like to begin an automatic 800-225-5478 for a Service Options
investment plan through Investment Form. A signature guarantee may be
Builder and the amount of the monthly required to add this privilege.
investment ($100 minimum).
[builder icon] . Send a check marked "Void" or a . See the section entitled
deposit slip from your bank account "Additional Investor Services".
along with your application.

Through Automated Clearing House ("ACH")
. Ask your bank or credit union whether . Call Nvest Funds at 800-225-5478 or
it is a member of the ACH system. visit nvestfunds.com to add shares to
your account through ACH.
[ACH icon] . Complete the "Telephone Withdrawal . If you have not signed up for the
and Exchange" and "Bank Information" ACH system, please call Nvest Funds for
sections on your account application. a Service Options Form. A signature
guarantee may be required to add this
privilege.
. Mail your completed application to
Nvest Funds, P.O. Box 8551, Boston, MA
02266-8551.
</TABLE>

25
<PAGE>

Fund Services
-------------

Selling Shares
To Sell Some or All of Your Shares

Certain restrictions may apply. See section entitled "Restrictions on Buying,
Selling and Exchanging Shares."

Through Your Investment Dealer
. Call your investment dealer for information.

By Mail

. Write a letter to request a redemption specifying
the name of your Fund, your class of shares, your
account number, the exact registered account
name(s), the number of shares or the dollar amount
to be redeemed and the method by which you wish to
receive your proceeds. Additional materials may be
required. See the section entitled "Selling Shares
in Writing."
[envelope icon] . The request must be signed by all of the owners of
the shares and must include the capacity in which
they are signing, if appropriate.
. Mail your request by regular mail to Nvest Funds,
P.O. Box 8551, Boston, MA 02266-8551 or by
registered, express or certified mail to Nvest
Funds, 66 Brooks Drive, Braintree, MA 02184.
. Your proceeds (less any applicable CDSC) will be
delivered by the method chosen in your letter. If
you choose to have your proceeds delivered by mail,
they will generally be mailed to you on the business
day after the request is received in good order. You
may also choose to redeem by wire or through ACH
(see below).

By Exchange
. Obtain a current prospectus for the Fund into which
you are exchanging by calling your investment dealer
or Nvest Funds at 800-225-5478.
[exchange icon] . Call Nvest Funds or visit nvestfunds.com to request
an exchange.
. See the section entitled "Exchanging Shares" for
more details.
By Wire
. Fill out the "Telephone Withdrawal and Exchange" and
"Bank Information" sections on your account
application.
[wire icon] . Call Nvest Funds at 800-225-5478, visit
nvestfunds.com or indicate in your redemption
request letter (see above) that you wish to have
your proceeds wired to your bank.
. Proceeds (less any applicable CDSC) will generally
be wired on the next business day. A wire fee
(currently $5.00) will be deducted from the
proceeds.

Through Automated Clearing House
. Ask your bank or credit union whether it is a member
of the ACH system.
. Complete the "Telephone Withdrawal and Exchange" and
"Bank Information" sections on your account
application.
[ ACH icon] . If you have not signed up for the ACH system on your
application, please call Nvest Funds at 800-225-5478
for a Service Options Form.
. Call Nvest Funds or visit nvestfunds.com to request
a redemption through this system.
. Proceeds (less any applicable CDSC) will generally
arrive at your bank within three business days.

By Systematic Withdrawal Plan

26
<PAGE>

. Please refer to the section entitled "Additional
Investor Services" or call Nvest Funds at 800-225-
5478 or your financial representative for
information.

[systematic icon] . Because withdrawal payments may have tax
consequences, you should consult your tax adviser
before establishing such a plan.

By Telephone
. You may receive your proceeds by mail, by wire or
through ACH (see above).
[telephone icon] . Call Nvest Funds at 800-225-5478 to choose the
method you wish to use to redeem your shares.

27
<PAGE>

Fund Services
-------------

Selling Shares in Writing

If you wish to redeem your shares in writing, all owners of the shares must sign
the redemption request in the exact names in which the shares are registered and
indicate any special capacity in which they are signing. In certain situations,
you will be required to make your request to sell shares in writing. In these
instances, a letter of instruction signed by the authorized owner is necessary.
In certain situations, we also may require a signature guarantee or additional
documentation.

A signature guarantee protects you against fraudulent orders and is necessary
if:

your address of record has been changed within the past 30 days;

you are selling more than $100,000 worth of shares and you are requesting the
proceeds by check; or

a proceeds check for any amount is either mailed to an address other than the
address of record or not payable to the registered owner(s).

A notary public cannot provide a signature guarantee. A signature guarantee can
be obtained from one of the following sources:

a financial representative or securities dealer;

a federal savings bank, cooperative, or other type of bank;

a savings and loan or other thrift institution;

a credit union; or

a securities exchange or clearing agency.

The table below shows some situations in which additional documentation may be
necessary. Please call your financial representative or Nvest Funds regarding
requirements for other account types.

Seller (Account Type) Requirements for Written
Requests

Individual, joint, sole proprietorship, . The request must include the
UGMA/UTMA (minor accounts) signatures of all persons
authorized to sign, including
title, if applicable.
. Signature guarantee, if
applicable (see above).

Corporate or association accounts . The request must include the
signatures of all persons
authorized to sign, including
title.

Owners or trustees of trust accounts . The request must include the
signatures of all trustees
authorized to sign, including
title.
. If the names of the trustees
are not registered on the
account, please provide a
copy of the trust document
certified within the past 60
days.
. Signature guarantee, if
applicable (see above).

Joint tenancy whose co-tenants are deceased . The request must include the
signatures of all surviving
tenants of the account.
. Copy of the death
certificate.
. Signature guarantee if
proceeds check is issued to
other than the surviving
tenants.

Power of Attorney (POA) . The request must include the
signatures of the attorney-
in-fact, indicating such
title.
. A signature guarantee.

28
<PAGE>

<TABLE>
<S> <C>
. Certified copy of the POA document stating it is still in full
force and effect, specifying the exact Fund and account number, and
certified within 30 days of receipt of instructions.*

Qualified retirement benefit plans (except Nvest . The request must include the signatures of all those
Funds prototype documents) authorized to sign, including title.
. Signature guarantee, if applicable (see above).

Executors of estates, administrators, guardians, . The request must include the signatures of all those
conservators authorized to sign, including capacity.
. A signature guarantee.
. Certified copy of court document where signer derives
authority, e.g.: Letters of Administration, Conservatorship
and Letters Testamentary.*

Individual Retirement Accounts (IRAs) . Additional documentation and distribution forms are
required.
</TABLE>

* Certification may be made on court documents by the court, usually certified
by the clerk of the court. Power of Attorney certification may be made by a
commercial bank, broker/member of a domestic stock exchange or a practicing
attorney.

29
<PAGE>

Fund Services
-------------

Exchanging Shares

In general, you may exchange shares of your Fund for shares of the same class of
another Nvest Fund without paying a sales charge or a CDSC (see the sections
entitled "Buying Shares" and "Selling Shares"). The exchange must be for a
minimum of $1,000 (or the total net asset value of your account, whichever is
less), or $100 if made under the Automatic Exchange Plan (see the section
entitled "Additional Investor Services"). All exchanges are subject to the
eligibility requirements of the Nvest Fund or Money Market Fund into which you
are exchanging. The exchange privilege may be exercised only in those states
where shares of the Nvest Fund or Money Market Fund may be legally sold. For
federal income tax purposes, an exchange of Fund shares for shares of another
Nvest Fund or Money Market Fund is generally treated as a sale on which gain or
loss may be recognized. Please refer to the Statement of Additional Information
(the "SAI") for more detailed information on exchanging Fund shares.

Restrictions on Buying, Selling and Exchanging Shares

Purchase and Exchange Restrictions

Although the Funds do not anticipate doing so, they reserve the right to suspend
or change the terms of purchasing or exchanging shares. Each Funds and the
Distributor reserve the right to refuse or limit any purchase or exchange order
by a particular purchaser (or group of related purchasers) if the transaction is
deemed harmful to the best interests of the Fund's other shareholders or would
disrupt the management of the Fund. Each Funds and the Distributor reserve the
right to restrict purchases and exchanges for the accounts of "market timers" by
limiting the transaction to a maximum dollar amount. An account will be deemed
to be one of a market timer if: (i) more than two exchange purchases of a given
Fund are made for the account in a calendar quarter or (ii) the account makes
one or more exchange purchases of a given Fund in a calendar quarter in an
aggregate amount in excess of 1% of the Fund's total net assets.

Selling Restrictions

The table below describes restrictions placed on selling shares of any Fund
described in this Prospectus:

<TABLE>
<CAPTION>
Restriction Situation
<S> <C>
The Fund may suspend the right of redemption or postpone . When the New York Stock Exchange (the "Exchange") is closed
payment for more than 7 days: (other than a weekend/holiday)
. During an emergency
. Any other period permitted by the SEC
------------------------------------------------------------ -------------------------------------------------------------------
The Fund reserves the right to suspend account services or . With a notice of a dispute between registered owners
refuse transaction requests:
. With suspicion/evidence of a fraudulent act
------------------------------------------------------------ -------------------------------------------------------------------
The Fund may pay the redemption price in whole or in part . When it is detrimental for the Fund to make cash payments as
by a distribution in kind of readily marketable securities determined in the sole discretion of the Adviser or subadviser
in lieu of cash or may take up to 7 days to pay a
redemption request in order to raise capital:
------------------------------------------------------------ -------------------------------------------------------------------
The Fund may withhold redemption proceeds until the check . When redemptions are made within 10 calendar days of
or funds have cleared: purchase by check or ACH of the shares being redeemed
------------------------------------------------------------ -------------------------------------------------------------------
</TABLE>

Telephone redemptions are not accepted for tax-qualified retirement accounts.

30
<PAGE>

If you hold certificates representing your shares, they must be sent with your
request for it to be honored.

The Fund recommends that certificates be sent by registered mail.

Small Account Redemption

When the Fund account falls below a set minimum (currently $1,000 as set by the
Fund's Board of Trustees), the Fund may close your account and send you the
proceeds. You will have 60 days after being notified of the Fund's intention to
close your account to increase its amount to the set minimum. This does not
apply to certain qualified retirement plans or accounts that have fallen below
the minimum solely because of fluctuations in the Fund's net asset value per
share.

31
<PAGE>

Fund Services
-------------

How Fund Shares Are Priced

"Net asset value" is the price of one share of the Fund without a sales charge,
and is calculated each business day using this formula:

Net Asset Value = Total market value of securities + Cash and other assets -
-------------------------------------------------------------
Liabilities Number of outstanding shares

The net asset value of Fund shares is determined according to this schedule:

. A share's net asset value is determined at the close of regular trading on
the Exchange on the days the Exchange is open for trading. This is normally
4:00 p.m. Eastern time. Fund shares will not be priced on the days on which
the Exchange is closed for trading.

. The price you pay for purchasing, redeeming or exchanging a share will be
based upon the net asset value next calculated after your order is received
"in good order" by State Street Bank and Trust Company, the Fund's custodian
(plus or minus applicable sales charges as described earlier in this
Prospectus).

. Requests received by the Distributor after the Exchange closes will be
processed based upon the net asset value determined at the close of regular
trading on the next day that the Exchange is open, with the exception that
those orders received by your investment dealer before the close of the
Exchange and received by the Distributor before 5:00 p.m. Eastern time* on
the same day will be based on the net asset value determined on that day.

. A Fund heavily invested in foreign securities may have net asset value
changes on days when you cannot buy or sell its shares.

* Under limited circumstances, the Distributor may enter into a contractual
agreement pursuant to which it may accept orders after 5:00 p.m., but not
later than 8:00 p.m.

Generally, during times of substantial economic or market change, it may be
difficult to place your order by phone. During these times, you may deliver your
order in person to the Distributor or send your order by mail as described in
"Buying Shares" and "Selling Shares."

Generally, Fund securities are valued as follows:

Equity securities -- most recent sales or quoted bid price as provided by a
pricing service.

Debt securities (other than short-term obligations) -- based upon pricing
service valuations, which determines valuations for normal, institutional-
size trading units of such securities using market information, transactions
for comparable securities and various relationships between securities which
are generally recognized by institutional traders.

Short-term obligations (remaining maturity of less than 60 days) -- amortized
cost (which approximates market value).

Securities traded on foreign exchanges -- most recent sale/bid price on the non-
U.S. exchange, unless an occurrence after the close of the exchange will
materially affect its value. In that case, it is given fair value as
determined by or under the direction of the Fund's Board of Trustees at the
close of regular trading on the Exchange.

Options -- last sale price, or if not available, last offering price.

Futures -- unrealized gain or loss on the contract using current settlement
price. When a settlement price is not used, futures contracts will be valued
at their fair value as determined by or under the direction of the Fund's
Board of Trustees.

All other securities -- fair market value as determined by the adviser or
subadviser of the Fund under the direction of the Fund's Board of Trustees.

32
<PAGE>

The effect of fair value pricing as described above for "Securities traded on
foreign exchanges" and "All other securities" is that securities may not be
priced on the basis of quotations from the primary market in which they are
traded but rather, may be priced by another method that each Fund's Board of
Trustees believes actually reflects fair value.

33
<PAGE>

Fund Services
-------------

Dividends and Distributions

The Funds generally distribute most or all of their net investment income
annually (other than capital gains) in the form of dividends. Each Fund expects
to distribute all net realized long- and short-term capital gains annually,
after applying any available capital loss carryovers. Each Fund's Board of
Trustees may adopt a different schedule as long as payments are made at least
annually.

Depending on your investment goals and priorities, you may choose to:

. Participate in the Dividend Diversification Program, which allows you to have
all dividends and distributions automatically invested at net asset value in
shares of the same class of another Nvest Fund registered in your name.
Certain investment minimums and restrictions may apply. For more information
about this program, see the section entitled "Additional Investor Services."

. Receive distributions from dividends and interest in cash while reinvesting
distributions from capital gains in additional shares of the same class of
the Fund, or in the same class of anotherNvest Fund.

. Receive all distributions in cash.

Unless you select one of the above options, distributions will automatically be
reinvested in shares of the same class of the Fund at net asset value.

For more information or to change your distribution option, contact Nvest Funds
in writing or call 800-225-5478.

If you earn more than $10 annually in taxable income from a non-retirement plan
Fund, you will receive a Form 1099 to help you report the prior calendar year's
distributions on your federal income tax return. Be sure to keep this Form 1099
as a permanent record. A fee may be charged for any duplicate information
requested.

Tax Consequences

Each Fund intends to meet all requirements under Subchapter M of the Internal
Revenue Code necessary to qualify as a "regulated investment company" and thus
does not expect to pay any federal income tax on income and capital gains
distributed to shareholders.

Fund distributions paid to you are taxable whether you receive them in cash or
reinvested them in additional shares. Distributions derived from short-term
capital gains or investment income are taxable at ordinary income rates. If you
are a corporation investing in a Fund, a portion of these dividends may qualify
for the dividends-received deduction provided that you meet certain holding
period requirements. Distributions of gains from investments that the Fund owned
for more than one year that are designated by the Fund as capital gain dividends
will generally be taxable to a shareholder receiving such distributions as long-
term capital gain, regardless of how long the shareholder has held Fund shares.
Distributions are taxable to you even if they are paid from income or gains
earned by the Fund before your investment (and thus were included in the price
you paid). Distributions are taxable whether you received them in cash or
reinvested them in additional shares.

The Funds' investments in foreign securities may be subject to foreign
withholding taxes. In that case, the Funds' yield on those securities would be
decreased. Shareholders may be entitled to claim a credit or deduction with
respect to foreign taxes. In addition, the Funds' investments in foreign
securities or foreign currencies may increase or accelerate the Funds'
recognition of ordinary income and may affect the timing or amount of the Funds'
distributions. Because the Funds invest in foreign securities, shareholders
should consult their tax advisers about consequences of their investments under
foreign laws.

Any gain resulting from the sale of your Fund shares will generally be subject
to tax. An exchange of Fund shares for shares of another Nvest Fund or a Money
Market Fund is generally treated as a sale, and any resulting gain or loss will
generally be subject to federal income tax. You should consult your tax adviser
for more information on your own tax situation, including possible foreign,
state and local taxes.

34
<PAGE>

Compensation to Securities Dealers

As part of their business strategies, the Funds pays securities dealers that
sell their shares. This compensation originates from two sources: sales charges
(front-end or deferred) and 12b-1 fees (comprising the annual service and/or
distribution fees of a plan adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940). The sales charges are detailed in the section entitled
"How Sales Charges Are Calculated." Each class of Fund shares pays an annual
service fee of 0.25% of its average daily net assets. In addition to this
service fee, Class B shares pay an annual distribution fee of 0.75% of their
average daily net assets for 8 years (at which time they automatically convert
into Class A shares)Class C shares are subject to a distribution fee of 0.75% of
their average daily net assets.. Generally, the 12b-1 fees are paid to
securities dealers on a quarterly basisThe Distributor retains the first year of
such fees for Class C shares. . Because these distribution fees are paid out of
the Fund's assets on an ongoing basis, over time these fees for Class B and
Class C shares will increase the cost of your investment and may cost you more
than paying the front-end sales charge on Class A shares.

The Distributor may, at its expense, pay concessions in addition to the payments
described above to dealers which satisfy certain criteria established from time
to time by the Distributor relating to increasing net sales of shares of the
Nvest Funds over prior periods, and certain other factors. See the SAI for more
details.

35
<PAGE>

Fund Services
-------------

Additional Investor Services

Retirement Plans

Nvest Funds offer a range of retirement plans, including IRAs, SEPs, SARSEPs*,
SIMPLE IRAs, 403(b) plans and other pension and profit sharing plans. Refer to
the section entitled "It's Easy to Open an Account" for investment minimums.
For more information about our Retirement Plans, call us at 800-225-5478.

Investment Builder Program

This is Nvest Funds' automatic investment plan. You may authorize automatic
monthly transfers of $100 or more from your bank checking or savings account to
purchase shares of one or more Nvest Funds. To join the Investment Builder
Program, please refer to the section entitled "Buying Shares."

Dividend Diversification Program

This program allows you to have all dividends and any other distributions
automatically invested in shares of the same class of another Kobrick Fund,
Nvest Fund or a Money Market Fund, subject to the eligibility requirements of
that other fund and to state securities law requirements. Shares will be
purchased at the selected fund's net asset value without a front-end sales
charge or CDSC on the dividend record date. Before establishing a Dividend
Diversification Program into any other Nvest Fund or a Money Market Fund, please
read its prospectus carefully.

Automatic Exchange Plan

Nvest Funds have an automatic exchange plan under which shares of a class of a
Fund are automatically exchanged each month for shares of the same class of
another Fund or Money Market Fund. There is no fee for exchanges made under
this plan, but there may be a sales charge in certain circumstances. Please
refer to the SAI for more information on the Automatic Exchange Plan.

Systematic Withdrawal Plan

This plan allows you to redeem shares and receive payments from your Fund on a
regular schedule. Redemption of shares that are part of the Systematic
Withdrawal Plan are not subject to a CDSC. However, the amount or percentage
you specify in the plan may not exceed, on an annualized basis, 10% of the value
of your Fund account based upon the value of your Fund account on the day you
establish your plan. To establish a Systematic Withdrawal Plan, please refer to
the section entitled "Selling Shares."

Nvest Funds Personal Access Line(R)

This automated customer service system allows you to have access to your account
24 hours a day by calling 800-225-5478, press 1. With a touch-tone telephone,
you can obtain information about your current account balance, recent
transactions, Fund prices and recent performance. You may also use Personal
Access Line(R) to purchase, exchange or redeem shares in any of your existing
accounts. Certain restrictions may apply.

Nvest Funds Web Site

Visit us at www.nvestfunds.com to review your account balance and recent
transactions, to view daily prices and performance information or to order
duplicate account statements and tax information. You may also go online to
purchase, exchange or redeem shares in your existing accounts. Certain
restrictions may apply.

Electronic Mail Delivery

36
<PAGE>

This delivery option allows you to receive important fund documents via the
Internet instead of in paper form through regular U.S. mail. Eligible documents
include confirmation statements, quarterly statements, prospectuses, annual and
semiannual reports and proxies. Electronic Delivery will cut down on the amount
of paper mail you receive; speed up the availability of your documents; and
lower expenses to your fund. To establish this option on your account(s),
complete the appropriate section of your new account application or visit us at
www.nvestfunds.com.

* Effective January 1, 1997, the Savings Incentive Match Plan for Employees of
Small Employers (SIMPLE) IRA became available, replacing SARSEP plans. SARSEP
plans established prior to January 1, 1997 may remain active and continue to
add new employees.

37
<PAGE>

Glossary of Terms

Bid price -- The price a prospective buyer is ready to pay. This term is used
by traders who maintain firm bid and offer prices in a given security by
standing ready to buy or sell security units at publicly quoted prices.

Bottom-up analysis -- The search for outstanding performance of individual
stocks before considering the impact of economic trends. Such companies may be
identified from research reports, stock screens or personal knowledge of the
products and services.

Capital gain distributions -- Payments to a Fund's shareholders of profits
earned from selling securities in a Fund's portfolio. Capital gain
distributions are usually paid once a year.

Credit rating -- Independent evaluation of a bond's creditworthiness. This
measurement is usually calculated through an index compiled by companies such as
Standard & Poor's Rating Service, Inc. ("S&P"), Moody's Investors Service, Inc.
("Moody's"), or Fitch Investors Services, Inc ("Fitch"). Bonds with a credit
rating of BBB or higher by S&P or Fitch, or Baa or higher by Moody's are
generally considered investment grade.

Derivative -- A financial instrument whose value and performance are based on
the value and performance of another security or financial instrument.

Discounted price -- The difference between a bond's current market price and its
face or redemption value.

Diversification -- The strategy of investing in a wide range of securities
representing different market sectors to reduce the risk if an individual
company oronesector suffers losses.

Duration -- An estimate of how much a bond's price fluctuates with changes in
comparable interest rates.

Earnings growth -- A pattern of increasing rate of growth in earnings per share
from one period to another, which usually causes a stock's price to rise.

Growth investing -- An investment style that emphasizes companies with strong
earnings growth. Growth investing is generally considered more aggressive than
"value" investing.

Income distributions -- Payments to a Fund's shareholders resulting from the net
interest or dividend income earned by a Fund's portfolio.

Inflation -- A general increase in prices coinciding with a fall in the real
value of money, as measured by the Consumer Price Index.

Interest rate -- Rate of interest charged for the use of money, usually
expressed at an annual rate.

Market capitalization -- Market price multiplied by number of shares
outstanding. Large capitalization companies generally have over $5 billion in
market capitalization; medium cap companies between $1.5 billion and $5 billion;
and small cap companies less than $1.5 billion. These capitalization figures
may vary depending upon the index being used and/or the guidelines used by the
portfolio manager.

Maturity -- The final date on which the payment of a debt instrument (e.g.
bonds, notes, repurchase agreements) becomes due and payable. Short-term bonds
generally have maturities of up to 5 years; intermediate-term bonds between 5
and 15 years; and long-term bonds over 15 years.

Net asset value (NAV) -- The market value of one share of a Fund on any given
day without taking into account any front-end sales charge or CDSC. It is
determined by dividing the Fund's total net assets by the number of shares
outstanding.

38
<PAGE>

Price-to-book value ratio -- Current market price of a stock divided by its book
value, or net asset value.

Price-to-earnings ratio -- Current market price of a stock divided by its
earnings per share. Also known as the "multiple," the price-to-earnings ratio
gives investors an idea of how much they are paying for a company's earning
power and is a useful tool for evaluating the costs of different securities.
Some firms use the inverse ratio for this calculation (i.e. earnings-to-price
ratio).

Qualitative analysis -- An analysis of the qualities possessed by a company,
including its management, products and competitive positions, to help determine
if the company can execute its strategies.

Return on equity -- The amount, expressed as a percentage, earned on a company's
common stock investment for a given period. It is calculated by dividing common
stock equity (net worth) at the beginning of the accounting period into net
income for the period after preferred stock dividends but before common stock
dividends. This tells common shareholders how effectively their money is being
employed.

Rule 144A securities -- Rule 144A securities are privately offered securities
that can be resold only to certain qualified institutional buyers. Rule 144A
securities are treated as illiquid, unless a manager has determined, under
guidelines established by a Fund's trustees, that a particular issue of Rule
144A securities is liquid.

Target price -- Price that an investor is hoping a stock he or she has just
bought will rise to within a specified period of time. An investor may buy XYZ
at $20, with a target price of $40 in one year's time, for instance.

Technical analysis -- The research into the demand and supply for securities,
options, mutual funds and commodities based on trading volume and price
studies. Technical analysis uses charts or computer programs to identify and
project price trends in a market, security, mutual fund or futures contract.

Top-down approach -- The method in which an investor first looks at trends in
the general economy, and next selects attractive industries and then companies
that should benefit from those trends.

Total return -- The change in value of an investment in a Fund over a specific
time period expressed as a percentage. Total returns assume all earnings are
reinvested in additional shares of the Fund.

Volatility -- The general variability of a portfolio's value resulting from
price fluctuations of its investments. In most cases, the more diversified a
portfolio is, the less volatile it will be.

Yield - The rate at which a Fund earns income, expressed as a percentage.
Mutual fund yield calculations are standardized, based upon a formula developed
by the SEC.

39
<PAGE>

Notes --

40
<PAGE>

Notes --

41
<PAGE>

If you would like more information about the Funds, the
following documents are available free upon request:

Statement of Additional Information (SAI) -- Provides
more detailed information about the Funds and their investment limitations and
policies , has been filed
with the Securities and Exchange Commission ("SEC") and is
incorporated into this Prospectus by reference.

To order a free copy of the Fund's SAI, contact your financial
representative, or the Fund at:

Nvest Funds Distributor, L.P., 399 Boylston Street, Boston, MA 02116
Telephone: 800-225-5478
Internet: www.nvestfunds.com

Your financial representative or Nvest Funds
will also be happy to answer your questions or to provide any
additional information that you may require.

You can review and copy the Fund's SAIs at the
Public Reference Room of the SEC in Washington, D.C. Text-only copies are
available free from
the Commission's Web site at: www.sec.gov.

Copies of the SAI are also available for a fee and information on the operation
of the Public Reference Room may be obtained by electronic request at the
following e-mail address: [email protected], or by
------------------
writing or calling the Public Reference Room of the SEC,
Washington, D.C. 20549-0102
Telephone: 1-202-942-8090

Nvest Funds Distributor, L.P., and other firms selling
shares of and Nvest Funds are members of the
National Association of Securities Dealers, Inc. (NASD). As
a service to investors, the NASD has asked that
we inform you of the availability of a brochure on its
Public Disclosure Program. The program provides
access to information about securities firms and their
representatives. Investors may obtain a copy by contacting the
NASD at 800-289-9999 or by visiting their Web site
at www.NASDR.com.

42
<PAGE>

Nvest Equity Research Fund

Nvest Mid Cap Growth Fund

(Investment Company Act File No. 811-7345)

43
<PAGE>

Nvest Funds(sm)
Where The Best Minds Meet(R)
________________________________________________________________________________

Nvest

Select Fund
Harris Associates, L.P.

[photo]

Prospectus
March 15, 2001

What's Inside

Goals, Strategies & Risks
Page X

Fund Fees & Expenses
Page X

Management Team
Page X

Fund Services
Page X

The Securities and Exchange Commission has not approved the Fund's shares or
determined whether this Prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.

For general information on the Funds or any of its services and for assistance
in opening an account, contact your financial representative or call Nvest
Funds.

Nvest Funds
399 Boylston Street, Boston, Massachusetts 02116
800-225-5478
www.nvestfunds.com

<PAGE>

Table of Contents

Goals, Strategies & Risks

Nvest Select Fund

Fund Fees & Expenses

More About Risk

Subadviser's Past Performance

Management Team

Meet The Fund's Investment Adviser and Subadviser
Meet The Fund's Portfolio Manager

Fund Services

Investing in the Fund
How Sales Charges are Calculated
Ways To Reduce or Eliminate Sales Charges
It's Easy to Open An Account
Buying Shares
Selling Shares
Selling Shares in Writing
Exchanging Shares
Restrictions on Buying, Selling and Exchanging Shares
How Fund Shares are Priced
Dividends and Distributions
Tax Consequences
Compensation to Securities Dealers
Additional Investor Services
Glossary of Terms

If you have questions about any of the terms used in this Prospectus, please
refer to the "Glossary of Terms."

2
<PAGE>

Goals, Strategies & Risks
-------------------------

Nvest Select Fund

--------------------------------------
Fund Focus
--------------------------------------
Stability Income Growth
--------------------------------------
High X
--------------------------------------
Mod.
--------------------------------------
Low X X
--------------------------------------

Adviser: Nvest Funds Management, L.P. ("Nvest Management")
Subadviser: Harris Associates, L.P. ("Harris Associates")
Managers: William C. Nygren, Floyd J. Bellman
Category All-Cap Equity

Ticker Symbol: Class A Class B Class C

Investment Goal

The Fund seeks long-term capital appreciation.

The Fund's investment goal may be changed without shareholder approval.
Principal Investment Strategies

Nvest Select Fund invests primarily in common stocks of U.S. companies. The
Fund is non-diversified, which means that it is not limited under the Investment
Company Act of 1940 to a percentage of assets that it may invest in any one
issuer. The Fund could own as few as 12 securities, but generally will have 15
to 20 securities in its portfolio. The Fund will normally invest in companies
with mid-to-large capitalizations.

Harris Associates uses a value investment philosophy in selecting equity
securities. This philosophy is based upon the belief that, over time, a
company's stock price converges with the company's true business value. By
"true business value," Harris Associates means its estimate of the price a
knowledgeable buyer would pay to acquire the entire business. Harris Associates
believes that investing in securities priced significantly below their true
business value presents the best opportunity to achieve their investment
objectives.

The Fund may:

. Purchase money market or high quality debt securities for temporary defensive
purposes in response to adverse market, economic or political conditions.
These investments may prevent the Fund from achieving its goal.

. Engage in active and frequent trading of securities. Frequent trading may
produce higher transaction costs and a higher level of taxable capital gains,
which may lower your return.

Principal Investment Risks

Equity securities: Because the Fund invests primarily in equity securities, its
major risks are those commonly associated with investing in stocks. This means
that you may lose money on your investment due to unpredictable drops in a
stock's value or periods of below-average performance in a given stock or in
the stock market as a whole. Value stocks present the risk that they may fall
out of favor with investors and underperform growth stocks during any given
period.

Non-diversified status: Compared with other mutual funds, the Fund may invest a
greater percentage of its assets in a particular issuer. Therefore, the Fund
may have more risk because changes in the value of a single security or the

3
<PAGE>

impact of a single economic, political or regulatory occurance may have a
greater adverse impact on the Fund's net asset value.

4
<PAGE>

Fund Fees & Expenses
----------------------

Fund Fees & Expenses

The following tables describe the fees and expenses that you may pay if you buy
and hold shares of the Fund.

Shareholder Fees

<TABLE>
<CAPTION>
(fees paid directly from your investment)
-------------------------------------------------------------------------------------------------------------------
Class A Class B Class C
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price)(1)(2) 5.75% None 1.00%(4)
-------------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage
of original purchase price or redemption proceeds, as
applicable)(2) (3) 5.00% 1.00%
-------------------------------------------------------------------------------------------------------------------
Redemption fees None* None* None*
-------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) A reduced sales charge on Class A and Class C shares applies in some cases.
See "Ways to Reduce or Eliminate Sales Charges" within the section entitled
"Fund Services."

(2) Does not apply to reinvested distributions.

(4) Accounts established prior to December 1, 2000 will not be subject to the
1.00% front-end sales charge for exchange or additional purchases of Class
C shares.

*Generally, a transaction fee will be charged for expedited payment of
redemption proceeds such as by wire or overnight delivery.

Annual Fund Operating Expenses

(expenses that are deducted from Fund assets, as a percentage of average daily
net assets)

<TABLE>
<CAPTION>
Nvest Select Fund**
-------------------------------------------------------------------------------------------------
Class A Class B Class C
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees 1.00% 1.00% 1.00%
-------------------------------------------------------------------------------------------------
Distribution and/or service (12b-1) fees 0.25% 1.00%* 1.00%*
-------------------------------------------------------------------------------------------------
Other expenses 0.52% 0.52% 0.52%
-------------------------------------------------------------------------------------------------
Total annual fund operating expenses 1.77% 2.52% 2.52%
-------------------------------------------------------------------------------------------------
Fee waiver and/or expense reimbursement*** 0.07% 0.07% 0.07%
-------------------------------------------------------------------------------------------------
Net expenses 1.70% 2.45% 2.45%
-------------------------------------------------------------------------------------------------
</TABLE>

* Because of the higher 12b-1 fees, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
rules of the National Association of Securities Dealers, Inc.

** Other expenses are based on estimated amounts for the current fiscal year.

*** Nvest Management has given a binding undertaking to the Fund to limit the
amount of the Fund's total annual fund operating expenses to 1.70%, 2.45%
and 2.45% of the Fund's average daily net assets for Class A, B and C
shares, respectively. This undertaking is in effect until May 1, 2002 and
will be reevaluated on an annual basis.

Example

5
<PAGE>

This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

The example assumes that:
. You invest $10,000 in the Fund for the time periods indicated;
. Your investment has a 5% return each year; and
. The Fund's operating expenses remain the same.

Although your actual costs and returns may be higher or lower, based on these
assumptions your costs would be:

Nvest Select Fund
------------------------------------------------------
Class Class Class
A B C
------------------------------------------------------
(1) (2) (1) (2)
------------------------------------------------------
1 year $ 738 $ 748 $248 $446 $346
------------------------------------------------------
3 years $1,093 $1,077 $777 $869 $869
------------------------------------------------------

(1) Assumes redemption at end of period.

(2) Assumes no redemption at end of period.

6
<PAGE>

More About Risk

The Fund has principal investment strategies that come with inherent risks. The
following is a list of risks to which the Fund may be subject by investing in
various types of securities or engaging in various practices.

Market Risk The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably, based upon change in a company's financial
condition as well as overall market and economic conditions.

Management Risk The risk that a strategy used by a Fund's portfolio management
may fail to produce the intended result.

Credit Risk The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation.

Risks of Options These transactions are subject to changes in the underlying
security on which such transactions are based. It is important to note that
even a small investment in these types of derivative securities can have a
significant impact on a Fund's exposure to stock market values, interest rates
or the currency exchange rate. These types of transactions will be used
primarily for hedging purposes.

Leverage Risk The risk associated with securities or practices (e.g. borrowing)
that multiply small index or market movements into large changes in value. When
a derivative security (a security whose value is based on another security or
index) is used as a hedge against an offsetting position that a Fund also holds,
any loss generated by the derivative security should be substantially offset by
gains on the hedged instrument, and vice versa. To the extent that a Fund uses a
derivative security for purposes other than as a hedge, that Fund is directly
exposed to the risks of that derivative security and any loss generated by the
derivative security will not be offset by a gain.

Interest Rate Risk The risk of market losses attributable to changes in
interest rates. In general, the prices of fixed-income securities rise when
interest rates fall, and fall when interest rates rise.

Information Risk The risk that key information about a security is inaccurate
or unavailable.

Opportunity Risk The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are invested in less profitable
investments.

Liquidity Risk The risk that certain securities may be difficult or impossible
to sell at the time and at the price that the seller would like. This may result
in a loss or may otherwise be costly to a Fund. These types of risks may also
apply to restricted securities, Section 4(2) Commercial Paper, or Rule 144A
Securities.

Correlation Risk The risk that changes in the value of a hedging instrument
will not match those of the asset being hedged.

Valuation Risk The risk that the Fund has valued certain securities at a higher
price than it can sell them for.

7
<PAGE>

Subadviser's Past Performance

The returns shown below represent the returns derived from performance
data furnished by Harris Associates relating to a mutual fund and a group of
private accounts advised by Harris Associates (together, the "Select Accounts"),
with substantially similar investment objectives, strategies and policies as the
Nvest Select Fund.

The Select Accounts, and in particular, the private accounts, have not been
subject to the same types of expense to which the Select Fund is subject. In
addition, the private accounts have not been subject to the diversification
requirements, investment limitations and other restrictions to which the Select
Fund is subject under the Investment Company Act and the Internal Revenue Code.
The Research Accounts' performance results may have been less favorable had they
been subject to these expenses or restrictions or to other restrictions
applicable to investment companies under relevant laws. In addition, the Nvest
Select Fund may be subject to more frequent inflows and outflows of assets than
the Select Accounts, which may negatively impact performance. The information
regarding the performance of the Select Accounts does not represent the Select
Fund's performance. Such information should not be considered a prediction of
the future performance of the Select Fund. The Select Fund is newly organized
and has no performance record of its own.

The table below shows the average annual total returns for each of the Select
Accounts for the period from January 1, 1993 (inception date of private
accounts) to December 31, 2000 (the mutual fund commenced operations on November
1, 1996). The Select Accounts are also compared against the S&P 500 Index. The
past performance data for the Select Accounts has been adjusted to reflect the
management fees and other expenses actually paid by the Select Accounts and
assumes the reinvestment of all dividends and distributions. The fees and
expenses paid by the Select Fund will be higher than the fees and expenses paid
by the corresponding Select Accounts. The performance of the Select Accounts
would have been lower than that shown below if they had been subject to the fees
and expenses of the Select Fund.

Avg Annual Total Returns (1)
For the period ending December 31, 2000
1 Year 5 Years Since Inception
Oakmark Private Accounts
Oakmark Select Fund
S&P 500
(1) Average Annual Total Returns: The Oakmark Select Accounts consist of all
client accounts whose portfolios are managed using investment policies and
strategies substantially similar to those that will be used to manage the Fund.
The private accounts have been managed since January 1, 1993. The Oakmark Select
Fund has been managed since November 1, 1996. The Standard & Poor's Composite
Index of 500 Stocks is a commonly used benchmark of U.S. equity securities. The
index is unmanaged, has no operating costs, and is included in the table to
facilitate your comparison of the Oakmark Select Accounts' performance to a
broad-based market index.

8
<PAGE>

Management Team
---------------

Meet the Fund's Investment Adviser and Subadviser

The Nvest Funds family includes 28 mutual funds with a total of over $___
billion in assets under management as of December 31, 2000. Nvest Funds are
distributed through Nvest Funds Distributor, L.P. (the "Distributor"). This
Prospectus covers Nvest Select Fund (the "Fund"), which along with Nvest Stock
Funds, Nvest Bond Funds, Nvest Star Funds, Kobrick Funds, Nvest AEW Real Estate
Fund, Nvest Equity Research Fund, Nvest Mid Cap Growth Fund and Nvest State Tax-
Free Funds, constitute the "Nvest Funds." Nvest Cash Management Trust Money
Market Series and Nvest Tax Exempt Money Market Trust constitute the "Money
Market Funds."

Nvest Funds Management, L.P.

Nvest Management, located at 399 Boylston Street, Boston, Massachusetts 02116,
serves as the adviser to the Funds. Nvest Management is a subsidiary of Nvest
Companies, L.P. ("Nvest Companies"), which is a subsidiary of CDC Asset
Management. CDC Asset Management is the investment management arm of France's
Caisse des Depots et Consignations ("CDC"), a major diversified financial
institution. As of December 31, 2000, Nvest Companies' 18 principal subsidiary
or affiliated asset management firms, collectively had more than $____ billion
in assets under management. Nvest Management oversees, evaluates and monitors
the subadvisory services provided to the Fund. It also provides general business
management and administration to the Fund. Nvest Management does not determine
what investments will be purchased by the Fund. The subadviser listed below
makes the investment decisions for the Funds.

The Fund pays combined advisory and subadvisory fees at an annual rate of 1.00%
as a percentage of its average daily net assets.

Subadviser

Harris Associates, located at Two North LaSalle Street, Chicago, Illinois 60602,
serves as subadviser to the Fund. Harris Associates, a subsidiary of CDC Asset
Management - North America, manages over $___ billion in assets as of December
31, 2000, and, together with its predecessor, has managed mutual funds since
1970. It also manages investments for other mutual funds as well as assets of
individuals, trusts, retirement plans, endowments, foundations, and several
private partnerships.

Subadvisory Agreements

The Fund has received an exemptive order from the Securities and Exchange
Commission (the "SEC"), which permits Nvest Management to amend or continue
existing subadvisory agreements when approved by the Fund's Board of Trustees,
without shareholder approval. The exemption also permits Nvest Management to
enter into new subadvisory agreements with subadvisers that are not affiliated
with Nvest Management, if approved by the Fund's Board of Trustees. Shareholders
will be notified of any subadviser changes.

Portfolio Trades

In placing portfolio trades, the Fund's adviser or subadviser may use brokerage
firms that market the Fund's shares or are affiliated with CDC Asset Management-
North America, Nvest Management, or Harris Associates. In placing trades, Harris
Associates will seek to obtain the best combination of price and execution,
which involves a number of judgmental factors. Such portfolio trades are subject
to applicable regulatory restrictions and related procedures adopted by the
Fund's Board of Trustees.

9
<PAGE>

Meet the Fund's Portfolio Managers

William C. Nygren

William C. Nygren has co-managed the Fund since inception on March 15, 2001. Mr.
Nygren, C.F.A., joined Harris Associates as an analyst in 1983 and was Director
of Research for Harris Associates from September 1990 to April 1998. Since
November 1, 1996 he has also been a portfolio manager of the Oakmark Select
Fund. Prior to joining Harris Associates, Mr. Nygren was an analyst with
Northwestern Mutual Life Insurance Company. He holds an M.S. in Finance from the
University of Wisconsin and a B.S. in Accounting from the University of
Minnesota. He has 19 years of investment management experience.

Floyd J. Bellman

Floyd J. Bellman has co-managed the Fund since inception. Mr. Bellman, C.F.A.,
joined the firm in 1995 as a portfolio manager. He manages both equity and
balanced accounts for individuals and institutions and serves as Vice President
of the Investment Advisory Department. Since February 2000, he has also
assisted in managing the Harris Associates segment of Star Value Fund. Prior to
joining Harris Associates, Mr. Bellman was a Vice President and Chairman of the
Personal Trust and Asset Management Committee at Harris Trust and Savings Bank
(1987-1995); an Investment Officer at 1st Source Bank (1984-1987); and an
Investment Officer at First Bank Milwaukee N.A. (1980-1984). He holds a BBA from
the University of Wisconsin-Whitewater. He has 20 years of investment
experience.

10
<PAGE>

Fund Services
-------------

Investing in the Funds

Choosing a Share Class

The Fund offers Classes A, B and C shares to the public. Each class has
different costs associated with buying, selling and holding Fund shares, which
allows you to choose the class that best meets your needs. Which class you
choose will depend upon the size of your investment and how long you intend to
hold your shares. Class B shares, Class C shares and certain shareholder
features may not be available to you if you hold your shares in a street name
account. Your financial representative can help you decide which class of shares
is most appropriate for you.

Class A Shares

. You pay a sales charge when you buy Fund shares. There are several ways to
reduce this charge. See the section entitled "Ways to Reduce or Eliminate
Sales Charges."

. You pay lower annual expenses than Class B and Class C shares, giving you
the potential for higher returns per share.

. You do not pay a sales charge on orders of $1 million or more, but you may
pay a charge on redemption if you redeem these shares within 1 year of
purchase.

Class B Shares

. You do not pay a sales charge when you buy Fund shares. All of your money
goes to work for you right away.

. You pay higher annual expenses than Class A shares.

. You will pay a charge on redemptions if you sell your shares within 6 years
of purchase, as described in the section "How Sales Charges Are
Calculated."

. Your Class B shares will automatically convert into Class A shares after 8
years, which reduces your annual expenses.

. We will not accept an order for $1 million or more of Class B shares. You
may, however, purchase $1 million or more of Class A shares, which will
have no sales charge as well as lower annual expenses. You may pay a charge
on redemption if you redeem these shares within 1 year of purchase.

Class C Shares

. You do pay a sales charge when you buy Fund shares. There are several ways
to reduce this charge. See section entitled "Ways to Reduce or Eliminate
Sales Charges."

. You pay higher annual expenses than Class A shares.

. You will pay a charge on redemptions if you sell your shares within 1 year
of purchase.

. Your Class C shares will not automatically convert into Class A shares. If
you hold your shares for longer than 8 years, you'll pay higher expenses
than other classes.

. We will not accept an order for $1 million or more of Class C shares. You
may, however, purchase $1 million or more of Class A shares, which will
have no sales charge as well as lower annual expenses. You may pay a charge
on redemption if you redeem these shares within 1 year of purchase.

For expenses associated with Classes A, B and C shares, see the section entitled
"Fund Fees & Expenses" in this Prospectus.

11
<PAGE>

Certificates

Certificates will not be issued automatically for any class of shares. Upon
written request, you may receive certificates for Class A shares only.

12
<PAGE>

Fund Services
-------------

How Sales Charges Are Calculated

Class A Shares

Your Investment As a % of As a % of your
offering price investment
------------------------------------------------------------------
Less than $ 50,000 5.75% 6.10%
------------------------------------------------------------------
$ 50,000 - $ 99,999 4.50% 4.71%
------------------------------------------------------------------
$ 100,000 - $249,999 3.50% 3.63%
------------------------------------------------------------------
$ 250,000 - $499,999 2.50% 2.56%
------------------------------------------------------------------
$ 500,000 - $999,999 2.00% 2.04%
------------------------------------------------------------------
$1,000,000 or more* 0.00% 0.00%
------------------------------------------------------------------

* For purchases of Class A shares of the Funds of $1 million or more or
purchases by Retirement Plans (Plans under Sections 401(a) or 401(k) of the
Internal Revenue Code with investments of $1 million or more or that have 100 or
more eligible employees), there is no front-end sales charge, but a contingent
deferred sales charge of 1.00% may apply to redemptions of your shares within
one year of the date of purchase. See the section entitled "Ways to Reduce or
Eliminate Sales Charges."

Class B Shares

---------------------------------------------------------
Class B Contingent Deferred Sales Charges
---------------------------------------------------------
Year Since Purchase CDSC on Shares Being Sold
---------------------------------------------------------
1st 5.00%
---------------------------------------------------------
2/nd/ 4.00%
---------------------------------------------------------
3/rd/ 3.00%
---------------------------------------------------------
4/th/ 3.00%
---------------------------------------------------------
5/th/ 2.00%
---------------------------------------------------------
6/th/ 1.00%
---------------------------------------------------------
Thereafter 0.00%
---------------------------------------------------------

Class C Shares

---------------------------------------------------------
Class C Contingent Deferred Sales Charges
---------------------------------------------------------
Year Since Purchase CDSC on Shares Being Sold
---------------------------------------------------------
1st 1.00%
---------------------------------------------------------
Thereafter 0.00%
---------------------------------------------------------

13
<PAGE>

How the CDSC Is Applied to Your Shares

The CDSC is a sales charge you pay when you redeem certain Fund shares.
The CDSC:

. is calculated based on the number of shares you are selling;

. is based on either your original purchase price or the current net asset
value of the shares being sold, whichever is lower;

. is deducted from the proceeds of the redemption, not from the amount
remaining in your account; and

. for year one applies to redemptions through the day one year after the date
on which your purchase was accepted, and so on for subsequent years.

A CDSC will not be charged on:

. increases in net asset value above the purchase price; or

. shares you acquired by reinvesting your dividends or capital gains
distributions.

Exchanges into Shares of a Money Market Fund

If you exchange shares of the Fund into shares of the Money Market Funds, the
holding period for purposes of determining the CDSC and conversion to Class A
shares stops until you exchange back into shares of another or Nvest Fund. If
you choose to redeem those Money Market Fund shares, a CDSC may apply.

14
<PAGE>

Fund Services
-------------

Ways to Reduce or Eliminate Sales Charges

Class A or C Shares

Reducing Sales Charges

There are several ways you can lower your sales charge for Class A shares
utilizing the chart on the previous page, including:

. Letter of Intent -- allows you to purchase Class A shares of any Nvest Fund
over a 13-month period but pay sales charges as if you had purchased all
shares at once. This program can save you money if you plan to invest
$50,000 or more over 13 months. Purchases in Class B and Class C shares may
be used toward meeting the letter of intent.

These privileges do not apply to the Money Market Funds unless shares are
purchased through an exchange from another Nvest Fund.

Eliminating Sales Charges and CDSC

Class A shares may be offered without front-end sales charges or a CDSC, and
Class C shares may be offered without a front-end sales charge, to the following
individuals and institutions:

. Any government entity that is prohibited from paying a sales charge or
commission to purchase mutual fund shares;

. Selling brokers, sales representatives or other intermediaries under
arrangements with the Distributor;

. Fund Trustees and other individuals who are affiliated with any Nvest Fund
or Money Market Fund (this also applies to any spouse, parents, children,
siblings, grandparents, grandchildren and in-laws of those mentioned);

. Participants in certain Retirement Plans with at least 100 eligible
employees (one-year CDSC may apply);

. Non-discretionary and non-retirement accounts of bank trust departments or
trust companies only if they principally engage in banking or trust
activities;

. Investments of $25,000 or more in Nvest Funds or Money Market Funds by
clients of an adviser or subadviser to any Nvest Fund or Money Market Fund.

Repurchasing Fund Shares

If you repurchase Class A shares of $1 million or more within 30 days after you
redeem such shares, the Distributor will rebate the amount of the CDSC charged
on the redemption.

15
<PAGE>

Class A, B or C Shares

Eliminating the CDSC

As long as we are notified at the time you sell, the CDSC for any share class
will generally be eliminated in the following cases:

. to make distributions from a retirement plan (a plan termination or total
plan redemption may incur a CDSC);

. to make payments through a systematic withdrawal plan; or

. due to shareholder death or disability.

If you think you may be eligible for a sales charge elimination or reduction,
contact your financial representative or Nvest Funds. Check the Statement of
Additional Information for details.

16
<PAGE>

Fund Services
-------------

It's Easy to Open an Account

To open an account with Nvest Funds:

1. To open an account with Nvest Funds:

2. Determine how much you wish to invest. The following chart shows the
investment minimums for various types of accounts:

<TABLE>
<CAPTION>
Minimum to Open
Minimum to Open an Account Using Minimum for
Type of Account an Account Investment Builder Existing Accounts
<S> <C> <C> <C>
Any account other than those listed below $2,500 $100 $100
Accounts registered under the Uniform Gifts to
Minors Act or the Uniform Transfers to Minors Act $2,500 $100 $100
Individual Retirement Accounts ("IRAs") $ 500 $100 $100
Retirement plans with tax benefits such as
corporate pension, profit sharing and Keogh plans $ 250 $100 $100
Payroll Deduction Investment Programs for SARSEP*,
SEP, SIMPLE IRA, 403(b)(7) and certain other $ 25 N/A $ 25
retirement plans
</TABLE>

4. Use the following sections as your guide for purchasing shares.

Self-Servicing Your Account

Buying or selling shares is easy with the services described below:

Nvest Funds Personal Access Line(R)

800-225-5478, press 1

Nvest Funds Web Site

www.nvestfunds.com

You have access to your account 24 hours a day by calling the Personal Access
Line(R) from a touch-tone telephone or by visiting us online. Using these
customer service options, you may:

. purchase, exchange or redeem shares in your existing accounts (certain
restrictions may apply);

. review your account balance, recent transactions, Fund prices and recent
performance;

. order duplicate account statements; and

17
<PAGE>

. obtain tax information.

Please see the following pages for other ways to buy, exchange or sell your
shares.

18
<PAGE>

Fund Services
--------------

Buying Shares

<TABLE>
<CAPTION>
Opening an Account Adding to an Account

Through Your Investment Dealer
<S> <C> <C>
. Call your investment dealer . Call your investment dealer
for information. for information.

By Mail
. Make out a check in U.S. dollars . Make out a check in U.S. dollars
for the investment amount, payable to for the investment amount, payable to
"Nvest Funds." Third party checks "Nvest Funds." Third party checks
and "starter" checks will not be and "starter" checks will not be
accepted. accepted.

[envelope icon] . Mail the check with your completed . Fill out the detachable investment
application to Nvest Funds, P.O. Box slip from an account statement. If
8551, Boston, MA 02266-8551 no slip is available, include with
the check a letter specifying the
Fund name, your class of shares, your
account number and the registered
account name(s). To make investing
even easier, you can order more
investment slips by calling
800-225-5478.
By Exchange
. The exchange must be for a . The exchange must be for a
minimum of $1,000 or for all of minimum of $1,000 or for all
your shares. of your shares.
[exchange icon] . Obtain a current prospectus for . Call your investment dealer or
the Fund into which you are Nvest Funds at 800-225-5478 or
exchanging by calling your investment visit nvestfunds.com to request
dealer or Nvest Funds at 800-225-5478. an exchange
. Call your investment dealer or . See the section entitled
Nvest Funds to request an exchange . "Exchanging Shares" for more details.

. See the section entitled
"Exchanging Shares" for more details.

19
<PAGE>

<TABLE>
<S> <C>
Company, ABA# 011000028, DDA#
99011538.
. Specify the Fund name, your class
of shares, your account number and
the registered account name(s). Your
bank may charge you for such a
transfer.
Automatic Investing Through Investment Builder

. Indicate on your application that . Please call Nvest Funds at
you would like to begin an automatic 800-225-5478 for a Service Options
investment plan through Investment Form. A signature guarantee may be
Builder and the amount of the monthly required to add this privilege.
investment ($100 minimum).
[builder icon] . Send a check marked "Void" or a . See the section entitled
deposit slip from your bank account "Additional Investor Services".
along with your application.

Through Automated Clearing House ("ACH")

. Ask your bank or credit union whether . Call Nvest Funds at 800-225-5478 or
it is a member of the ACH system. visit nvestfunds.com to add shares to your
account through ACH.
[ACH icon] . Complete the "Telephone Withdrawal and . If you have not signed up for the ACH
Exchange" and "Bank Information" sections system, please call Nvest Funds for a
on your account application. Service Options Form. A signature
guarantee may be required to add this
privilege.
. Mail your completed application to
Nvest Funds, P.O. Box 8551, Boston,
MA 02266-8551.
</TABLE>

20
<PAGE>

Fund Services
-------------

Selling Shares

To Sell Some or All of Your Shares

Certain restrictions may apply. See section entitled "Restrictions on Buying,
Selling and Exchanging Shares."

Through Your Investment Dealer

. Call your investment dealer for information.

By Mail
. Write a letter to request a redemption specifying the name of
your Fund, your class of shares, your account number, the
exact registered account name(s), the number of shares or the
dollar amount to be redeemed and the method by which you wish
to receive your proceeds. Additional materials may be
required. See the section entitled "Selling Shares in
Writing."
[envelope icon] . The request must be signed by all of the owners of the shares
and must include the capacity in which they are signing, if
appropriate.
. Mail your request by regular mail to Nvest Funds, P.O. Box
8551, Boston, MA 02266-8551 or by registered, express or
certified mail to Nvest Funds, 66 Brooks Drive, Braintree, MA
02184.
. Your proceeds (less any applicable CDSC) will be delivered by
the method chosen in your letter. If you choose to have your
proceeds delivered by mail, they will generally be mailed to
you on the business day after the request is received in good
order. You may also choose to redeem by wire or through ACH
(see below).

By Wire
. Fill out the "Telephone Withdrawal and Exchange" and "Bank
Information" sections on your account application.
[wire icon] . Call Nvest Funds at 800-225-5478, visit nvestfunds.com or
indicate in your redemption request letter (see above) that
you wish to have your proceeds wired to your bank.
. Proceeds (less any applicable CDSC) will generally be wired
on the next business day. A wire fee (currently $5.00) will
be deducted from the proceeds.

Through Automated Clearing House

. Ask your bank or credit union whether it is a member of the
ACH system.
. Complete the "Telephone Withdrawal and Exchange" and "Bank
Information" sections on your account application.
[ ACH icon] . If you have not signed up for the ACH system on your
application, please call Nvest Funds at 800-225-5478 for a
Service Options Form.
. Call Nvest Funds or visit nvestfunds.com to request a
redemption through this system.
. Proceeds (less any applicable CDSC) will generally arrive at
your bank within three business days.

By Systematic Withdrawal Plan

21
<PAGE>

. Please refer to the section entitled
"Additional Investor Services" or call Nvest
Funds at 800-225-5478 or your financial
representative for information.

[systematic icon] . Because withdrawal payments may have tax
consequences, you should consult your tax
adviser before establishing such a plan

By Telephone
. You may receive your proceeds by mail, by wire
or through ACH (see above).
[telephone icon] . Call Nvest Funds at 800-225-5478 to choose the
method you wish to use to redeem your shares.

22
<PAGE>

Selling Shares in Writing

A signature guarantee protects you against fraudulent orders and is necessary
if:

. your address of record has been changed within the past 30 days;

. you are selling more than $100,000 worth of shares and you are requesting the
proceeds by check; or

. a proceeds check for any amount is either mailed to an address other than the
address of record or not payable to the registered owner(s).

A notary public cannot provide a signature guarantee. A signature guarantee can
be obtained from one of the following sources:

. a financial representative or securities dealer;

. a federal savings bank, cooperative, or other type of bank;

. a savings and loan or other thrift institution;

. a credit union; or

. a securities exchange or clearing agency.

The table below shows some situations in which additional documentation may be
necessary. Please call your financial representative or Nvest Funds regarding
requirements for other account types.

Seller (Account Type) Requirements for Written Requests

Individual, joint, sole proprietorship, . The request must include the
UGMA/UTMA (minor accounts) signatures of all persons to sign,
including title, if applicable.
. Signature guarantee, if applicable
(see above).

Corporate or association accounts . The request must include the
signatures of all persons
authorized to sign, including title

Owners or trustees of trust accounts . The request must include the
signatures of all trustees
authorized to sign, including
title.
. If the names of the trustees are
not registered on the account,
please provide a copy of the trust
document certified within the past
60 days.
. Signature guarantee, if applicable
(see above).

Joint tenancy whose co-tenants are . The request must include the
deceased signatures of all surviving tenants
of the account.
. Copy of the death certificate.

23
<PAGE>

. Signature guarantee if proceeds check
is issued to other than the surviving
tenants.

Power of Attorney (POA) . The request must include the
signatures of the attorney-in-fact,
indicating such title.
. A signature guarantee.
. Certified copy of the POA document
stating it is still in full force and
effect, specifying the exact Fund and
account number, and certified within
30 days of receipt of instructions.*

Qualified retirement benefit plans . The request must include the
(except Nvest Funds prototype signatures of all those authorized
documents) to sign, including title.
. Signature guarantee, if applicable
(see above).

Executors of estates, administrators, . The request must include the
guardians, conservators signatures of all those authorized to
sign, including capacity.
. A signature guarantee.
. Certified copy of court document
where signer derives authority, e.g.:
Letters of Administration,
Conservatorship and Letters
Testamentary.*

Individual Retirement Accounts (IRAs) . Additional documentation and
distribution forms are required.

24
<PAGE>

Fund Services
-------------

Exchanging Shares

In general, you may exchange shares of your Fund for shares of the same class of
another Nvest Fund without paying a sales charge or a CDSC (see the sections
entitled "Buying Shares" and "Selling Shares"). The exchange must be for a
minimum of $1,000 (or the total net asset value of your account, whichever is
less), or $100 if made under the Automatic Exchange Plan (see the section
entitled "Additional Investor Services"). All exchanges are subject to the
eligibility requirements of the Nvest Fund or Money Market Fund into which you
are exchanging. The exchange privilege may be exercised only in those states
where shares of the Funds may be legally sold. For federal income tax purposes,
an exchange of Fund shares for shares of another Nvest Fund or Money Market Fund
is generally treated as a sale on which gain or loss may be recognized. Please
refer to the Statement of Additional Information (the "SAI") for more detailed
information on exchanging Fund shares.

Restrictions on Buying, Selling and Exchanging Shares

Purchase and Exchange Restrictions

Although the Funds does not anticipate doing so, it reserves the right to
suspend or change the terms of purchasing or exchanging shares. The Funds and
the Distributor reserve the right to refuse or limit any purchase or exchange
order by a particular purchaser (or group of related purchasers) if the
transaction is deemed harmful to the best interests of the Fund's other
shareholders or would disrupt the management of the Fund. The Funds and the
Distributor reserve the right to restrict purchases and exchanges for the
accounts of "market timers" by limiting the transaction to a maximum dollar
amount. An account will be deemed to be one of a market timer if: (i) more than
two exchange purchases of a given Fund are made for the account in a calendar
quarter or (ii) the account makes one or more exchange purchases of a given Fund
in a calendar quarter in an aggregate amount in excess of 1% of the Fund's total
net assets.

Selling Restrictions

The table below describes restrictions placed on selling shares of the Fund:

Restriction Situation

The Fund may suspend the right of . When the New York Stock Exchange
redemption or postpone payment for (the "Exchange") is closed (other
more than 7 days: than a weekend/holiday)
. During an emergency
. Any other period permitted by the SEC
------------------------------------ -----------------------------------------
The Fund reserves the right to . With a notice of a dispute between
suspend account services or refuse registered owners
transaction requests:
. With suspicion/evidence of a
fraudulent act
------------------------------------ -----------------------------------------
The Fund may pay the redemption . When it is detrimental for the Fund
price in whole or in part by a to make cash payments as determined
distribution in kind of readily in the sole discretion of the
marketable securities in lieu of Adviser or subadviser
cash or may take up to 7 days to
pay a redemption request in order
to raise capital:
------------------------------------ -----------------------------------------
The Fund may withhold redemption . When redemptions are made within 10
proceeds until the check or funds calendar days of purchase by check or
have cleared: ACH of the shares being redeemed
--------------------------------------------------------------------------------

Telephone redemptions are not accepted for tax-qualified retirement accounts.

25
<PAGE>

If you hold certificates representing your shares, they must be sent with your
request for it to be honored.

The Fund recommends that certificates be sent by registered mail.

Small Account Redemption
When the Fund account falls below a set minimum (currently $1,000 as set by the
Fund's Board of Trustees), the Fund may close your account and send you the
proceeds. You will have 60 days after being notified of the Fund's intention to
close your account to increase its amount to the set minimum. This does not
apply to certain qualified retirement plans or accounts that have fallen below
the minimum solely because of fluctuations in the Fund's net asset value per
share.

26
<PAGE>

How Fund Shares Are Priced

"Net asset value" is the price of one share of the Fund without a sales charge,
and is calculated each business day using this formula:

<TABLE>
<S> <C>
Net Asset Value = Total market value of securities + Cash and other assets - Liabilities
----------------------------------------------------------------------
Number of outstanding shares
</TABLE>

The net asset value of Fund shares is determined according to this schedule:

. The price you pay for purchasing, redeeming or exchanging a share will be
based upon the net asset value next calculated after your order is received
"in good order" by State Street Bank and Trust Company, the Fund's
custodian (plus or minus applicable sales charges as described earlier in
this Prospectus).

. A Fund heavily invested in foreign securities may have net asset value
changes on days when you cannot buy or sell its shares.

* Under limited circumstances, the Distributor may enter into a contractual
agreement pursuant to which it may accept orders after 5:00 p.m., but not
later than 8:00 p.m.

Generally, during times of substantial economic or market change, it may be
difficult to place your order by phone. During these times, you may deliver
your order in person to the Distributor or send your order by mail as described
in "Buying Shares" and "Selling Shares."

Generally, Fund securities are valued as follows:

Equity securities -- most recent sales or quoted bid price as provided by a
pricing service.

Debt securities (other than short-term obligations) -- based upon pricing
service valuations.

Short-term obligations (remaining maturity of less than 60 days) -- amortized
cost (which approximates market value).

Options -- last sale price, or if not available, last offering price.

All other securities -- fair market value as determined by the adviser or
subadviser of the Fund under the direction of the Fund's Board of Trustees.

The effect of fair value pricing as described above for "Securities traded on
foreign exchanges" and "All other securities" is that securities may not be
priced on the basis of quotations from the primary market in which they are
traded but rather, may be priced by another method that the Fund's Board of
Trustees believes actually reflects fair value.

27
<PAGE>

Dividends and Distributions

The Funds generally distributes most or all of its net investment income
annually (other than capital gains) in the form of dividends. The Fund expects
to distributes all net realized long- and short-term capital gains annually,
after applying any available capital loss carryovers. The Fund's Board of
Trustees may adopt a different schedule as long as payments are made at least
annually.

Depending on your investment goals and priorities, you may choose to:

. Participate in the Dividend Diversification Program, which allows you to
have all dividends and distributions automatically invested at net asset
value in shares of the same class of another Nvest Fund registered in your
name. Certain investment minimums and restrictions may apply. For more
information about this program, see the section entitled "Additional
Investor Services."

. Receive all distributions in cash.

Unless you select one of the above options, distributions will automatically be
reinvested in shares of the same class of the Fund at net asset value.
For more information or to change your distribution option, contact Nvest Funds
in writing or call 800-225-5478.

Tax Consequences

The Fund intends to meet all requirements under Subchapter M of the Internal
Revenue Code necessary to qualify as a "regulated investment company" and thus
does not expect to pay any federal income tax on income and capital gains
distributed to shareholders.

Fund distributions paid to you are taxable whether you receive them in cash or
reinvested them in additional shares. Distributions derived from short-term
capital gains or investment income are taxable at ordinary income rates. The
Funds usually do not realize a substantial amount of long-term capital gains. If
you are a corporation investing in a Fund, a portion of these dividends may
qualify for the dividends-received deduction provided that you meet certain
holding period requirements. Distributions of gains from investments that the
Fund owned for more than one year that are designated by the Fund as capital
gain dividends will generally be taxable to a shareholder receiving such
distributions as long-term capital gain, regardless of how long the shareholder
has held Fund shares. Distributions are taxable to you even if they are paid
from income or gains earned by the Fund before your investment (and thus were
included in the price you paid). Distributions are taxable whether you received
them in cash or reinvested them in additional shares.

You should consult your tax adviser for more information on your own situation,
including possible foreign, state and local taxes.

Shareholders should consult their tax advisers about the consequences of
investments, if any, that the Fund may make in foreign securities or foreign
currencies.

28
<PAGE>

Compensation to Securities Dealers

As part of their business strategies, the Fund pays securities dealers that sell
its shares. This compensation originates from two sources: sales charges
(front-end or deferred) and 12b-1 fees (comprising the annual service and/or
distribution fees of a plan adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940). The sales charges are detailed in the section entitled
"How Sales Charges Are Calculated." Each class of Fund shares pays an annual
service fee of 0.25% of its average daily net assets. In addition to this
service fee, Class B shares pay an annual distribution fee of 0.75% of their
average daily net assets for 8 years (at which time they automatically convert
into Class A shares). Class C shares are subject to a distribution fee of 0.75%
of their average daily net assets. Generally, the 12b-1 fees are paid to
securities dealers on a quarterly basis. The Distributor retains the first year
of such fees for Class C shares. Because these distribution fees are paid out
of the Fund's assets on an ongoing basis, over time these fees for Class B and
Class C shares will increase the cost of your investment and may cost you more
than paying the front-end sales charge on Class A shares.

29
<PAGE>

Additional Investor Services

Retirement Plans

Investment Builder Program

Dividend Diversification Program

This program allows you to have all dividends and any other distributions
automatically invested in shares of the same class of another Nvest Fund or a
Money Market Fund, subject to the eligibility requirements of that other fund
and to state securities law requirements. Shares will be purchased at the
selected fund's net asset value without a front-end sales charge or CDSC on the
dividend record date. Before establishing a Dividend Diversification Program
into a Nvest Fund or a Money Market Fund, please read its prospectus carefully.

Automatic Exchange Plan

Systematic Withdrawal Plan

Nvest Funds Personal Access Line(R)

Nvest Funds Web Site

Electronic Mail Delivery

30
<PAGE>

31
<PAGE>

Glossary of Terms

Capital gain distributions -- Payments to a Fund's shareholders of profits
earned from selling securities in a Fund's portfolio. Capital gain
distributions are usually paid once a year.

Derivative -- A financial instrument whose value and performance are based on
the value and performance of another security or financial instrument.

Discounted price -- The difference between a bond's current market price and its
face or redemption value.

Diversification -- The strategy of investing in a wide range of companies or
industries to reduce the risk if an individual company or sector suffers losses.

Dividend yield -- The current or estimated annual dividend divided by the market
price per share of a security.

Duration -- An estimate of how much a bond's price fluctuates with changes in
comparable interest rates.

Earnings growth -- A pattern of increasing rate of growth in earnings per share
from one period to another, which usually causes a stock's price to rise.

Fundamental analysis -- An analysis of the balance sheet and income statements
of a company in order to forecast its future stock price movements. Fundamental
analysis considers past records of assets, earnings, sales, products, management
and markets in predicting future trends in these indicators of a company's
success or failure. By appraising a company's prospects, analysts using such an
approach assess whether a particular stock or group of stocks is undervalued or
overvalued at its current market price.

Growth investing -- An investment style that emphasizes companies with strong
earnings growth. Growth investing is generally considered more aggressive than
"value" investing.

Income distributions -- Payments to a Fund's shareholders resulting from the net
interest or dividend income earned by a Fund's portfolio.

Inflation -- A general increase in prices coinciding with a fall in the real
value of money, as measured by the Consumer Price Index.

Interest rate -- Rate of interest charged for the use of money, usually
expressed at an annual rate.

32
<PAGE>

Price-to-book value ratio -- Current market price of a stock divided by its book
value, or net asset value.

Qualitative analysis -- An analysis of the qualities possessed by a company,
including its management, products and competitive positions, to help determine
if the company can execute its strategies.

Technical analysis -- The research into the demand and supply for securities,
options, mutual funds and commodities based on trading volume and price studies.
Technical analysis uses charts or computer programs to identify and project
price trends in a market, security, mutual fund or futures contract.

Top-down approach -- The method in which an investor first looks at trends in
the general economy, and next selects attractive industries and then companies
that should benefit from those trends.

Value investing -- A relatively conservative investment approach that focuses on
companies that may be temporarily out of favor or whose earnings or assets are
not fully reflected in their stock prices. Value stocks will tend to have a
lower price-to-earnings ratio than growth stocks.

Volatility -- The general variability of a portfolio's value resulting from
price fluctuations of its investments. In most cases, the more diversified a
portfolio is, the less volatile it will be.

Yield - The rate at which a Fund earns income, expressed as a percentage.
Mutual fund yield calculations are standardized, based upon a formula developed
by the SEC.

Yield-to-maturity -- The concept used to determine the rate of return an
investor will receive if a long-term, interest-bearing investment, such as a
bond, is held to its maturity date. It takes into account purchase price,
redemption value, time to maturity, coupon yield (the interest rate on a debt
security the issuer promises to pay to the holder until maturity, expressed as
an annual percentage of face value) and the time between interest payments.

33
<PAGE>

If you would like more information about the Funds, the
following documents are available free upon request:
Statement of Additional Information (SAI) -- Provides
more detailed information about the Funds and their investment limitations and
policies , has been filed
with the Securities and Exchange Commission ("SEC") and is
incorporated into this Prospectus by reference.
To order a free copy of the Fund's SAI, contact your financial
representative, or the Fund at:
Nvest Funds Distributor, L.P., 399 Boylston Street, Boston, MA 02116
Telephone: 800-225-5478
Internet: www.nvestfunds.com
Your financial representative or Nvest Funds
will also be happy to answer your questions or to provide any
additional information that you may require.
You can review and copy the Fund's SAIs at the
Public Reference Room of the SEC in Washington, D.C. Text-only copies are
available free from
the Commission's Web site at: www.sec.gov.

Nvest Funds Distributor, L.P., and other firms selling
shares of Nvest Funds are members of the
National Association of Securities Dealers, Inc. (NASD). As
a service to investors, the NASD has asked that
we inform you of the availability of a brochure on its
Public Disclosure Program. The program provides
access to information about securities firms and their
representatives. Investors may obtain a copy by contacting the
NASD at 800-289-9999 or by visiting their Web site
at www.NASDR.com.

34
<PAGE>

Nvest

Select Fund

(Investment Company Act File No. 811-7345)

35
<PAGE>

[LOGO]

--------------------------------------------------------------------------------
Nvest Equity Research Fund
Nvest Mid Cap Growth Fund
Nvest Select Fund

Statement of Additional Information I

March 15, 2001

This Statement of Additional Information (the "Statement") contains
information which may be useful to investors but which is not included in the
Prospectus of the Nvest Funds listed above (the "Funds" and each a "Fund"). This
Statement is not a prospectus and is authorized for distribution only when
accompanied or preceded by the Prospectuses of the Funds dated March 15, 2001
(the "Prospectus" or "Prospectuses"). The Statement should be read together with
the Prospectuses. Investors may obtain a free copy of the Prospectus by writing
to Nvest Funds Distributor, L.P., Prospectus Fulfillment Desk, 399 Boylston
Street, Boston, Massachusetts 02116, by calling Nvest Funds at 800-225-5478 or
by placing an order online at www.nvestfunds.com.

The Funds, are each a diversified (Select Fund is non-diversified) fund of
Nvest Funds Trust III (the "Trust"), a registered open-end management investment
company that currently offers a total of five funds.

Table of Contents

<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Restrictions 2
Fund Charges and Expenses 4
Ownership of Fund Shares 5
Miscellaneous Investment Practices 5
Management of the Trust 21
Portfolio Transactions and Brokerage 29
Description of the Trust and Ownership of Shares 31
How to Buy Shares 34
Net Asset Value and Public Offering Price 34
Reduced Sales Charges 35
Shareholder Services 38
Redemptions 45
Standard Performance Measures 48
Income Dividends, Capital Gain Distributions and Tax Status 52
Appendix A - Description of Bond Ratings 54
Appendix B - Media That May Contain Fund Information 57
Appendix C - Advertising and Promotional Literature 60
</TABLE>
<PAGE>

--------------------------------------------------------------------------------

INVESTMENT RESTRICTIONS

--------------------------------------------------------------------------------

The following is a description of restrictions on the investments to be
made by the Funds. The restrictions marked with an asterisk (*) may not be
changed without the vote of a majority of the outstanding voting securities of
the relevant Fund (as defined in the Investment Company Act of 1940, as amended
[the "1940 Act"]). Except in the case of restrictions marked with a dagger (+)
below, the percentages set forth below and the percentage limitations set forth
in the Prospectus will apply at the time of the purchase of a security and shall
not be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of a purchase of such security.

Nvest Equity Research Fund and Nvest Mid Cap Growth Fund
Nvest Equity Research Fund (the "Equity Research Fund") and Nvest Mid Cap Growth
Fund (the "Mid Cap Growth Fund") each will not:

*(1) With respect to 75% of its total assets, purchase any security if, as a
result, more than 5% of the Fund's total assets (taken at current value)
would then be invested in securities of a single issuer. This limitation
does not apply to U.S. Government Securities (as defined in the 1940 Act).

*(2) With respect to 75% of its total assets, acquire more than 10% of the
outstanding voting securities of any issuer.

*(3) Invest more than 25% of its net assets in any one industry. This
restriction does not apply to U.S. Government Securities. For the purposes
of this restriction, gas, electric, water and telephone companies will be
considered as being in separate industries and finance companies whose
financing activities are related primarily to the activities of their
parent companies are classified in the industry of their parents. For
purposes of this restriction with regard to bank obligations, bank
obligations are considered to be one industry, and asset-backed securities
are not considered to be bank obligations.

*(4) Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Fund may obtain short-term credits
as necessary for the clearance of security transactions, and the Fund may
make any short sales or maintain any short positions where the short sales
or short positions would not constitute "senior securities" under the 1940
Act.

+(5) Borrow money, except to the extent permitted under the 1940 Act.

*(6) Make loans, except that the Fund may lend its portfolio securities to the
extent permitted under the 1940 Act. (For purposes of this investment
restriction, neither (i) entering into repurchase agreements nor (ii)
purchasing debt obligations in which a Fund may invest consistent with its
investment policies is considered the making of a loan.)

*(7) Act as underwriter of securities of other issuers except that, in the
disposition of portfolio securities, it may be deemed to be an underwriter
under the federal securities laws.

*(8) Purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, securities which are secured by
interests in real estate, and securities which represent interests in real
estate, and it may acquire and dispose of real estate or interests in real
estate acquired through the exercise of its rights as a holder of debt
obligations secured by real estate or interests therein.

*(9) Purchase or sell commodities, except that the Fund may purchase and sell
futures contracts and options, may enter into foreign exchange contracts
and may enter into swap agreements and other financial transactions not
requiring the delivery of physical commodities.

2
<PAGE>

*(10) Issue senior securities, except for permitted borrowings or as otherwise
permitted under the 1940 Act.

Restrictions (4) and (10) shall be interpreted based upon no-action
letters and other pronouncements of the staff of the Securities and
Exchange Commission (the "SEC"). Under current pronouncements, certain
Fund positions are excluded from the definition of "senior security" so
long as the Fund maintains adequate cover, segregation of assets or
otherwise.

Nvest Select Fund
Nvest Select Fund (the "Select Fund") may not:

+(1) Acquire securities of any one issuer which (a) represent more than 10% of
the voting securities of the issuer or (b) have a value greater than 10%
of the value of the outstanding securites of the issuer;

+*(2) Invest more than 25% of its net assets in any one industry. This
restriction does not apply U.S. Government Securities. For purposes of
this restriction, telephone, gas and electric public utilities are each
regarded as separate industries and finance companies whose financing
activities are related primarily to the activities of their parent
companies are classified in the industry of their parents. For purposes of
this restriction with regard to bank obligations, bank obligations are
considered to be one industry, and asset-backed securities are not
considered to be bank obligations.

*(3) Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Fund may obtain short-term credits
as necessary for the clearance of security transactions, and the Fund may
make any short sales or maintain any short positions where the short sales
or short positions would not constitute "senior securities" under the 1940
Act.

+*(4) Borrow money except to the extent permitted under the 1940 Act.

*(5) Make loans, except that the Fund may lend its portfolio securities to the
extent permitted under the 1940 Act. (For the purposes of this investment
restriction, neither (i) entering into repurchase agreements nor (ii)
purchasing debt obligations in which a Fund may invest consistent with its
investment policies is considered the making of a loan.)

*(6) Act as an underwriter of securities of other issuers except that, in the
disposition of portfolio securities, it may be deemed to be an underwriter
under the federal securities laws.

*(7) Purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, securities which are secured by
interests in real estate, and securities which represent interests in real
estate, and it may acquire and dispose of real estate or interests in real
estate acquired through the exercise of its rights as a holder of debt
obligations secured by real estate or interests therein

*(8) Purchase or sell commodities, except that the Fund may purchase and sell
futures contracts and options, may enter into foreign exchange contracts
and may enter into swap agreements and other financial transactions not
requiring the delivery or physical commodities.

*(9) Issue senior securities, except for permitted borrowings or as otherwise
permitted under the 1940 Act;

Restrictions (3) and (9) shall be interpreted based upon no-action letters
and other pronouncements of the staff of the SEC. Under current
pronouncements, certain Fund positions are excluded from the definition of
"senior security" so long as the Fund maintains adequate cover,
segregation of assets or otherwise.

In addition, it is contrary to each Fund's present policy, which may be
changed without shareholder vote, to purchase any illiquid security,
including any securities whose disposition is restricted under federal
securities laws and securities that are not readily marketable, if, as a
result, more than 15% of the Fund's total assets (based on current value)
would then be invested in such securities. The staff of the Securities

3
<PAGE>

and Exchange Commission is presently of the view that repurchase
agreements maturing in more than seven days are subject to this
restriction. Until that position is revised, modified or rescinded, the
Fund will conduct its operations in a manner consistent with this view.
This limitation on investment in illiquid securities does not apply to
certain restricted securities, including securities pursuant to Rule 144A
under the Securities Act of 1933 and certain commercial paper, that the
Manager has determined to be liquid under procedures approved by the Board
of Trustees.

--------------------------------------------------------------------------------

FUND CHARGES AND EXPENSES

--------------------------------------------------------------------------------

MANAGEMENT FEES

Pursuant to separate advisory agreements, each dated _______________,
Nvest Funds Management, L.P. ("Nvest Management") has agreed, subject to the
supervision of the Board of Trustees of the Trust, to manage the investment and
reinvestment of the assets of the Equity Research, Mid Cap Growth and Select
Funds and to provide a range of administrative services to such Funds. For the
services described in the advisory agreements, each such Fund has agreed to pay
Nvest Management a gross management fee at the annual rate set forth in the
following table, reduced by the amount of any sub-advisory fees paid by the Fund
to the subadviser pursuant to any sub-advisory agreement:

<TABLE>
<CAPTION>
Management fee payable by Fund to Nvest Management
Fund (includes any subadviser fees paid)
(as a percentage of average daily net assets of the Fund)
--------------------------------- ------------------------------------------------------------
<S> <C>
Equity Research Fund 0.80%

Mid Cap Growth Fund and 0.95%

Select Fund 1.00%
</TABLE>

Each of the advisory agreements for the Equity Research, Mid Cap Growth
and Select Funds provides that Nvest Management may delegate its
responsibilities thereunder to other parties. Pursuant to separate subadvisory
agreements, each dated -_____________, Nvest Management has delegated
responsibility for managing the investment and reinvestment of each of these
Funds' assets to a subadviser. The subadviser is Loomis Sayles, in the case of
the Equity Research and Mid Cap Growth Funds and Harris Associates, L.P.
("Harris Associates") in the case of the Select Fund. For the services described
in the subadvisory agreements, each such Fund has agreed to pay its respective
subadviser a subadvisory fee at the annual rate set forth in the following
table:

<TABLE>
<CAPTION>
Subadvisory fee payable to subadviser
Fund Subadviser (as a percentage of average daily net assets of the Fund)
------------------------------ ----------------- --------------------------------------------------------------
<S> <C> <C>
Equity Research Fund Loomis Sayles 0.400%

Mid Cap Growth Fund Loomis Sayles 0.550% of the first $1 billion
0.425% of amounts in excess of $1 billion
</TABLE>

4
<PAGE>

<TABLE>
<S> <C> <C>
Select Fund Harris Associates 0.60% of the first $1 billion
0.55% of amounts in excess of $1 billion
</TABLE>

Nvest Management has given a binding undertaking to the Equity Research,
Mid Cap Growth and Select Funds to reduce each Fund's fees and, if necessary, to
bear certain expenses related to operating each Fund in order to limit each
Fund's expenses to an annual rate of 1.70% of the average daily net assets of
the Fund's Class A shares, 2.45% of the average daily net assets of the Fund's
Class B shares, and 2.45% of the average daily net assets of the Fund's Class C
shares.

--------------------------------------------------------------------------------

OWNERSHIP OF FUND SHARES

--------------------------------------------------------------------------------

As of (______________), 2001, to the Trusts' knowledge, the following
persons owned of record or beneficially 5% or more of the outstanding shares of
the indicated classes of the Funds set forth below.

<TABLE>
<CAPTION>
Fund Shareholder and Address Ownership Percentage
---- ----------------------- --------------------
<S> <C> <C>
[TO BE UPDATED}
</TABLE>

--------------------------------------------------------------------------------

MISCELLANEOUS INVESTMENT PRACTICES

--------------------------------------------------------------------------------

The following is a list of certain investment practices in which a Fund
may engage as secondary investment strategies. A Fund's primary strategies are
detailed in its Prospectus.

<TABLE>
<CAPTION>
Equity Research Fund Mid Cap Growth Fund Select Fund
-------------------- ------------------- -----------
<S> <C> <C>
[TO BE UPDATED] [TO BE UPDATED] [TO BE UPDATED]
</TABLE>

The following is a description of the various investment practices in
which a Fund may engage as a secondary strategy:

Equity Securities Equity securities are securities that represent an ownership
-----------------
interest (or the right to acquire such an interest) in a company and include
common and preferred stocks and securities exercisable for, or convertible into,
common or preferred stocks (such as warrants, convertible debt securities and
convertible preferred stock). While offering greater potential for long-term
growth, equity securities are more volatile and more risky than some other forms
of investment. Therefore, the value of your investment in a Fund may sometimes
decrease instead of increase. A Fund may invest in equity securities of
companies with relatively small market capitalization. Securities of such
companies may be more volatile than the securities of larger, more established
companies and the broad equity market indices. See "Small Companies" below. A
Fund's investments may include securities traded "over-the-counter" as well as
those traded on a securities exchange. Some over-the-counter securities may be
more difficult to sell under some market conditions.

. Small Companies - A Fund may invest in companies with relatively small
---------------
capitalization. Such investments may involve greater risk than is usually
associated with more established companies. These companies often have
sales and earnings growth rates which exceed those of companies with
larger capitalization. Such growth rates may in turn be reflected in more
rapid share price appreciation. However, companies with smaller
capitalization often have limited product lines, markets or financial
resources and may be dependent

5
<PAGE>

upon a relatively small management group. The securities may have limited
marketability and may be subject to more abrupt or erratic movements in
price than securities of companies with larger capitalization or market
averages in general. The net asset value of Funds that invest in companies
with smaller capitalization therefore may fluctuate more widely than
market averages.

. Warrants - A Fund may invest in warrants. A warrant is an instrument that
--------
gives the holder a right to purchase a given number of shares of a
particular security at a specified price until a stated expiration date.
Buying a warrant generally can provide a greater potential for profit or
loss than an investment of equivalent amounts in the underlying common
stock. The market value of a warrant does not necessarily move with the
value of the underlying securities. If a holder does not sell the warrant,
it risks the loss of its entire investment if the market price of the
underlying security does not, before the expiration date, exceed the
exercise price of the warrant plus the cost thereof. Investment in
warrants is a speculative activity. Warrants pay no dividends and confer
no rights (other than the right to purchase the underlying securities)
with respect to the assets of the issuer.

. Real estate investment trusts (REITs) - Certain Funds may invest in REITs.
-------------------------------------
REITs are pooled investment vehicles that invest primarily in either real
estate or real estate related loans. The value of a REIT is affected by
changes in the value of the properties owned by the REIT or securing
mortgage loans held by the REIT. REITs are dependent upon cash flow from
their investments to repay financing costs and the ability of the REITs'
managers. REITs are also subject to risks generally associated with the
investments in real estate. A Fund will indirectly bear its proportionate
share of expenses, including management fees, paid by each REIT in which
it invests.

Initial Public Offerings Funds may purchase securities of companies that are
------------------------
offered pursuant to an initial public offering ("IPO"). An IPO is a company's
first offering of stock to the public in the primary market, typically to raise
additional capital. The Funds may purchase a "hot" IPO (also known as a "hot
issue"), which is an IPO that is oversubscribed and, as a result, is an
investment opportunity of limited availability. As a consequence, the price at
which these IPO shares open in the secondary market may be significantly higher
than the original IPO price. IPO securities tend to involve greater risk due, in
part, to public perception and the lack of publicly available information and
trading history. There is the possibility of losses resulting from the
difference between the issue price and potential diminished value of the stock
once traded in the secondary market. Although the Funds will make diligent
efforts to research a company prior to purchasing IPO securities, including
reviewing the company's prospectus, there is no guarantee against significant
losses. The Funds' investment in IPO securities may have a significant impact on
a Fund's performance and may result in significant capital gains.

Fixed-income Securities A Fund may invest in fixed-income securities. Because
-----------------------
interest rates vary, it is impossible to predict the income of a Fund for any
particular period. The net asset value of your shares will vary as a result of
changes in the value of the bonds and other securities in a Fund's portfolio.

Fixed-income securities include a broad array of short, medium and long term
obligations issued by the U.S. or foreign governments, government or
international agencies and instrumentalities, and corporate issuers of various
types. Some fixed-income securities represent uncollateralized obligations of
their issuers; in other cases, the securities may be backed by specific assets
(such as mortgages or other receivables) that have been set aside as collateral
for the issuer's obligation. Fixed-income securities generally involve an
obligation of the issuer to pay interest or dividends on either a current basis
or at the maturity of the securities, as well as the obligation to repay the
principal amount of the security at maturity.

Fixed-income securities are subject to market and credit risk. Credit risk
relates to the ability of the issuer to make payments of principal and interest
and includes the risk of default. In the case of municipal bonds, the issuer may
make these payments from money raised through a variety of sources, including
(1) the issuer's general taxing power, (2) a specific type of tax such as a
property tax, or (3) a particular facility or project such as a highway. The
ability of an issuer of municipal bonds to make these payments could be affected
by litigation, legislation or other political events, or the bankruptcy of the
issuer. U.S. government securities do not involve the credit risks

6
<PAGE>

associated with other types of fixed-income securities; as a result, the yields
available from U.S. government securities are generally lower than the yields
available from corporate fixed-income securities. Market risk is the risk that
the value of the security will fall because of changes in market rates of
interest. (Generally, the value of fixed-income securities falls when market
rates of interest are rising.) Some fixed-income securities also involve
prepayment or call risk. This is the risk that the issuer will repay a Fund the
principal on the security before it is due, thus depriving the Fund of a
favorable stream of future interest payments.

Because interest rates vary, it is impossible to predict the income of a fund
that invests in fixed-income securities for any particular period. Fluctuations
in the value of a Fund's investments in fixed-income securities will cause the
Fund's net asset value to increase or decrease.

Lower Quality Fixed-income Securities Fixed-income securities rated BB or lower
-------------------------------------
by Standard & Poor's Ratings Group ("Standard & Poor's" or "S&P") or Ba or lower
by Moody's Investor's Service, Inc. ("Moody's") (and comparable unrated
securities) are of below "investment grade" quality. Lower quality fixed-income
securities generally provide higher yields, but are subject to greater credit
and market risk, than higher quality fixed-income securities, including U.S.
government and many foreign government securities. Lower quality fixed-income
securities are considered predominantly speculative with respect to the ability
of the issuer to meet principal and interest payments. Achievement of the
investment objective of a mutual fund investing in lower quality fixed-income
securities may be more dependent on the Fund's adviser's or subadviser's own
credit analysis than for a fund investing in higher quality bonds. The market
for lower quality fixed-income securities may be more severely affected than
some other financial markets by economic recession or substantial interest rate
increases, by changing public perceptions of this market or by legislation that
limits the ability of certain categories of financial institutions to invest in
these securities. In addition, the secondary market may be less liquid for lower
rated fixed-income securities. This lack of liquidity at certain times may
affect the valuation of these securities and may make the valuation and sale of
these securities more difficult. Securities of below investment grade quality
are considered high yield, high risk securities and are commonly known as "junk
bonds." For more information, including a detailed description of the ratings
assigned by S&P and Moody's, please refer to the Statement's "Appendix A --
Description of Bond Ratings" and "Appendix D - Average Monthly Portfolio
Composition Tables."

Structured Notes Certain Funds may invest in a broad category of instruments
----------------
known as "structured notes." These instruments are debt obligations issued by
industrial corporations, financial institutions or governmental or international
agencies. Traditional debt obligations typically obligate the issuer to repay
the principal plus a specified rate of interest. Structured notes, by contrast,
obligate the issuer to pay amounts of principal or interest that are determined
by reference to changes in some external factor or factors. For example, the
issuer's obligations could be determined by reference to changes in the value of
a commodity (such as gold or oil), a foreign currency, an index of securities
(such as the Standard & Poor's Composite Index of 500 Stocks ("S&P 500")) or an
interest rate (such as the U.S. Treasury bill rate). In some cases, the issuer's
obligations are determined by reference to changes over time in the difference
(or "spread") between two or more external factors (such as the U.S. prime
lending rate and the total return of the stock market in a particular country,
as measured by a stock index). In some cases, the issuer's obligations may
fluctuate inversely with changes in an external factor or factors (for example,
if the U.S. prime lending rate goes up, the issuer's interest payment
obligations are reduced). In some cases, the issuer's obligations may be
determined by some multiple of the change in an external factor or factors (for
example, three times the change in the U.S. Treasury bill rate). In some cases,
the issuer's obligations remain fixed (as with a traditional debt instrument) so
long as an external factor or factors do not change by more than the specified
amount (for example, if the value of a stock index does not exceed some
specified maximum), but if the external factor or factors change by more than
the specified amount, the issuer's obligations may be sharply reduced.

Structured notes can serve many different purposes in the management of a mutual
fund. For example, they can be used to increase the fund's exposure to changes
in the value of assets that the fund would not ordinarily purchase directly
(such as stocks traded in a market that is not open to U.S. investors). They can
also be used to hedge the risks associated with other investments the fund
holds. For example, if a structured note has an interest rate that fluctuates
inversely with general changes in a country's stock market index, the value of
the structured note would

7
<PAGE>

generally move in the opposite direction to the value of holdings of stocks in
that market, thus moderating the effect of stock market movements on the value
of the fund's portfolio as a whole.

Structured notes involve special risks. As with any debt obligation, structured
notes involve the risk that the issuer will become insolvent or otherwise
default on its payment obligations. This risk is in addition to the risk that
the issuer's obligations (and thus the value of the Fund's investment) will be
reduced because of adverse changes in the external factor or factors to which
the obligations are linked. The value of structured notes will in many cases be
more volatile (that is, will change more rapidly or severely) than the value of
traditional debt instruments. Volatility will be especially high if the issuer's
obligations are determined by reference to some multiple of the change in the
external factor or factors. Many structured notes have limited or no liquidity,
so that the Fund would be unable to dispose of the investment prior to maturity.
(The Funds are not permitted to invest more than 15% of their net assets in
illiquid investments.) As with all investments, successful use of structured
notes depends in significant part on the accuracy of the relevant adviser's or
subadviser's analysis of the issuer's creditworthiness and financial prospects,
and of the adviser's or subadviser's forecast as to changes in relevant economic
and financial market conditions and factors. In instances where the issuer of a
structured note is a foreign entity, the usual risks associated with investments
in foreign securities (described below) apply.

U.S. Government Securities Certain Funds may invest in some or all of the
--------------------------
following U.S. government securities:

. U.S. Treasury Bills - Direct obligations of the U.S. Treasury which are
-------------------
issued in maturities of one year or less. No interest is paid on Treasury
bills; instead, they are issued at a discount and repaid at full face
value when they mature. They are backed by the full faith and credit of
the U.S. government.

. U.S. Treasury Notes and Bonds - Direct obligations of the U.S. Treasury
-----------------------------
issued in maturities that vary between one and 40 years, with interest
normally payable every six months. These obligations are backed by the
full faith and credit of the U.S. government.

. "Ginnie Maes" - Debt securities issued by a mortgage banker or other
-------------
mortgagee which represent an interest in a pool of mortgages insured by
the Federal Housing Administration or the Farmer's Home Administration or
guaranteed by the Veterans Administration. The Government National
Mortgage Association ("GNMA") guarantees the timely payment of principal
and interest when such payments are due, whether or not these amounts are
collected by the issuer of these certificates on the underlying mortgages.
An assistant attorney general of the United States has rendered an opinion
that the guarantee by GNMA is a general obligation of the United States
backed by its full faith and credit. Mortgages included in single, family
or multi-family residential mortgage pools backing an issue of Ginnie Maes
have a maximum maturity of up to 30 years. Scheduled payments of principal
and interest are made to the registered holders of Ginnie Maes (such as
the Fund) each month. Unscheduled prepayments may be made by homeowners,
or as a result of a default. Prepayments are passed through to the
registered holder (such as the Fund, which reinvests any prepayments) of
Ginnie Maes along with regular monthly payments of principal and interest.

. "Fannie Maes" - The Federal National Mortgage Association ("FNMA") is a
-------------
government-sponsored corporation owned entirely by private stockholders
that purchases residential mortgages from a list of approved
seller/servicers. Fannie Maes are pass-through securities issued by FNMA
that are guaranteed as to timely payment of principal and interest by FNMA
but are not backed by the full faith and credit of the United States
government.

. "Freddie Macs" - The Federal Home Loan Mortgage Corporation ("FHLMC") is a
--------------
corporate instrumentality of the United States government. Freddie Macs
are participation certificates issued by FHLMC that represent an interest
in residential mortgages from FHLMC's National Portfolio. FHLMC guarantees
the timely payment of interest and ultimate collection of principal, but
Freddie Macs are not backed by the full faith and credit of the United
States government.

U.S. government securities generally do not involve the credit risks
associated with investments in other types of fixed-income securities, although,
as a result, the yields available from U.S. government securities are generally
lower than the yields available from corporate fixed-income securities. Like
other fixed-income

8
<PAGE>

securities, however, the values of U.S. government securities change as interest
rates fluctuate. Fluctuations in the value of portfolio securities will not
affect interest income on existing portfolio securities but will be reflected in
the Fund's net asset value. Since the magnitude of these fluctuations will
generally be greater at times when the Fund's average maturity is longer, under
certain market conditions the Fund may, for temporary defensive purposes, accept
lower current income from short-term investments rather than investing in higher
yielding long-term securities.

Mortgage-related Securities Mortgage-related securities, such as GNMA or FNMA
---------------------------
certificates, differ from traditional debt securities. Among the major
differences are that interest and principal payments are made more frequently,
usually monthly, and that principal may be prepaid at any time because the
underlying mortgage loans generally may be prepaid at any time. As a result, if
a Fund purchases these assets at a premium, a faster-than-expected prepayment
rate will reduce yield to maturity, and a slower-than-expected prepayment rate
will have the opposite effect of increasing yield to maturity. If a Fund
purchases mortgage-related securities at a discount, faster-than-expected
prepayments will increase, and slower-than-expected prepayments will reduce,
yield to maturity. Prepayments, and resulting amounts available for reinvestment
by the Fund, are likely to be greater during a period of declining interest
rates and, as a result, are likely to be reinvested at lower interest rates.
Accelerated prepayments on securities purchased at a premium may result in a
loss of principal if the premium has not been fully amortized at the time of
prepayment. Although these securities will decrease in value as a result of
increases in interest rates generally, they are likely to appreciate less than
other fixed-income securities when interest rates decline because of the risk of
prepayments. In addition, an increase in interest rates would also increase the
inherent volatility of the Fund by increasing the average life of the Fund's
portfolio securities.

An Adjustable Rate Mortgage security ("ARM"), like a traditional mortgage
security, is an interest in a pool of mortgage loans that provides investors
with payments consisting of both principal and interest as mortgage loans in the
underlying mortgage pool are paid off by the borrowers. ARMs have interest rates
that are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate. Although the rate adjustment feature may act as a
buffer to reduce sharp changes in the value of adjustable rate securities, these
securities are still subject to changes in value based on changes in market
interest rates or changes in the issuer's creditworthiness. Because the interest
rates are reset only periodically, changes in the interest rate on ARMs may lag
changes in prevailing market interest rates. Also, some ARMs (or the underlying
mortgages) are subject to caps or floors that limit the maximum change in
interest rate during a specified period or over the life of the security. As a
result, changes in the interest rate on an ARM may not fully reflect changes in
prevailing market interest rates during certain periods. Because of the
resetting of interest rates, ARMs are less likely than non-adjustable rate
securities of comparable quality and maturity to increase significantly in value
when market interest rates fall.

Asset-backed Securities The securitization techniques used to develop mortgage
-----------------------
securities are also being applied to a broad range of other assets. Through the
use of trusts and special purpose corporations, assets such as automobile and
credit card receivables are being securitized in pass- through structures
similar to mortgage pass-through structures or in a pay-through structure
similar to a Collateralized Mortgage Obligation structure. Generally the issuers
of asset-backed bonds, notes or pass-through certificates are special purpose
entities and do not have any significant assets other than the receivables
securing such obligations. In general, the collateral supporting asset-backed
securities is of shorter maturity than mortgage loans. Instruments backed by
pools of receivables are similar to mortgage-backed securities in that they are
subject to unscheduled prepayments of principal prior to maturity. When the
obligations are pre-paid, the Fund will ordinarily reinvest the prepaid amounts
in securities the yields of which reflect interest rates prevailing at the time.
Therefore, the Fund's ability to maintain a portfolio which includes high-
yielding asset-backed securities will be adversely affected to the extent that
prepayments of principal must be reinvested in securities which have lower
yields than the prepaid obligations. Moreover, prepayments of securities
purchased at a premium could result in a realized loss.

Collateralized Mortgage Obligations ("CMO") A CMO is a security backed by a
-------------------------------------------
portfolio of mortgages or mortgage securities held under an indenture. The
underlying mortgages or mortgage securities are issued or guaranteed by the U.S.
government or an agency or instrumentality thereof. The issuer's obligation to
make

9
<PAGE>

interest and principal payments is secured by the underlying portfolio of
mortgages or mortgage securities. CMOs are issued with a number of classes or
series which have different maturities and which may represent interests in some
or all of the interest or principal on the underlying collateral or a
combination thereof. CMOs of different classes are generally retired in sequence
as the underlying mortgage loans in the mortgage pool are repaid. In the event
of sufficient early prepayments on such mortgages, the class or series of CMO
first to mature generally will be retired prior to its maturity. Thus, the early
retirement of a particular class or series of CMO held by the Fund would have
the same effect as the prepayment of mortgages underlying a mortgage pass-
through security. CMOs may be considered derivative securities.

"Stripped" Securities Stripped securities are usually structured with two or
---------------------
more classes that receive different proportions of the interest and principal
distribution on a pool of U.S. government or foreign government securities or
mortgage assets. In some cases, one class will receive all of the interest (the
interest-only or "IO" class), while the other class will receive all of the
principal (the principal-only or "PO" class). Stripped securities commonly have
greater market volatility than other types of fixed-income securities. In the
case of stripped mortgage securities, if the underlying mortgage assets
experience greater than anticipated payments of principal, a Fund may fail to
recoup fully its investments in IOs. The staff of the SEC has indicated that it
views stripped mortgage securities as illiquid unless the securities are issued
by the U.S. government or its agencies and are backed by fixed-rate mortgages.
The Funds intend to abide by the staff's position. Stripped securities may be
considered derivative securities.

Zero-coupon Securities; Pay-in-kind and Step Coupon Zero-coupon securities are
---------------------------------------------------
debt obligations that do not entitle the holder to any periodic payments of
interest either for the entire life of the obligation or for an initial period
after the issuance of the obligations. Pay-in-kind securities pay dividends or
interest in the form of additional securities of the issuer, rather than in
cash. These securities are issued and traded at a discount from their face
amounts. The amount of the discount varies depending on such factors as the time
remaining until maturity of the securities, prevailing interest rates, the
liquidity of the security and the perceived credit quality of the issuer. The
market prices of zero-coupon and pay-in-kind securities generally are more
volatile than the market prices of securities that pay interest periodically and
are likely to respond to changes in interest rates to a greater degree than do
non-zero-coupon securities having similar maturities and credit quality. In
order to satisfy a requirement for qualification as a "regulated investment
company" under the Internal Revenue Code of 1986 (the "Code"), a Fund must
distribute each year at least 90% of its net investment income, including the
original issue discount accrued on zero-coupon securities. Because the Fund will
not on a current basis receive cash payments from the issuer of a zero-coupon
security in respect of accrued original issue discount, in some years the Fund
may have to distribute cash obtained from other sources in order to satisfy the
90% distribution requirement under the Code. Such cash might be obtained from
selling other portfolio holdings of the Fund. In some circumstances, such sales
might be necessary in order to satisfy cash distribution requirements even
though investment considerations might otherwise make it undesirable for the
Fund to sell such securities at such time. Step coupon bonds trade at a discount
from their face value and pay coupon interest. The coupon rate is low for an
initial period and then increases to a higher coupon rate thereafter. Market
values of these types of securities generally fluctuate in response to changes
in interest rates to a greater degree than do conventional interest-paying
securities of comparable term and quality. Under many market conditions,
investments in such securities may be illiquid, making it difficult for the Fund
to dispose of them or determine their current value.

When-issued Securities Each Fund may purchase "when-issued" equity securities,
----------------------
which are traded on a price basis prior to actual issuance. Such purchases will
only be made to achieve a Fund's investment objective and not for leverage. The
when-issued trading period generally lasts from a few days to months, or a year
or more; during this period dividends on equity securities are not payable. No
dividend income accrues to the Fund prior to the time it takes delivery. A
frequent form of when-issued trading occurs when corporate securities to be
created by a merger of companies are traded prior to the actual consummation of
the merger. Such transactions may involve a risk of loss if the value of the
securities fall below the price committed to prior to actual issuance. Each
Trust's custodian will establish a segregated account for each Fund when it
purchases securities on a when-issued basis consisting of cash or liquid
securities equal to the amount of the when-issued commitments. Securities
transactions involving delayed deliveries or forward commitments are frequently
characterized as when-issued transactions and are similarly treated by each
Fund.

10
<PAGE>

Repurchase Agreements Certain Funds may enter into repurchase agreements, by
---------------------
which the Fund purchases a security and obtains a simultaneous commitment from
the seller to repurchase the security at an agreed-upon price and date. The
resale price is in excess of the purchase price and reflects an agreed-upon
market rate unrelated to the coupon rate on the purchased security. Such
transactions afford the Fund the opportunity to earn a return on temporarily
available cash at relatively low market risk. While the underlying security may
be a bill, certificate of indebtedness, note or bond issued by an agency,
authority or instrumentality of the United States government, the obligation of
the seller is not guaranteed by the U.S. government and there is a risk that the
seller may fail to repurchase the underlying security. In such event, the Fund
would attempt to exercise rights with respect to the underlying security,
including possible disposition in the market. However, the Fund may be subject
to various delays and risks of loss, including (a) possible declines in the
value of the underlying security during the period while the Fund seeks to
enforce its rights thereto, (b) possible reduced levels of income and lack of
access to income during this period and (c) inability to enforce rights and the
expenses involved in the attempted enforcement.

Reverse Repurchase Agreements Each Fund may enter into reverse repurchase
-----------------------------
agreements. However, a Fund may not engage in reverse repurchase agreements in
excess of 5% of the applicable Fund's total assets. In a reverse repurchase
agreement the Fund transfers possession of a portfolio instrument to another
person, such as a financial institution, broker or dealer, in return for a
percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed-upon rate.
The ability to use reverse repurchase agreements may enable, but does not ensure
the ability of, a Fund to avoid selling portfolio instruments at a time when a
sale may be deemed to be disadvantageous. When effecting reverse repurchase
agreements, assets of the applicable Fund in a dollar amount sufficient to make
payment of the obligations to be purchased are segregated on the applicable
Fund's records at the trade date and maintained until the transaction is
settled.

Convertible Securities Certain Funds may invest in convertible securities,
-----------------------
including corporate bonds, notes or preferred stocks of U.S. or foreign issuers
that can be converted into (that is, exchanged for) common stocks or other
equity securities. Convertible securities also include other securities, such as
warrants, that provide an opportunity for equity participation. Because
convertible securities can be converted into equity securities, their values
will normally vary in some proportion with those of the underlying equity
securities. Convertible securities usually provide a higher yield than the
underlying equity, however, so that the price decline of a convertible security
may sometimes be less substantial than that of the underlying equity security.

Foreign Securities Investments in foreign securities present risks not
------------------
typically associated with investments in comparable securities of U.S. issuers.

Since most foreign securities are denominated in foreign currencies or
traded primarily in securities markets in which settlements are made in foreign
currencies, the value of these investments and the net investment income
available for distribution to shareholders of a Fund may be affected favorably
or unfavorably by changes in currency exchange rates or exchange control
regulations. Because a Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S. dollar
will result in a change in the U.S. dollar value of the Fund's assets and the
Fund's income available for distribution.

In addition, although a Fund's income may be received or realized in
foreign currencies, the Fund will be required to compute and distribute its
income in U.S. dollars. Therefore, if the value of a currency relative to the
U.S. dollar declines after a Fund's income has been earned in that currency,
translated into U.S. dollars and declared as a dividend, but before payment of
such dividend, the Fund could be required to liquidate portfolio securities to
pay such dividend. Similarly, if the value of a currency relative to the U.S.
dollar declines between the time a Fund incurs expenses in U.S. dollars and the
time such expenses are paid, the amount of such currency required to be
converted into U.S. dollars in order to pay such expenses in U.S. dollars will
be greater than the equivalent amount in such currency of such expenses at the
time they were incurred.

<PAGE>

There may be less information publicly available about a foreign corporate
or government issuer than about a U.S. issuer, and foreign corporate issuers are
not generally subject to accounting, auditing and financial reporting standards
and practices comparable to those in the United States. The securities of some
foreign issuers are less liquid and at times more volatile than securities of
comparable U.S. issuers. Foreign brokerage commissions and securities custody
costs are often higher than those in the United States, and judgments against
foreign entities may be more difficult to obtain and enforce. With respect to
certain foreign countries, there is a possibility of governmental expropriation
of assets, confiscatory taxation, political or financial instability and
diplomatic developments that could affect the value of investments in those
countries. The receipt of interest on foreign government securities may depend
on the availability of tax or other revenues to satisfy the issuer's
obligations.

Investments in foreign securities may include investments in emerging or
developing countries, whose economies or securities markets are not yet highly
developed. Special considerations associated with these investments (in addition
to the considerations regarding foreign investments generally) may include,
among others, greater political uncertainties, an economy's dependence on
revenues from particular commodities or on international aid or development
assistance, currency transfer restrictions, highly limited numbers of potential
buyers for such securities and delays and disruptions in securities settlement
procedures.

Certain Funds may invest in foreign equity securities either by purchasing
such securities directly or by purchasing "depository receipts." Depository
receipts are instruments issued by a bank that represent an interest in equity
securities held by arrangement with the bank. Depository receipts can be either
"sponsored" or "unsponsored." Sponsored depository receipts are issued by banks
in cooperation with the issuer of the underlying equity securities. Unsponsored
depository receipts are arranged without involvement by the issuer of the
underlying equity securities. Less information about the issuer of the
underlying equity securities may be available in the case of unsponsored
depository receipts.

In addition, certain Funds may invest in securities issued by supranational
agencies. Supranational agencies are those agencies whose member nations
determine to make capital contributions to support the agencies' activities, and
include such entities as the International Bank of Reconstruction and
Development (the World Bank), the Asian Development Bank, the European Coal and
Steel Community and the Inter-American Development Bank.

In determining whether to invest in securities of foreign issuers, Nvest
Management or the subadviser of each Fund will consider the likely effects of
foreign taxes on the net yield available to the Fund and its shareholders.
Compliance with foreign tax law may reduce the Fund's net income available for
distribution to shareholders.

Foreign Currency Most foreign securities in the Funds' portfolios will be
----------------
denominated in foreign currencies or traded in securities markets in which
settlements are made in foreign currencies. Similarly, any income on such
securities is generally paid to the Fund in foreign currencies. The value of
these foreign currencies relative to the U.S. dollar varies continually, causing
changes in the dollar value of the Fund's portfolio investments (even if the
local market price of the investments is unchanged) and changes in the dollar
value of the Fund's income available for distribution to its shareholders. The
effect of changes in the dollar value of a foreign currency on the dollar value
of the Fund's assets and on the net investment income available for distribution
may be favorable or unfavorable.

A Fund may incur costs in connection with conversions between various
currencies. In addition, a Fund may be required to liquidate portfolio assets,
or may incur increased currency conversion costs, to compensate for a decline in
the dollar value of a foreign currency occurring between the time when the Fund
declares and pays a dividend, or between the time when the Fund accrues and pays
an operating expense in U.S. dollars.

Foreign Currency Hedging Transactions To protect against a change in the
-------------------------------------
foreign currency exchange rate between the date on which a Fund contracts to
purchase or sell a security and the settlement date for the purchase or sale, or
to "lock in" the equivalent of a dividend or interest payment in another
currency, a Fund might

<PAGE>

purchase or sell a foreign currency on a spot (i.e., cash) basis at the
prevailing spot rate. If conditions warrant, a Fund may also enter into
contracts with banks or broker-dealers to purchase or sell foreign currencies at
a future date ("forward contracts"). A Fund will maintain cash or other liquid
assets eligible for purchase by the Fund in a segregated account with the
custodian in an amount at least equal to the lesser of (i) the difference
between the current value of the Fund's liquid holdings that settle in the
relevant currency and the Fund's outstanding obligations under currency forward
contracts, or (ii) the current amount, if any, that would be required to be paid
to enter into an offsetting forward currency contract which would have the
effect of closing out the original forward contract. The Fund's use of currency
hedging transactions may be limited by tax considerations. The Fund may also
purchase or sell foreign currency futures contracts traded on futures exchanges.
Foreign currency futures contract transactions involve risks similar to those of
other futures transactions. See "Futures, Options and Swap Contracts" below.

Privatizations In a number of countries around the world, governments have
--------------
undertaken to sell to investors interests in enterprises that the government has
historically owned or controlled. These transactions are known as
"privatizations" and may in some cases represent opportunities for significant
capital appreciation. In some cases, the ability of U.S. investors, such as the
Funds, to participate in privatizations may be limited by local law, or the
terms of participation may be less advantageous than for local investors. Also,
there is no assurance that privatized enterprises will be successful, or that an
investment in such an enterprise will retain its value or appreciate in value.

Investments in Other Investment Companies Investment companies, including
-----------------------------------------
companies such as iShares, "SPDRs" and "WEBS," are essentially pools of
securities. Since the value of an investment company is based on the value of
the individual securities it holds, the value of a Fund's investment in an
investment company will fall if the value of the investment company's underlying
securities declines. As a shareholder of an investment company, a Fund will bear
its ratable share of the investment company's expenses, including management
fees, and the Fund's shareholders will bear such expenses indirectly, in
addition to similar expenses of the Fund.

Because of restrictions on direct investment by U.S. entities in certain
countries, investing indirectly in such countries (by purchasing shares of
another fund that is permitted to invest in such countries) may be the most
practical or efficient way for a Fund to invest in such countries. In other
cases, where a Fund's subadviser desires to make only a relatively small
investment in a particular country, investing through another fund that holds a
diversified portfolio in that country may be more effective than investing
directly in issuers in that country. In some cases, investing in an investment
company may involve the payment of a premium over the value of the assets held
in that investment company's portfolio. In other cases, an investment company's
shares may trade at a discount to the investment company's net asset value per
share.

Futures, Options and Swap Contracts
-----------------------------------

Futures Contracts A futures contract is an agreement between two parties to buy
and sell a particular commodity (e.g., an interest-bearing security) for a
specified price on a specified future date. In the case of futures on an index,
the seller and buyer agree to settle in cash, at a future date, based on the
difference in value of the contract between the date it is opened and the
settlement date. The value of each contract is equal to the value of the index
from time to time multiplied by a specified dollar amount. For example, long-
term municipal bond index futures trade in contracts equal to $1000 multiplied
by the Bond Buyer Municipal Bond Index, and S&P 500 futures trade in contracts
equal to $500 multiplied by the S&P 500.

When a trader, such as a Fund, enters into a futures contract, it is
required to deposit with (or for the benefit of) its broker as "initial margin"
an amount of cash or short-term high-quality securities (such as U.S. Treasury
Bills or high-quality tax exempt bonds acceptable to the broker) equal to
approximately 2% to 5% of the delivery or settlement price of the contract
(depending on applicable exchange rules). Initial margin is held to secure the
performance of the holder of the futures contract. As the value of the contract
changes, the value of futures contract positions increases or declines. At the
end of each trading day, the amount of such increase and decline is received and
paid respectively by and to the holders of these positions. The amount received
or paid is known as "variation margin." If the Fund has a long position in a
futures contract it will establish a segregated account with the Fund's

13
<PAGE>

custodian containing cash or liquid securities eligible for purchase by the Fund
equal to the purchase price of the contract (less any margin on deposit). For
short positions in futures contracts, the Fund will establish a segregated
account with the custodian with cash or liquid securities eligible for purchase
by the Fund that, when added to the amounts deposited as margin, equal the
market value of the instruments or currency underlying the futures contracts.

Although futures contracts by their terms require actual delivery and
acceptance of securities (or cash in the case of index futures), in most cases
the contracts are closed out before settlement. A futures sale is closed by
purchasing a futures contract for the same aggregate amount of the specific type
of financial instrument or commodity and with the same delivery date. Similarly,
the closing out of a futures purchase is closed by the purchaser selling an
offsetting futures contract.

Gain or loss on a futures position is equal to the net variation margin
received or paid over the time the position is held, plus or minus the amount
received or paid when the position is closed, minus brokerage commissions.

Options An option on a futures contract obligates the writer, in return for
the premium received, to assume a position in a futures contract (a short
position if the option is a call and a long position if the option is a put), at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option generally will be accompanied by delivery
of the accumulated balance in the writer's futures margin account, which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option. The premium paid by the purchaser of an option
will reflect, among other things, the relationship of the exercise price to the
market price and volatility of the underlying contract, the remaining term of
the option, supply and demand and interest rates. Options on futures contracts
traded in the United States may only be traded on a United States board of trade
licensed by the Commodity Futures Trading Commission (the "CFTC").

An option on a security entitles the holder to receive (in the case of a
call option) or to sell (in the case of a put option) a particular security at a
specified exercise price. An "American style" option allows exercise of the
option at any time during the term of the option. A "European style" option
allows an option to be exercised only at the end of its term. Options on
securities may be traded on or off a national securities exchange.

A call option on a futures contract written by a Fund is considered by the
Fund to be covered if the Fund owns the security subject to the underlying
futures contract or other securities whose values are expected to move in tandem
with the values of the securities subject to such futures contract, based on
historical price movement volatility relationships. A call option on a security
written by the Fund is considered to be covered if the Fund owns a security
deliverable under the option. A written call option is also covered if the Fund
holds a call on the same futures contract or security as the call written where
the exercise price of the call held (a) is equal to or less than the exercise
price of the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash or liquid securities
eligible for purchase by the Fund in a segregated account with its custodian.

A put option on a futures contract written by a Fund, or a put option on a
security written by a Fund, is covered if the Fund maintains cash or liquid
securities eligible for purchase by the Fund with a value equal to the exercise
price in a segregated account with the Fund's custodian, or else holds a put on
the same futures contract (or security, as the case may be) as the put written
where the exercise price of the put held is equal to or greater than the
exercise price of the put written.

If the writer of an option wishes to terminate its position, it may effect
a closing purchase transaction by buying an option identical to the option
previously written. The effect of the purchase is that the writer's position
will be canceled. Likewise, the holder of an option may liquidate its position
by selling an option identical to the option previously purchased.

14
<PAGE>

Closing a written call option will permit the Fund to write another call
option on the portfolio securities used to cover the closed call option. Closing
a written put option will permit the Fund to write another put option secured by
the segregated assets used to secure the closed put option. Also, effecting a
closing transaction will permit the cash or proceeds from the concurrent sale of
any futures contract or securities subject to the option to be used for other
Fund investments. If the Fund desires to sell particular securities covering a
written call option position, it will close out its position or will designate
from its portfolio comparable securities to cover the option prior to or
concurrent with the sale of the covering securities.

The Fund will realize a profit from closing out an option if the price of
the offsetting position is less than the premium received from writing the
option or is more than the premium paid to purchase the option; the Fund will
realize a loss from closing out an option transaction if the price of the
offsetting option position is more than the premium received from writing the
option or is less than the premium paid to purchase the option. Because
increases in the market price of a call option will generally reflect increases
in the market price of the covering securities, any loss resulting from the
closing of a written call option position is expected to be offset in whole or
in part by appreciation of such covering securities.

Since premiums on options having an exercise price close to the value of
the underlying securities or futures contracts usually have a time value
component (i.e., a value that diminishes as the time within which the option can
be exercised grows shorter) an option writer may profit from the lapse of time
even though the value of the futures contract (or security in some cases)
underlying the option (and of the security deliverable under the futures
contract) has not changed. Consequently, profit from option writing may or may
not be offset by a decline in the value of securities covering the option. If
the profit is not entirely offset, the Fund will have a net gain from the
options transaction, and the Fund's total return will be enhanced. Likewise, the
profit or loss from writing put options may or may not be offset in whole or in
part by changes in the market value of securities acquired by the Fund when the
put options are closed.

As an alternative to purchasing call and put options on index futures, a
Fund may purchase or sell call or put options on the underlying indices
themselves. Such options would be used in a manner identical to the use of
options on index futures.

Certain Funds may purchase put warrants and call warrants whose values vary
depending on the change in the value of one or more specified securities indices
("index warrants"). Index warrants are generally issued by banks or other
financial institutions and give the holder the right, at any time during the
term of the warrant, to receive upon exercise of the warrant a cash payment from
the issuer based on the value of the underlying index at the time of exercise.
In general, if the value of the underlying index rises above the exercise price
of the index warrant, the holder of a call warrant will be entitled to receive a
cash payment from the issuer upon exercise based on the difference between the
value of the index and the exercise price of the warrant; if the value of the
underlying index falls, the holder of a put warrant will be entitled to receive
a cash payment from the issuer upon exercise based on the difference between the
exercise price of the warrant and the value of the index. The holder of a
warrant would not be entitled to any payments from the issuer at a time when, in
the case of a call warrant, the exercise price is less than the value of the
underlying index, or in the case of a put warrant, the exercise price is less
than the value of the underlying index. If the Fund were not to exercise an
index warrant prior to its expiration, then the Fund would lose the amount of
the purchase price paid by it for the warrant.

A Fund will normally use index warrants in a manner similar to its use of
options on securities indices. The risks of the Fund's use of index warrants are
generally similar to those relating to its use of index options. Unlike most
index options, however, index warrants are issued in limited amounts and are not
obligations of a regulated clearing agency, but are backed only by the credit of
the bank or other institution which issues the warrant. Also, index warrants
generally have longer terms than index options. Although the Fund will normally
invest only in exchange-listed warrants, index warrants are not likely to be as
liquid as certain index options backed by a recognized clearing agency. In
addition, the terms of index warrants may limit the Fund's ability to exercise
the warrants at such time, or in such quantities, as the Fund would otherwise
wish to do.

15
<PAGE>

Certain Funds may buy and write options on foreign currencies in a manner
similar to that in which futures or forward contracts on foreign currencies will
be utilized. For example, a decline in the U.S. dollar value of a foreign
currency in which portfolio securities are denominated will reduce the U.S.
dollar value of such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminutions in the value of
the portfolio securities, the Fund may buy put options on the foreign currency.
If the value of the currency declines, the Fund will have the right to sell such
currency for a fixed amount in U.S. dollars, thereby offsetting, in whole or in
part, the adverse effect on its portfolio.

Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Fund may buy call options on the foreign currency.
The purchase of such options could offset, at least partially, the effects of
the adverse movements in exchange rates. As in the case of other types of
options, however, the benefit to the Fund from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, if currency exchange rates do not move in the direction or
to the extent desired, the Fund could sustain losses on transactions in foreign
currency options that would require the Fund to forego a portion or all of the
benefits of advantageous changes in those rates.

Certain Funds may also write options on foreign currencies. For example, to
hedge against a potential decline in the U.S. dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange rates, the Fund
could, instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the option will most likely not be
exercised and the diminution in value of portfolio securities be offset at least
in part by the amount of the premium received.

Similarly, instead of purchasing a call option to hedge against a potential
increase in the U.S. dollar cost of securities to be acquired, the Fund could
write a put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Fund to hedge the increased
cost up to the amount of the premium. If exchange rates do not move in the
expected direction, the option may be exercised and the Fund would be required
to buy or sell the underlying currency at a loss, which may not be fully offset
by the amount of the premium. Through the writing of options on foreign
currencies, the Fund also may lose all or a portion of the benefits which might
otherwise have been obtained from favorable movements in exchange rates.

All call options written by a Fund on foreign currencies will be "covered."
A call option written on a foreign currency by the Fund is "covered" if the Fund
owns the foreign currency underlying the call or has an absolute and immediate
right to acquire that foreign currency without additional cash consideration (or
for additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other foreign currencies held in its portfolio. A
call option is also covered if the Fund has a call on the same foreign currency
in the same principal amount as the call written if the exercise price of the
call held (i) is equal to or less than the exercise price of the call written or
(ii) is greater than the exercise price of the call written, if the difference
is maintained by the Fund in cash or liquid securities eligible to be purchased
by the Fund in a segregated account with the Fund's custodian. For this purpose,
a call option is also considered covered if the Fund owns securities denominated
in (or which trade principally in markets where settlement occurs in) the same
currency, which securities are readily marketable, and the Fund maintains in a
segregated account with its custodian cash or liquid securities eligible to be
purchased by the Fund in an amount that at all times at least equals the excess
of (x) the amount of the Fund's obligation under the call option over (y) the
value of such securities.

Swap Contracts Interest rate swaps involve the exchange by a Fund with another
party of their respective commitments to pay or receive interest (for example,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal). A currency swap is an agreement to exchange cash
flows on a notional amount based on changes in the relative values of the
specified currencies. An index swap is an agreement to make or receive payments
based on the different returns that would be achieved if a notional amount were
invested in a specified basket of securities (such as the S&P 500 or in some
other investment (such as U.S. Treasury securities). The Fund will maintain at
all times in a segregated account with its custodian cash or liquid securities
eligible to be purchased by the Fund in amounts sufficient to satisfy its
obligations under swap contracts.

<PAGE>

Risks The use of futures contracts, options and swap contracts involves risks.
One risk arises because of the imperfect correlation between movements in the
price of futures contracts and movements in the price of the securities that are
the subject of the hedge. A Fund's hedging strategies will not be fully
effective unless the Fund can compensate for such imperfect correlation. There
is no assurance that the Fund will be able to effect such compensation.

Options, futures and swap contracts fall into the broad category of
financial instruments known as "derivatives" and involve special risks. Use of
options, futures or swaps for other than hedging purposes may be considered a
speculative activity, involving greater risks than are involved in hedging.

The correlation between the price movement of the futures contract and the
hedged security may be distorted due to differences in the nature of the
markets. For example, to the extent that the Municipal Income Fund enters into
futures contracts on securities other than tax exempt bonds, the value of such
futures may not vary in direct proportion to the value of tax exempt bonds that
the Fund owns or intends to acquire, because of an imperfect correlation between
the movement of taxable securities and tax exempt bonds. If the price of the
futures contract moves more than the price of the hedged security, the relevant
Fund would experience either a loss or a gain on the future that is not
completely offset by movements in the price of the hedged securities. In an
attempt to compensate for imperfect price movement correlations, the Fund may
purchase or sell futures contracts in a greater dollar amount than the hedged
securities if the price movement volatility of the hedged securities is
historically greater than the volatility of the futures contract. Conversely,
the Fund may purchase or sell fewer contracts if the volatility of the price of
hedged securities is historically less than that of the futures contracts.

The price of index futures may not correlate perfectly with movement in the
relevant index due to certain market distortions. First, all participants in the
futures market are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions, which could distort the
normal relationship between the index and futures markets. Secondly, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market, and as a result the futures market may attract more
speculators than does the securities market. In addition, trading hours for
foreign stock index futures may not correspond perfectly to hours of trading on
the foreign exchange to which a particular foreign stock index future relates.
This may result in a disparity between the price of index futures and the value
of the relevant index due to the lack of continuous arbitrage between the index
futures price and the value of the underlying index. Finally, hedging
transactions using stock indices involve the risk that movements in the price of
the index may not correlate with price movements of the particular portfolio
securities being hedged.

Price movement correlation also may be distorted by the illiquidity of the
futures and options markets and the participation of speculators in such
markets. If an insufficient number of contracts are traded, commercial users may
not deal in futures contracts or options because they do not want to assume the
risk that they may not be able to close out their positions within a reasonable
amount of time. In such instances, futures and options market prices may be
driven by different forces than those driving the market in the underlying
securities, and price spreads between these markets may widen. The participation
of speculators in the market enhances its liquidity. Nonetheless, speculators
trading spreads between futures markets may create temporary price distortions
unrelated to the market in the underlying securities.

Positions in futures contracts and options on futures contracts may be
established or closed out only on an exchange or board of trade. There is no
assurance that a liquid market on an exchange or board of trade will exist for
any particular contract or at any particular time. The liquidity of markets in
futures contracts and options on futures contracts may be adversely affected by
"daily price fluctuation limits" established by commodity exchanges which limit
the amount of fluctuation in a futures or options price during a single trading
day. Once the daily limit has been reached in a contract, no trades may be
entered into at a price beyond the limit, which may prevent the liquidation of
open futures or options positions. Prices have in the past exceeded the daily
limit on a number of consecutive trading days. If there is not a liquid market
at a particular time, it may not be possible to close a futures or options
position at such time, and, in the event of adverse price

17
<PAGE>
movements, the Fund would continue to be required to make daily cash payments of
variation margin. However, if futures or options are used to hedge portfolio
securities, an increase in the price of the securities, if any, may partially or
completely offset losses on the futures contract.

An exchange-traded option may be closed out only on a national securities
or commodities exchange which generally provides a liquid secondary market for
an option of the same series. If a liquid secondary market for an exchange-
traded option does not exist, it might not be possible to effect a closing
transaction with respect to a particular option with the result that the Fund
would have to exercise the option in order to realize any profit. If the Fund is
unable to effect a closing purchase transaction in a secondary market, it will
be not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. Reasons for the absence of a
liquid secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities;
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or the Options Clearing Corporation
or other clearing organization may not at all times be adequate to handle
current trading volume; or (vi) one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.

Because the specific procedures for trading foreign stock index futures on
futures exchanges are still under development, additional or different margin
requirements as well as settlement procedures may be applicable to foreign stock
index futures at the time the International Equity Fund purchases foreign stock
index futures.

The successful use of transactions in futures and options depends in part
on the ability of a Fund's adviser or subadviser(s) to forecast correctly the
direction and extent of interest rate movements within a given time frame. To
the extent interest rates move in a direction opposite to that anticipated, the
Fund may realize a loss on the hedging transaction that is not fully or
partially offset by an increase in the value of portfolio securities. In
addition, whether or not interest rates move during the period that the Fund
holds futures or options positions, the Fund will pay the cost of taking those
positions (i.e., brokerage costs). As a result of these factors, the Fund's
total return for such period may be less than if it had not engaged in the
hedging transaction.

Options trading involves price movement correlation risks similar to those
inherent in futures trading. Additionally, price movements in options on futures
may not correlate with price movements in the futures underlying the options.
Like futures, options positions may become less liquid because of adverse
economic circumstances. The securities covering written option positions are
expected to offset adverse price movements if those options positions cannot be
closed out in a timely manner, but there is no assurance that such offset will
occur. Also, an option writer may not effect a closing purchase transaction
after it has been notified of the exercise of an option.

Over-the-counter Options An over-the-counter option (an option not traded on a
national securities exchange) may be closed out only with the other party to the
original option transaction. While the Fund will seek to enter into
over-the-counter options only with dealers who agree to or are expected to be
capable of entering into closing transactions with the Fund, there can be no
assurance that the Fund will be able to liquidate an over-the-counter option at
a favorable price at any time prior to its expiration. Accordingly, the Fund
might have to exercise an over-the-counter option it holds in order to realize
any profit thereon and thereby would incur transactions costs on the purchase or
sale of the underlying assets. If the Fund cannot close out a covered call
option written by it, it will not be able to sell the underlying security until
the option expires or is exercised. Furthermore, over-the-counter options are
not subject to the protections afforded purchasers of listed options by the
Options Clearing Corporation or other clearing organizations.

18
<PAGE>

Economic Effects and Limitations Income earned by a Fund from its hedging
activities will be treated as capital gain and, if not offset by net recognized
capital losses incurred by the Fund, will be distributed to shareholders in
taxable distributions. Although gain from futures and options transactions may
hedge against a decline in the value of the Fund's portfolio securities, that
gain, to the extent not offset by losses, will be distributed in light of
certain tax considerations and will constitute a distribution of that portion of
the value preserved against decline.

The Fund intends to comply with guidelines of eligibility for exclusion
from the definition of the term "commodity pool operator" adopted by the CFTC
and the National Futures Association, which regulate trading in the futures
markets. The Fund will use futures contracts and related options primarily for
bona fide hedging purposes within the meaning of CFTC regulations. To the extent
that the Fund holds positions in futures contracts and related options that do
not fall within the definition of bona fide hedging transactions, the aggregate
initial margin and premiums required to establish such positions will not exceed
5% of the fair market value of the Fund's net assets, after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into.

Future Developments The above discussion relates to the Fund's proposed use of
futures contracts, options and options on futures contracts currently available.
The relevant markets and related regulations are still in the developing stage.
In the event of future regulatory or market developments, the Fund may also use
additional types of futures contracts or options and other investment techniques
for the purposes set forth above.

Short Sales The Funds may make short sales of securities if (a) the Fund owns
-----------
at least an equal amount of such securities, or of securities that are
convertible or exchangeable, or anticipated to be convertible or exchangeable,
into at least an equal amount of such securities with no restriction other than
the payment of additional consideration or (b) immediately after such a short
sale the aggregate value of all securities that the Fund is short (excluding the
value of securities sold short against-the-box) does not exceed 5% of the value
of the Fund's net assets, and the Fund covers such short sales as described in
the following paragraph.

In a short sale, a Fund does not deliver from its portfolio the securities
sold and does not receive immediately the proceeds from the short sale. Instead,
the Fund borrows the securities sold short from a broker-dealer through which
the short sale is executed, and the broker-dealer delivers such securities, on
behalf of the Fund, to the purchaser of such securities. Such broker-dealer is
entitled to retain the proceeds from the short sale until the Fund delivers to
such broker-dealer the securities sold short. In addition, the Fund is required
to pay the broker-dealer the amount of any dividends paid on shares sold short.
Finally, in order to cover its short positions, the Fund must deposit and
continuously maintain in a separate account with the Fund's custodian either (1)
an equivalent amount of the securities sold short or securities convertible into
or exchangeable for such securities without the payment of additional
consideration or (2) cash, U.S. government securities or other liquid securities
having a value equal to the excess of (a) the market value of the securities
sold short over (b) the value of any cash, U.S. government securities or other
liquid securities deposited as collateral with the broker in connection with the
short sale . A Fund is said to have a short position in the securities sold
until it delivers to the broker-dealer the securities sold, at which time the
Fund receives the proceeds of the sale. A Fund may close out a short position by
purchasing on the open market and delivering to the broker-dealer an equal
amount of the securities sold short, rather than by delivering portfolio
securities.

Short sales may protect a Fund against the risk of losses in the value of
its portfolio securities because any unrealized losses with respect to such
portfolio securities should be wholly or partially offset by a corresponding
gain in the short position. However, any potential gains in such portfolio
securities should be wholly or partially offset by a corresponding loss in the
short position. The extent to which such gains or losses are offset will depend
on the amount of securities sold short relative to the amount the Fund owns,
either directly or indirectly, and, in the case where the Fund owns convertible
securities, changes in the conversion premium.

Short sale transactions involve certain risks. If the price of the security
sold short increases between the time of the short sale and the time the Fund
replaces the borrowed security, the Fund will incur a loss, and if the price
declines during this period, the Fund will realize a short-term capital gain.
Any realized short-term capital gain will be decreased, and any incurred loss
increased, by the amount of transaction costs and any premium,

<PAGE>

dividend or interest which the Fund may have to pay in connection with such
short sale. Certain provisions of the Code may limit the degree to which a Fund
is able to enter into short sales. There is no limitation on the amount of each
Fund's assets that, in the aggregate, may be deposited as collateral for the
obligation to replace securities borrowed to effect short sales and allocated to
segregated accounts in connection with short sales.

Illiquid Securities (Rule 144 and Section 4(2) Commercial Paper) Illiquid
---------------------------------------------------------------
securities are those which are not readily resaleable, which may include
securities whose disposition is restricted by federal securities laws.

Rule 144A securities are privately offered securities that can be resold
only to certain qualified institutional buyers pursuant to Rule 144A under the
1933 Act. Certain Funds may also purchase commercial paper issued under Section
4(2) of the 1933 Act. Investing in Rule 144A securities and Section 4(2)
commercial paper could have the effect of increasing the level of a Fund's
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing these securities. Rule 144A securities and
Section 4(2) commercial paper are treated as illiquid, unless a subadviser has
determined, under guidelines established by each Trust's Board of Trustees, that
the particular issue of Rule 144A securities is liquid. Investment in restricted
or other illiquid securities involves the risk that a Fund may be unable to sell
such a security at the desired time. Also, a Fund may incur expenses, losses or
delays in the process of registering restricted securities prior to resale.

Private Placements Each Fund may acquire securities in private placements.
------------------
Because an active trading market may not exist for such securities, the sale of
such securities may be subject to delay and additional costs. The Funds will not
purchase such a security if more than 15% of the value of its net assets would
be invested in illiquid securities.

Loans of Portfolio Securities Certain Funds may lend up to 33 1/3% of their
-----------------------------
total assets (taken at current value) in the form of their portfolio securities
to broker-dealers under contracts calling for collateral equal to at least the
market value of the securities loaned, marked to market on a daily basis. These
Funds will continue to benefit from interest or dividends on the securities
loaned and may also receive interest through investment of the cash collateral
in short-term liquid investments, which may include shares of money market funds
subject to any investment restriction listed in the beginning of this Statement.
Any voting rights, or rights to consent, relating to securities loaned pass to
the borrower. However, if a material event affecting the investment occurs, such
loans will be called so that the securities may be voted by the Fund. The Fund
pays various fees in connection with such loans, including shipping fees and
reasonable custodian and placement fees approved by the Boards of Trustees of
the Trust or persons acting pursuant to the direction of the Board.

These transactions must be fully collateralized at all times, but involve
some credit risk to the Fund if the other party should default on its obligation
and the Fund is delayed in or prevented from recovering the collateral.

Short-Term Trading Certain Funds may, consistent with their investment
------------------
objectives, engage in portfolio trading in anticipation of, or in response to,
changing economic or market conditions and trends. These policies may result in
higher turnover rates in the Fund's portfolio, which may produce higher
transaction costs and a higher level of taxable capital gains. Portfolio
turnover considerations will not limit any subadviser's investment discretion in
managing its segment or segments of a Fund's assets. The Funds anticipate that
their portfolio turnover rates will vary significantly from time to time
depending on the volatility of economic and market conditions.

Money Market Instruments Each Fund may seek to minimize risk by investing in
------------------------
money market instruments, which are high-quality, short-term securities.
Although changes in interest rates can change the market value of a security, a
Fund expects those changes to be minimal and that the Fund will be able to
maintain the net asset value of its shares at $1.00, although this value cannot
be guaranteed.

Money market obligations of foreign banks or of foreign branches or
subsidiaries of U.S. banks may be subject to different risks than obligations of
domestic banks, such as foreign economic, political and legal developments and
the fact that different regulatory requirements apply.

<PAGE>

Temporary Strategies A Fund has the flexibility to respond promptly to changes
--------------------
in market and economic conditions. In the interest of preserving shareholders'
capital, the adviser may employ a temporary defensive strategy if it determines
such a strategy to be warranted. Pursuant to such a defensive strategy a Fund
temporarily may hold cash (U.S. dollars, foreign currencies, or multinational
currency units) and/or invest up to 100% of its assets in high quality debt
securities or money market instruments of U.S. or foreign issuers. It is
impossible to predict whether, when or for how long a Fund will employ defensive
strategies.

In addition, pending investment of proceeds from new sales of Fund
shares or to meet ordinary daily cash needs, a Fund may temporarily hold cash
(U.S. dollars, foreign currencies or multinational currency units) and may
invest any portion of its assets in money instruments. The use of defensive
strategies may prevent a Fund from achieving its goal.

--------------------------------------------------------------------------------

MANAGEMENT OF THE TRUST

-----------------------------------------------------------------------------
The Funds are governed by a Board of Trustees, which is responsible for
generally overseeing the conduct of Fund business and for protecting the
interests of the shareholders. The trustees meet periodically throughout the
year to oversee the Funds' activities, review contractual arrangements with
companies that provide services to the Funds and review the Funds' performance.

Trustees
--------

Trustees of the Trust and their ages (in parentheses), addresses and
principal occupations during at least the past five years are listed below.
Those marked with an asterisk (*) may be deemed to be an "interested person" of
the Trust as defined in the 1940 Act.

GRAHAM T. ALLISON, JR.--Trustee (61); 79 John F. Kennedy Street, Cambridge,
-------
Massachusetts 02138; Member of the Contract Review and Governance
Committee for the Trust; Douglas Dillon Professor and Director for the
Belfer Center of Science and International Affairs, John F. Kennedy
School of Government, Harvard University; Special Advisor to the United
States Secretary of Defense; formerly, Assistant Secretary of Defense;
formerly, Dean, John F. Kennedy School of Government.

DANIEL M. CAIN - Trustee (56); 452 Fifth Avenue, New York, New York 10018;
-------
Chairman of the Audit Committee for the Trust; President and CEO, Cain
Brothers & Company, Incorporated (investment banking); Trustee,
Universal Health Realty Income Trust(NYSE), eBenX, Inc. (NASDAQ); and
Board Member, Norman Rockwell Museum, Sharon Hospital, National
Committee for Quality Healthcare, and Columbia University School of
Business;

KENNETH J. COWAN -- Trustee (68); One Beach Drive, S.E. #2103, St. Petersburg,
-------
Florida 33701; Chairman of the Contract Review and Governance Committee
for the Trust; Retired; formerly, Senior Vice President-Finance and
Chief Financial Officer, Blue Cross of Massachusetts, Inc. and Blue
Shield of Massachusetts, Inc.; formerly, Director, Neworld Bank for
Savings and Neworld Bancorp.

RICHARD DARMAN - Trustee (57); 1001 Pennsylvania Avenue, N.W., Washington, D.C.
-------
20004; Member of the Contract Review and Governance Committee for the
Trust; Partner, The Carlyle Group (investments); Public Service
Professor, John F. Kennedy School of Government, Harvard University;
Trustee, Council for Excellence in Government (not for profit);
Director, Frontier Ventures (personal investment); Director, Telcom
Ventures (telecommunications); Director, Prime Communications (cable
communications); Director, Neptune Communications (undersea cable
systems); formerly, Director of the U.S. Office of Management and
Budget and a member of President Bush's Cabinet; formerly, Managing
Director, Shearson Lehman Brothers (Investments).

*JOHN T. HAILER - President and Trustee (40); President and Chief Executive
---------------------
Officer, Nvest Funds Distributor, L.P.; President and Chief

21
<PAGE>

Executive Officer, Nvest Distribution Corporation; President and Chief
Executive Officer, Nvest Management; formerly, Senior Vice President,
Fidelity Investments Institutional Services Company; formerly, Senior
Vice President and Director of Retail Business Development, Putnam
Investments; Director, Home for Little Wanderers.

SANDRA O. MOOSE -- Trustee (59); Exchange Place, Boston, Massachusetts 02109;
-------
Member of the Audit Committee for the Trust; Senior Vice President and
Director, The Boston Consulting Group, Inc. (management consulting);
Director, Verizon Communications (communications services); Director,
Rohm and Haas Company (specialty chemicals); Trustee, Boston Public
Library Foundation; Board of Overseers, Museum of Fine Arts and Beth
Israel/New England Deaconess Hospital; Director, Alfred P. Sloan
Foundation, Harvard Graduate School Society Council; Member, Visiting
Committee, Harvard School of Public Health.

JOHN A. SHANE -- Trustee (68); 200 Unicorn Park Drive, Woburn, Massachusetts
-------
01801; Member of the Audit Committee for the Trust; President, Palmer
Service Corporation (venture capital organization); Director, Arch
Communications Group, Inc. (paging service); Director, Eastern Bank
Corporation; Director, Gensym Corporation (developer of expert system
software); Director, Overland Data, Inc. (manufacturer of computer tape
drives); Director, United Asset Management Corporation (holding company
for institutional money management firms).

* PETER S. VOSS -- Chairman of the Board, Chief Executive Officer and Trustee
----------------------------------------------------------
(54); Director, President and Chief Executive Officer, Nvest Companies,
L.P. ("Nvest Companies"); Director, Nvest Services Company; Director,
Nvest Distribution Corporation; Director of various affiliates of Nvest
Management; formerly, Board Member, Investment Company Institute and
United Way of Massachusetts Bay; Committee Member, New York Stock
Exchange Listed Company Advisory Committee.

PENDLETONP. WHITE -- Trustee (69); 6 Breckenridge Lane, Savannah, Georgia
-------
31411; Member of the Contract Review and Governance Committee for the
Trust; Retired; formerly, President and Chairman of the Executive
Committee, Studwell Associates (executive search consultants);
formerly, Trustee, The Faulkner Corporation (community hospital
corporation).

The Contract Review and Governance Committee of the Board of Trustees is
comprised solely of disinterested trustees and considers matters relating to
advisory, subadvisory and distribution arrangements, potential conflicts of
interest between the adviser or subadviser and the Funds, and governance matters
relating to the Funds.

The Audit Committee of the Board of Trustees is comprised solely of
disinterested trustees and considers matters relating to the scope and results
of the Funds' audits and serves as a forum in which the independent accountants
can raise any issues or problems identified in the audit with the Board of
Trustees. This Committee also reviews and monitors compliance with stated
investment objectives and polices, regulations of the SEC and Internal Revenue
Service (the "IRS") as well as operational issues relating to the transfer
agent.

Officers
--------

Officers of the Trust, in addition to Mr. Voss and Mr. Hailer, and
their ages (in parentheses) and principal occupations during at least the past
five years are listed below.

THOMAS P. CUNNINGHAM - Treasurer (55); Senior Vice President, Nvest Services
---------
Company; Senior Vice President, Nvest Management; formerly, Vice
President, Allmerica Financial Life Insurance and Annuity Company,
formerly, Treasurer, Allmerica Investment Trust; formerly, Vice
President, First Data Investor Services Group.

JOHN E. PELLETIER - Secretary and Clerk (36); Director, Nvest Distribution
-------------------
Corporation; Senior Vice President, General Counsel, Secretary and
Clerk, Nvest Funds Distributor, L.P.; Senior Vice President, General
Counsel, Secretary and Clerk, Nvest Management; Executive Vice
President, General Counsel, Secretary and Clerk, Nvest Services
Company; formerly, Senior Vice President and General Counsel, Funds
Distributor, Inc. (mutual funds service company); formerly, Vice
President and General Counsel, Boston

22
<PAGE>

Institutional Group (mutual funds service company); formerly, Senior
Vice President and General Counsel, Financial Research Corporation.

Each person listed above holds the same position(s) withNvest Funds
Trust I, Nvest Funds Trust II, Nvest Cash Management Trust, Nvest Tax Exempt
Money Market Trust and Nvest Companies Trust I on behalf of Nvest AEW Real
Estate Fund (collectively, with the Trust, the "Nvest Funds Trusts"). Previous
positions during the past five years with Nvest Funds Distributor, L.P. or Nvest
Management are omitted, if not materially different from a trustee's or
officer's current position with such entity. As indicated below under "Trustee
Fees," each of the Nvest Funds Trusts' trustees is also a trustee of certain
other investment companies for which Nvest Funds Distributor, L.P. acts as
principal underwriter. Except as indicated above, the address of each trustee
and officer of the Trusts is 399 Boylston Street, Boston, Massachusetts 02116.

Trustee Fees
------------

The Trust pays no compensation to its officers or to its trustees who
are interested persons thereof.

Each trustee who is not an interested person of the Trust receives, in
the aggregate for serving on the Board of Trustees of the Nvest Funds Trusts ,
comprising as of March 15, 2001 a total of 26 mutual fund portfolios, a retainer
fee at the annual rate of $40,000 and meeting attendance fees of $3,500 for each
meeting of the Board of Trustees that he or she attends. Each committee member
receives an additional retainer fee at the annual rate of $6,000. Furthermore,
each committee chairman receives an additional retainer fee (beyond the $6,000
fee) at the annual rate of $4,000. These fees are allocated among the mutual
fund portfolios in the Nvest Funds Trusts based on a formula that takes into
account, among other factors, the relative net assets of each Fund.

During the fiscal year ended December 31, 2000, the trustees of the
Trust received the amounts set forth in the following table for serving as a
trustee of the Trust and for also serving as trustees of the other Nvest Funds
Trusts.
[TO BE UPDATED]

<TABLE>
<CAPTION>
Pension or
Aggregate Retirement Estimated Total
Compensation Benefits Accrued Annual Compensation
from the as Part of Fund Benefits from the
Trust Expenses Upon Nvest Funds Trusts
Name of Trustee in 2000* in 2000 Retirement in 2000*
--------------- -------- ------- ---------- --------
<S> <C> <C> <C> <C>
Graham T. Allison, Jr. $0 $0
Daniel M. Cain $0 $0
Kenneth J. Cowan $0 $0
Richard Darman $0 $0
Sandra O. Moose $0 $0
John A. Shane $0 $0
Pendleton P. White $0 $0
</TABLE>

[*Amounts include payments deferred by trustees for 2000. The total amount of
deferred compensation for all periods to date accrued for the trustees follows:
Allison ($__________); Cain ($_________); Cowan ($_______); Darman ($______).]
TO BE UPDATED

The Funds provide no pension or retirement benefits to trustees, but
have adopted a deferred payment arrangement under which each trustee may elect
not to receive fees from the Funds on a current basis but to receive in a
subsequent period an amount equal to the value that such fees would have been if
they had been invested in a Fund or Funds selected by the trustee on the normal
payment date for such fees. Each Fund will make an investment in the selected
Fund (s) in an amount equal to its pro rata share of the deferred fees. As a
result of this arrangement, each Fund, upon making the deferred payments, will
be in substantially the same financial position as if the deferred fees had been
paid on the normal payment dates.

23
<PAGE>

At February 15, 2001, the officers and trustees of the Trust as a group
owned less than 1% of the outstanding shares of each Fund.

Advisory and Subadvisory Agreements
-----------------------------------

Each Fund's advisory agreement between the Fund and Nvest Management
provides that the adviser (Nvest Management) will furnish or pay the expenses of
the applicable Fund for office space, facilities and equipment, services of
executive and other personnel of the Trust and certain administrative services.
Nvest Management is responsible for obtaining and evaluating such economic,
statistical and financial data and information and performing such additional
research as is necessary to manage each Fund's assets in accordance with its
investment objectives and policies.

Each Fund pays all expenses not borne by its adviser or subadviser(s)
including, but not limited to, the charges and expenses of the Fund's custodian
and transfer agent, independent auditors and legal counsel for the Fund and the
Trust's independent trustees, 12b-1 fees, all brokerage commissions and transfer
taxes in connection with portfolio transactions, all taxes and filing fees, the
fees and expenses for registration or qualification of its shares under federal
and state securities laws, all expenses of shareholders' and trustees' meetings
and of preparing, printing and mailing reports to shareholders and the
compensation of trustees who are not directors, officers or employees of the
Fund's adviser, subadviser(s) or their affiliates, other than affiliated
registered investment companies.

Each Fund's advisory agreement and each Fund's subadvisory
agreementprovides that it will continue in effect for two years from its date of
execution and thereafter from year to year if its continuance is approved at
least annually (i) by the Board of Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the relevant Fund and (ii) by
vote of a majority of the trustees who are not "interested persons" of the
Trust, as that term is defined in the 1940 Act, cast in person at a meeting
called for the purpose of voting on such approval. The Trust has received an
exemptive order from the SEC which permits Nvest Management to amend or continue
existing subadvisory agreements when approved by the Fund's Board of Trustees,
without shareholder approval. The exemption also permits Nvest Management to
enter into new subadvisory agreements with subadvisers that are not affiliated
with Nvest Management, if approved by the Fund's Board of Trustees. Shareholders
will be notified of any subadviser changes. Each advisory and subadvisory
agreement may be terminated without penalty by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting securities of the
relevant Fund, upon 60 days' written notice, or by the Fund's adviser upon 90
days' written notice, and each terminates automatically in the event of its
assignment. Each subadvisory agreement also may be terminated by the subadviser
upon 90 days' notice and automatically terminates upon termination of the
related advisory agreement.

Each advisory and subadvisory agreement provides that the adviser or
subadviser shall not be subject to any liability in connection with the
performance of its services thereunder in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations and duties.

Nvest Management, formed in 1995, is a limited partnership whose sole
general partner, Nvest Distribution Corporation, is a wholly-owned subsidiary of
Nvest Holdings, L.P. ("Nvest Holdings"), which in turn is a wholly-owned
subsidiary of Nvest Companies. Nvest Distribution Corporation is also the sole
general partner of Nvest Funds Distributor, L.P. (the "Distributor") and the
sole shareholder of Nvest Services Company, Inc., the transfer and dividend
disbursing agent of the Funds. Nvest Companies owns the entire limited
partnership interest in each of Nvest Management and the Distributor. Nvest
Services Company has subcontracted certain of its obligations as the transfer
and dividend disbursing agent of the Funds to third parties. Nvest Services
Company, Inc. will also do business as Nvest Services Company and Nvest Services
Co.

Nvest Companies is part of the investment management arm of France's
Caisse des Depots et Consignations ("CDC"), a major diversified financial
institution which, in turn, is wholly-owned by the French Government. Nvest
Companies is owned by CDC AM - North America, which is wholly-owned by CDC Asset
Management, a French entity that is part of Caisse des Depots et Consignations.

24
<PAGE>

Nvest Companies' advising general partner is Nvest, L.P. Nvest
Corporation is the sole general partner of Nvest, L.P. The eighteen principal
subsidiary or affiliated asset management firms of Nvest Companies,
collectively, have more than $_____ billion of assets under management or
administration as of December 31, 2000.

Loomis Sayles was organized in 1926 and is one of the oldest investment
management firms in the country. An important feature of the Loomis Sayles
investment approach is its emphasis on investment research. Recommendations and
reports of the Loomis Sayles research department are circulated throughout the
Loomis Sayles organization and are available to the individuals in the Loomis
Sayles organization who are responsible for making investment decisions for the
Funds' portfolios as well as numerous other institutional and individual clients
to which Loomis Sayles provides investment advice. Loomis Sayles is a limited
partnership whose sole general partner, Loomis, Sayles & Company, Inc., is a
wholly-owned subsidiary of Nvest Holdings. Nvest Companies owns the entire
limited partnership interest in Loomis Sayles.

Harris Associates was organized in 1995 to succeed to the business of a
predecessor limited partnership also named Harris Associates L.P., which
together with its predecessor had advised and managed mutual funds since 1970.
Harris Associates is a limited partnership whose sole general partner is Harris
Associates Inc., a wholly-owned subsidiary of Nvest Holdings. Nvest Companies
owns the entire limited partnership interest in Harris Associates. Harris
Associates also serves as investment adviser to individuals, trusts, retirement
plans, endowments and foundations, and manages numerous private partnerships.

Certain officers of Loomis Sayles have responsibility for the
management of other client portfolios. The Boston office of Loomis Sayles makes
the investment decisions for the Equity Research Fund and Mid Cap Growth Fund
Fund. The other investment companies and clients served by Loomis Sayles
sometimes invest in securities in which Equity Research and Mid Cap Growth Funds
also invest. If one of these Funds and such other clients advised by theBoston
office of Loomis Sayles desire to buy or sell the same portfolio securities at
about the same time, purchases and sales will be allocated, to the extent
practicable, on a pro rata basis in proportion to the amounts desired to be
purchased or sold for each. It is recognized that in some cases the practices
described in this paragraph could have a detrimental effect on the price or
amount of the securities which each of the Funds purchases or sells. In other
cases, however, it is believed that these practices may benefit the relevant
Fund. It is the opinion of the Trusts' trustees that the desirability of
retaining Loomis Sayles as subadviser for the Equity Research and Mid Cap Growth
Funds outweighs the disadvantages, if any, which might result from these
practices.

Certain officers and employees of Harris Associates have responsibility
for portfolio management of other advisory accounts and clients (including other
registered investment companies and accounts of affiliates of Harris Associates)
that may invest in securities in which the Select Fund may invest. Where Harris
Associates determines that an investment purchase or sale opportunity is
appropriate and desirable for more than one advisory account, purchase and sale
orders may be executed separately or may be combined and, to the extent
practicable, allocated by Harris Associates to the participating accounts. Where
advisory accounts have competing interests in a limited investment opportunity,
Harris Associates will allocate investment opportunities based on numerous
considerations, including the time the competing accounts have had funds
available for investment, the amounts of available funds, an account's cash
requirements and the time the competing accounts have had investments available
for sale. It is Harris Associates' policy to allocate, to the extent
practicable, investment opportunities to each client over a period of time on a
fair and equitable basis relative to its other clients. It is believed that the
ability of the Select Fund to participate in larger volume transactions in this
manner will in some cases produce better executions for the Fund. However, in
some cases, this procedure could have a detrimental effect on the price and
amount of a security available to the Select Fund or the price at which a
security may be sold. The trustees of the Trust are of the view that the
benefits of retaining Harris Associates as a subadviser to the Select Fund
outweigh the disadvantages, if any, that might result from participating in such
transactions.

Distribution Agreements and Rule 12b-1 Plans. Under a separate agreement with
--------------------------------------------
each Fund, the Distributor serves as the principal distributor of each class of
shares of the Funds. Under these agreements (the "Distribution Agreements"), the
Distributor conducts a continuous offering and is not obligated to sell a
specific

25
<PAGE>

number of shares. The Distributor bears the cost of making information about the
Funds available through advertising and other means and the cost of printing and
mailing Prospectuses to persons other than shareholders. Each Fund pays the cost
of registering and qualifying its shares under state and federal securities laws
and the distribution of Prospectuses to existing shareholders.

The Distributor is compensated under each agreement through receipt of
the sales charges on Class A and Class C shares described below under "Net Asset
Value and Public Offering Price" and is paid by the Funds the service and
distribution fees described in the Prospectus. The Distributor may, at its
discretion, reallow the entire sales charge imposed on the sale of Class A and
Class C shares of each Fund to investment dealers from time to time. The SEC is
of the view that dealers receiving all or substantially all of the sales charge
may be deemed underwriters of a Fund's shares.

Each Fund has adopted Rule 12b-1 plans (the "Plans") for its Class A,
Class B and Class C shares which, among other things, permit it to pay the
Fund's Distributor monthly fees out of its net assets. These fees consist of a
service fee and a distribution fee. Any such fees that are paid by a distributor
to securities dealers are known as "trail commissions." Pursuant to Rule 12b-1
under the 1940 Act, each Plan was approved by the shareholders of each Fund, and
(together with the related Distribution Agreement) by the Board of Trustees,
including a majority of the trustees who are not interested persons of the Trust
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in the operation of the Plan or the Distribution Agreement (the
"Independent Trustees").

Under the Plans, each Fund pays the Distributor a monthly service fee
at an annual rate not to exceed 0.25% of the Fund's average daily net assets
attributable to the Class A, Class B and Class C shares. In the case of the
Class B shares, the Distributor pays investment dealers the first year's service
fee at the time of sale, in the amount of up to 0.25% of the amount invested. In
the case of Class C shares, the Distributor retains the first year's service fee
of 0.25% assessed against such shares. For Class A and, after the first year for
Class B and Class C shares, the Distributor may pay up to the entire amount of
this fee to securities dealers who are dealers of record with respect to the
Fund's shares, on a quarterly basis, unless other arrangements are made between
the Distributor and the securities dealer, for providing personal services to
investors in shares of the Fund and/or the maintenance of shareholder accounts.
This service fee will accrue to securities dealers of record immediately with
respect to reinvested income dividends and capital gain distributions of the
Fund's Class A and Class B shares.

The service fee may be paid only to reimburse the Distributor for
expenses of providing personal services to investors, including, but not limited
to, (i) expenses (including overhead expenses) of the Distributor for providing
personal services to investors in connection with the maintenance of shareholder
accounts and (ii) payments made by the Distributor to any securities dealer or
other organization (including, but not limited to, any affiliate of the
Distributor) with which the Distributor has entered into a written agreement for
this purpose, for providing personal services to investors and/or the
maintenance of shareholder accounts, which payments to any such organization may
be in amounts in excess of the cost incurred by such organization in connection
therewith.

To the extent that the Distributor's reimbursable expenses in any year
exceed the maximum amount payable under the relevant Plan for that year, such
expenses may be carried forward for reimbursement in future years in which the
Plan remains in effect.

Each Fund's Class B and Class C shares also pay the Distributor a
monthly distribution fee at an annual rate not to exceed 0.75% of the average
net assets of the respective Fund's Class B and Class C shares. The Distributor
retains the 0.75% distribution fee assessed against both Class B and Class C
shares during the first year of investment. After the first year for Class B
shares, the Distributor retains the annual distribution fee as compensation for
its services as distributor of such shares. After the first year for Class C
shares, the Distributor may pay up to the entire amount of this fee to
securities dealers who are dealers of record with respect to the Fund's shares,
as distribution fees in connection with the sale of the Fund's shares on a
quarterly basis, unless other arrangements are made between the Distributor and
the securities dealer.

26
<PAGE>

Each Plan may be terminated by vote of a majority of the relevant
Independent Trustees, or by vote of a majority of the outstanding voting
securities of the relevant class of shares of the relevant Fund. Each Plan may
be amended by vote of the relevant trustees, including a majority of the
relevant Independent Trustees, cast in person at a meeting called for that
purpose. Any change in any Plan that would materially increase the fees payable
thereunder by the relevant class of shares of the relevant Fund requires
approval by vote of the holders of a majority of such shares outstanding. The
Trust's trustees review quarterly a written report of such costs and the
purposes for which such costs have been incurred. For so long as a Plan is in
effect, selection and nomination of those trustees who are not interested
persons of the Trust shall be committed to the discretion of such disinterested
persons.

The Distributor has entered into selling agreements with investment
dealers, including affiliates of the Distributor, for the sale of the Funds'
shares. The Distributor may, at its expense, pay an amount not to exceed 0.50%
of the amount invested to dealers who have selling agreements with the
Distributor.

The Distribution Agreement for any Fund may be terminated at any time
on 60 days' written notice without payment of any penalty by the Distributor or
by vote of a majority of the outstanding voting securities of the relevant Fund
or by vote of a majority of the relevant Independent Trustees.

The Distribution Agreements and the Plans will continue in effect for
successive one-year periods, provided that each such continuance is specifically
approved (i) by the vote of a majority of the relevant Independent Trustees and
(ii) by the vote of a majority of the entire Board of Trustees cast in person at
a meeting called for that purpose or by a vote of a majority of the outstanding
securities of a Fund (or the relevant class, in the case of the Plans).

With the exception of the Distributor and its direct and indirect
parent companies, no interested person of the Trust or any trustee of the Trust
had any direct or indirect financial interest in the operation of the Plans or
any related agreement.

Benefits to the Funds and their shareholders resulting from the Plans
are believed to include (1) enhanced shareholder service, (2) asset retention,
(3) enhanced bargaining position with third party service providers and
economies of scale arising from having higher asset levels and (4) portfolio
management opportunities arising from having an enhanced positive cash flow.

The Distributor controls the words "Nvest" in the names of the Trust
and the Funds and if it should cease to be the principal distributor of the
Funds' shares, the Trust or the affected Fund may be required to change their
names and delete these words or letters. The Distributor also acts as principal
distributor for Kobrick Capital Fund, Kobrick Emerging Growth Fund, Kobrick
Growth Fund (together, the "Kobrick Funds"), Nvest Funds Trust I, Nvest Funds
Trust II, Nvest Companies Trust I, Nvest Cash Management Trust and Nvest Tax
Exempt Money Market Trust. The address of the Distributor is 399 Boylston
Street, Boston, Massachusetss, 02116.

The portion of the various fees and expenses for Class A, B, and with
respect to certain Funds, C shares that are paid (reallowed) to securities
dealers are shown below:

For Class A shares, the service fee is payable only to reimburse the
Distributor for amounts it pays in connection with providing personal services
to investors and/or maintaining shareholder accounts. To the extent that the
Distributor's reimbursable expenses in any year exceed the maximum amount
payable for that year under the relevant service plan, these expenses may be
carried forward for reimbursement in future years as long as the plan remains in
effect. The portion of the various fees and expenses for Class A shares of the
Funds that are paid (reallowed) to securities dealers are shown below:

27
<PAGE>

<TABLE>
<CAPTION>
Maximum Maximum Maximum Maximum
Sales Charge Reallowance or First Year First Year
Paid by Investors Commission Service Fee Compensation
Investment (% of offering price) (% of offering price) (% of net investment) (% of offering price)
<S> <C> <C> <C> <C>
Less than $ 50,000 5.75% 5.00% 0.25% 5.25%
$50,000 - $ 99,999 4.50% 4.00% 0.25% 4.25%
$100,000 - $249,999 3.50% 3.00% 0.25% 3.25%
$250,000 - $499,999 2.50% 2.15% 0.25% 2.40%
$500,000 - $999,999 2.00% 1.70% 0.25% 1.95%

Investments of $1 million
or more
First $3 Million none 1.00%(2) 0.25% 1.25%
Excess over $3 Million (1) none 0.50%(2) 0.25% 0.75%

Investments with no Sales
Charge(3) none 0.00% 0.25% 0.25%
</TABLE>

(1) For investments by Retirement Plans (Plans under Sections 401(a) or 401(k)
of the Code with investments of $1 million or more that have 100 or more
eligible employees), the Distributor may pay a 0.50% commission for
investments in excess of $3 million and up to $10 million.
Those Plans with investments of over $10 million are eligible to purchase
Class Y shares of other Nvest funds, which are described in a separate
prospectus.
(2) These commissions are not payable if the purchase represents the
reinvestment of a redemption made during the previous 12 calendar months.
(3) Refers to any investments made by municipalities, financial
institutions, trusts and affinity group members as described earlier in the
Prospectus under the section entitled "Ways to Reduce or Eliminate Sales
Charges."

The Class B and Class C service fees are payable regardless of the
amount of the Distributor's related expenses. The portion of the various fees
and expenses for Class B and Class C shares of the Funds that are paid to
securities dealers are shown below:

<TABLE>
<CAPTION>
Maximum Front-End
Sales Charge Paid by Maximum Reallowance Maximum First Year Maximum First Year
Investors or Commission Service Fee Compensation
Investment (% of offering price) (% of offering price) (% of net investment) (% of offering price)
<S> <C> <C> <C> <C>
All amounts for Class B None 3.75% 0.25% 4.00%
Class C amounts None 1.00% 0.00% 1.00%
Purchased at NAV (1)
All amounts for Class C 1.00% 2.00% 0.00% 2.00%
</TABLE>

(1) Refers to any investments made by municipalities, financial institutions,
trusts and affinity group members as described in the Prospectus under the
section entitled "Ways to Reduce or Eliminate Sales Charges." Also refers to any
Class C share accounts established prior to December 1, 2000.

Each transaction receives the net asset value next determined after an
order is received on sales of each class of shares. The sales charge is
allocated between the investment dealer and the Distributor. The Distributor
receives the Contingent Deferred Sales Charge (the "CDSC"). Proceeds from the
CDSC on Class A and C shares are paid to the Distributor and are used by the
Distributor to defray the expenses for services the Distributor provides the
Trust. Proceeds from the CDSC on Class B shares are paid to the Distributor and
are remitted to FEP Capital, L.P. to compensate FEP Capital, L.P. for financing
the sale of Class B shares pursuant to certain Class B financing and servicing
agreements between the Distributor and FEP Capital, L.P. The Distributor may, at
its discretion, pay (reallow) the entire sales charge imposed on the sale of
Class A or Class C shares to investment dealers from time to time.

For new amounts invested at net asset value by an eligible governmental
authority, the Distributor may, at its expense, pay investment dealers a
commission of 0.025% of the average daily net assets of an account at the end of
each calendar quarter for up to one year. These commissions are not payable if
the purchase represents the reinvestment of redemption proceeds from any other
Nvest Fund or if the account is registered in street name.

The Distributor may at its expense provide additional concessions to
dealers who sell shares of the Funds, including: (i) full reallowance of the
sales charge of Class A or Class C shares, (ii) additional compensation with
respect to the sale of Class A, B and C shares and (iii) financial assistance
programs to firms who sell or arrange for the sale of Fund shares including, but
not limited to, remuneration for: the firm's internal sales contests and
incentive programs, marketing and sales fees, expenses related to advertising or
promotional activity and events, and shareholder record keeping or miscellaneous
administrative services. Payment for travel, lodging and related expenses may be
provided for attendance at Nvest Funds' seminars and conferences, e.g., due
diligence meetings held for training and educational purposes. The payment of
these concessions and any other compensation offered will

28
<PAGE>

conform with state and federal laws and the rules of any self-regulatory
organization, such as the National Association of Securities Dealers, Inc
("NASD"). The participation of such firms in financial assistance programs is at
the discretion of the firm.

Custodial Arrangements. State Street Bank and Trust Company ("State
----------------------
Street Bank"), 225 Franklin Street, Boston, Massachusetts 02110, is the Trust's
custodian. As such, State Street Bank holds in safekeeping certificated
securities and cash belonging to each Fund and, in such capacity, is the
registered owner of securities in book-entry form belonging to each Fund. Upon
instruction, State Street Bank receives and delivers cash and securities of each
Fund in connection with Fund transactions and collects all dividends and other
distributions made with respect to Fund portfolio securities. State Street Bank
also maintains certain accounts and records of the Trust and calculates the
total net asset value, total net income and net asset value per share of each
Fund on a daily basis.

Independent Accountants. The Trust's independent accountants are
-----------------------
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts 02110. The
independent accountants conduct an annual audit of each Fund's financial
statements, assist in the preparation of federal and state income tax returns
and consult with the Trust as to matters of accounting and federal and state
income taxation.

Other Arrangements
------------------

Pursuant to a contract between the Trust and Nvest Services Company
("NSC"), NSC acts as shareholder servicing and transfer agent for the Funds and
is responsible for services in connection with the establishment, maintenance
and recording of shareholder accounts, including all related tax and other
reporting requirements and the implementation of investment and redemption
arrangements offered in connection with the sale of the Funds' shares. For
Classes A, B and C the Funds pay an asset-based fee to NSC for these services.
This fee is assessed at the greater of (i) 0.184% of the aggregate average daily
net assets of all Stock Funds and Kobrick Funds up to $5.7 billion; at 0.18% of
such assets between $5.7 billion and $10.7 billion; and at 0.175% of such assets
in excess of $10.7 billion, or (ii) a minimum fee of $10.5 million. NSC has
subcontracted with State Street Bank for it to provide, through its subsidiary,
Boston Financial Data Services, Inc. ("BFDS"), transaction processing, mail and
other services. For these services, NSC pays BFDS a monthly per account fee.

In addition, pursuant to an Administrative Services Agreement among the
Nvest Funds Trusts and NSC, NSC performs certain accounting and administrative
services for the Funds. The Nvest Funds Trusts pay NSC an aggregate fee equal to
the annual rate of 0.035% of the first $5 billion of the Nvest Funds Trusts'
average daily net assets, 0.0325% of the next $5 billion of the Nvest Funds
Trusts' average daily net assets and 0.03% of the Nvest Funds Trusts' average
daily net assets in excess of $10 billion. The Funds also reimburse NSC for all
or part of NSC's expenses of providing these services, which include the
following: (i) expenses for personnel performing bookkeeping, accounting,
internal auditing and financial reporting functions and clerical functions
relating to the Fund, (ii) expenses for services required in connection with the
preparation of registration statements and prospectuses, registration of shares
in various states, shareholder reports and notices, proxy solicitation material
furnished to shareholders of the Fund or regulatory authorities and reports and
questionnaires for SEC compliance, and (iii) registration, filing and other fees
in connection with requirements of regulatory authorities.

--------------------------------------------------------------------------------

PORTFOLIO TRANSACTIONS AND BROKERAGE

--------------------------------------------------------------------------------

In placing orders for the purchase and sale of equity securities, each
Fund's adviser or subadviser selects only brokers that it believes are
financially responsible, will provide efficient and effective services in
executing, clearing and settling an order and will charge commission rates that,
when combined with the quality of the foregoing services, will produce the best
price and execution for the transaction. This does not necessarily mean that the
lowest available brokerage commission will be paid. However, the commissions are
believed to be competitive with generally prevailing rates. Each Fund's adviser
or subadviser will use its best efforts to obtain

29
<PAGE>

information as to the general level of commission rates being charged by the
brokerage community from time to time and will evaluate the overall
reasonableness of brokerage commissions paid on transactions by reference to
such data. In making such evaluation, all factors affecting liquidity and
execution of the order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account.

In placing orders for the purchase and sale of securities for Equity
Research Fund and Mid Cap Growth Fund , Loomis Sayles follows the same policies
as for the other funds for which it acts as subadviser, except that Loomis
Sayles may cause the Funds to pay a broker-dealer that provides brokerage and
research services to Loomis Sayles an amount of commission for effecting a
securities transaction for the Fund in excess of the amount another
broker-dealer would have charged for effecting that transaction. Loomis Sayles
must determine in good faith that such greater commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker-dealer viewed in terms of that particular transaction or Loomis
Sayles' overall responsibilities to the Fund and its other clients. Loomis
Sayles' authority to cause these Funds to pay such greater commissions is also
subject to such policies as the trustees of the Trust may adopt from time to
time.

In placing orders for the purchase and sale of portfolio securities
for the Select Fund, Harris Associates always seeks best execution, subject to
the considerations set forth below. Transactions in unlisted securities are
carried out through broker-dealers that make the market for such securities
unless, in the judgment of Harris Associates, a more favorable execution can be
obtained by carrying out such transactions through other brokers or dealers.
Subject to the above standard, portfolio transactions for Select Fund may be
executed through Harris Associates Securities L.P., a registered broker-dealer
and an affiliate of Harris Associates.

Harris Associates selects only brokers or dealers that it
believes are financially responsible, will provide efficient and effective
services in executing, clearing and settling an order and will charge commission
rates which, when combined with the quality of the foregoing services, will
produce best execution for the transaction. This does not necessarily mean that
the lowest available brokerage commission will be paid. However, the commissions
are believed to be competitive with generally prevailing rates. Harris
Associates will use its best efforts to obtain information as to the general
level of commission rates being charged by the brokerage community from time to
time and will evaluate the overall reasonableness of brokerage commissions paid
on transactions by reference to such data. In making such evaluation, all
factors affecting liquidity and execution of the order, as well as the amount of
the capital commitment by the broker in connection with the order, are taken
into account.

Receipt of brokerage or research services from brokers may
sometimes be a factor in selecting a broker which Harris Associates believes
will provide best execution for a transaction. These services include not only a
wide variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and projections,
asset allocation and portfolio structure, but also meetings with management
representatives of issuers and with other analysts and specialists. Although it
is not possible to assign an exact dollar value to these services, they may, to
the extent used, tend to reduce Harris Associates' expenses. Such services may
be used by Harris Associates in servicing other client accounts and in some
cases may not be used with respect to the Select Fund. Consistent with the Rules
of theNASD, and subject to seeking best execution, Harris Associates may,
however, consider purchases of shares of Select Fund by customers of
broker-dealers as a factor in the selection of broker-dealers to execute Fund
portfolio transactions.

Harris Associates may cause the Select Fundd to pay a broker-
dealer that provides brokerage and research services to Harris Associates an
amount of commission for effecting a securities transaction for the Fund in
excess of the amount another broker-dealer would have charged for effecting that
transaction. Harris Associates must determine in good faith that such greater
commission is reasonable in relation to the value of the brokerage and research
services provided by the executing broker-dealer viewed in terms of that
particular transaction or Harris Associates' overall responsibilities to the
Fund and its other clients. Harris Associates' authority to cause the Fund to
pay such greater commissions is also subject to such policies as the trustees of
the Trust may adopt from time to time.

30
<PAGE>

Portfolio Trades of All Subadvisers Subject to the overriding
-------------------------------------------------------------
objective of obtaining the best possible execution of orders, each of the
subadvisers may allocate brokerage transactions to affiliated brokers. In order
for the affiliated broker to effect portfolio transactions for the Fund, the
commissions, fees or other remuneration received by the affiliated broker must
be reasonable and fair compared to the commissions, fees and other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period. Furthermore, the trustees of the Trust, including a majority
of those trustees who are not "interested persons" of the Trust, as defined in
the 1940 Act, have adopted procedures which are reasonably designed to provide
that any commissions, fees or other remuneration paid to an affiliated broker
are consistent with the foregoing standard.

General
-------

Subject to procedures adopted by the Board of Trustees of the Trust,
the Funds' brokerage transactions may be executed by brokers that are affiliated
with Nvest Companies or the Funds' advisers or subadvisers. Any such
transactions will comply with Rule 17e-1 under the 1940 Act.

Under the 1940 Act, persons affiliated with the Trust are prohibited
from dealing with the Trust's Funds as a principal in the purchase and sale of
securities. Since transactions in the over-the-counter market usually involve
transactions with dealers acting as principals for their own accounts,
affiliated persons of the Trust may not serve as the Funds' dealer in connection
with such transactions.

To the extent permitted by applicable law, and in all instances subject
to the foregoing policy of best execution, the adviser or subadviser may
allocate brokerage transactions in a manner that takes into account the sale of
shares of one or more Funds distributed by the Distributor. In addition, the
adviser or subadviser may allocate brokerage transactions to broker-dealers
(including affiliates of the Distributor) that have entered into arrangements in
which the broker-dealer allocates a portion of the commissions paid by a Fund
toward the reduction of that Fund's expenses, subject to the requirement that
the adviser or subadviser will seek best execution.

It is expected that the portfolio transactions in fixed-income
securities will generally be with issuers or dealers on a net basis without a
stated commission. Securities firms may receive brokerage commissions on
transactions involving options, futures and options on futures and the purchase
and sale of underlying securities upon exercise of options. The brokerage
commissions associated with buying and selling options may be proportionately
higher than those associated with general securities transactions.

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DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES

--------------------------------------------------------------------------------

Nvest Funds Trust III was organized as a Massachusetts business trust
pursuant to a Declaration of Trust dated August 22, 1995. The Trust has five
separate funds (Nvest Bullseye Fund, Nvest Large Cap Value Fund (formerly Nvest
Equity Income Fund), Nvest Equity Research Fund, Nvest Mid Cap Growth Fund and
Nvest Select Fund. Nvest Large Cap Value Fund was organized in 1995 and
commenced operations on November 28, 1995. Nvest Bullseye Fundwas organized in
1998 and commenced operations on March 31, 1998. Nvest Equity Research Fund,
Nvest Mid Cap Growth Fund and Nvest Select Fundwere organized on ___________
200_ and commenced operations on March 15, 2001.

The Declaration of Trust of Nvest Funds Trust III permits the Trust's
trustees to issue an unlimited number of full and fractional shares of each
series. Each Fund is represented by a particular series of shares. The
Declaration of Trust further permits the Trust's Board of Trustees to divide the
shares of each series into any number of separate classes, each having such
rights and preferences relative to other classes of the same series as the
Trust's Board of Trustees may determine. When you invest in a Fund, you acquire
freely transferable shares of beneficial interest that entitle you to receive
annual or quarterly dividends as determined by the Trust's Board of Trustees and
to cast a vote for each share you own at shareholder meetings. The shares of
each Fund do not

31
<PAGE>

have any preemptive rights. Upon termination of any Fund, whether pursuant to
liquidation of the Trust or otherwise, shareholders of each class of the Fund
are entitled to share pro rata in the net assets attributable to that class of
shares of the Fund available for distribution to shareholders. The Declaration
of Trust also permits the Board of Trustees to charge shareholders directly for
custodial, transfer agency and servicing expenses.

The shares of all the Funds are divided into three classes: Class A,
Class B and Class C. Each Fund offers such classes of shares as set forth in
such Fund's Prospectus. All expenses of each Fund (excluding transfer agency
fees and expenses of printing and mailing Prospectuses to shareholders ("Other
Expenses")) are borne by its Class A, B and C shares on a pro rata basis, except
for 12b-1 fees, which are borne by each class and may be charged at a separate
rate to each such class. Other Expenses of Classes A, B and C are borne by such
classes on a pro rata basis. The Class A, Class B and Class C structure could be
terminated should certain IRS rulings be rescinded.

The assets received by each class of a Fund for the issue or sale of
its shares and all income, earnings, profits, losses and proceeds therefrom,
subject only to the rights of the creditors, are allocated to, and constitute
the underlying assets of, that class of a Fund. The underlying assets of each
class of a Fund are segregated and are charged with the expenses with respect to
that class of a Fund and with a share of the general expenses of the Trust. Any
general expenses of the Trust that are not readily identifiable as belonging to
a particular class of a Fund are allocated by or under the direction of the
trustees in such manner as the trustees determine to be fair and equitable.
While the expenses of the Trust are allocated to the separate books of account
of the Fund, certain expenses may be legally chargeable against the assets of
all of the Funds in the Trust.

The Declaration of Trust also permits each Trust's Board of Trustees,
without shareholder approval, to subdivide any Fund or series or class of shares
into various sub-series or sub-classes with such dividend preferences and other
rights as the trustees may designate. While the Trust's Board of Trustees has no
current intention to exercise this power, it is intended to allow them to
provide for an equitable allocation of the impact of any future regulatory
requirements that might affect various classes of shareholders differently. The
Trust's Board of Trustees may also, without shareholder approval, establish one
or more additional series or classes or merge two or more existing series or
classes.

The Declaration of Trust provides for the perpetual existence of the
Trust. The Trust or any Fund, however, may be terminated at any time by vote of
at least two-thirds of the outstanding shares of each Fund affected. Similarly,
any class within a Fund may be terminated by vote of at least two-thirds of the
outstanding shares of such class. While the Declaration of Trust further
provides that the Board of Trustees may also terminate the Trust upon written
notice to its shareholders, the 1940 Act requires that the Trust receive the
authorization of a majority of its outstanding shares in order to change the
nature of its business so as to cease to be an investment company.

Voting Rights
-------------

Shareholders are entitled to one vote for each full share held (with
fractional votes for each fractional share held) and may vote (to the extent
provided therein) in the election of trustees and the termination of the Trust
and on other matters submitted to the vote of shareholders.

The Declaration of Trust provides that on any matter submitted to a
vote of all shareholders of the Trust, all Trust shares entitled to vote shall
be voted together irrespective of series or class unless the rights of a
particular series or class would be adversely affected by the vote, in which
case a separate vote of that series or class shall also be required to decide
the question. Also, a separate vote shall be held whenever required by the 1940
Act or any rule thereunder. Rule 18f-2 under the 1940 Act provides in effect
that a series or class shall be deemed to be affected by a matter unless it is
clear that the interests of each series or class in the matter are substantially
identical or that the matter does not affect any interest of such series or
class. On matters affecting an individual series or class, only shareholders of
that series or class are entitled to vote. Consistent with the current position
of the SEC, shareholders of all series and classes vote together, irrespective
of series or class, on the election of trustees and the selection of the Trust's
independent accountants, but shareholders of each series vote separately on
other matters requiring shareholder approval, such as certain changes in
investment policies

32
<PAGE>

of that series or the approval of the investment advisory and subadvisory
agreement relating to that series, and shareholders of each class within a
series vote separately as to the Rule 12b-1 plan relating to that class.

There will normally be no meetings of shareholders for the purpose of
electing trustees except that, in accordance with the 1940 Act, (i) a Trust will
hold a shareholders' meeting for the election of trustees at such time as less
than a majority of the trustees holding office have been elected by
shareholders, and (ii) if there is a vacancy on the Board of Trustees, such
vacancy may be filled only by a vote of the shareholders unless, after filing
such vacancy by other means, at least two-thirds of the trustees holding office
shall have been elected by the shareholders. In addition, trustees may be
removed from office by a written consent signed by the holders of two-thirds of
the outstanding shares and filed with a Trust's custodian or by a vote of the
holders of two-thirds of the outstanding shares at a meeting duly called for
that purpose, which meeting shall be held upon the written request of the
holders of not less than 10% of the outstanding shares.

Upon written request by the holders of shares having a net asset value
of at least $25,000 or at least 1% of the outstanding shares stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
trustee, the Trust will undertake to provide a list of shareholders or to
disseminate appropriate materials (at the expense of the requesting
shareholders).

Except as set forth above, the trustees shall continue to hold office
and may appoint successor trustees. Shareholder voting rights are not
cumulative.

No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust except (i)
to change the Trust's or a Fund's name or to cure technical problems in the
Declaration of Trust, (ii) to establish and designate new series or classes of
Trust shares and (iii) to establish, designate or modify new and existing series
or classes of Trust shares or other provisions relating to Trust shares in
response to applicable laws or regulations. If one or more new series of a Trust
is established and designated by the trustees, the shareholders having
beneficial interests in the Funds described in this Statement shall not be
entitled to vote on matters exclusively affecting such new series, such matters
including, without limitation, the adoption of or any change in the investment
objectives, policies or restrictions of the new series and the approval of the
investment advisory contracts of the new series. Similarly, the shareholders of
the new series shall not be entitled to vote on any such matters as they affect
the Funds.

Shareholder and Trustee Liability
---------------------------------

Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by a Trust or
the trustees. The Declaration of Trust provides for indemnification out of each
Fund's property for all loss and expense of any shareholder held personally
liable for the obligations of the Fund by reason of owning shares of such Fund.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is considered remote since it is limited to circumstances
in which the disclaimer is inoperative and a Fund itself would be unable to meet
its obligations.

The Declaration of Trust further provides that the Board of Trustees
will not be liable for errors of judgment or mistakes of fact or law. However,
nothing in the Declaration of Trust protects a trustee against any liability to
which the trustee would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office. The By-Laws of the Trust provide for
indemnification by the Trust of its trustees and officers, except with respect
to any matter as to which any such person did not act in good faith in the
reasonable belief that his or her action was in or not opposed to the best
interests of the Trust. Such persons may not be indemnified against any
liability to the Trust or the Trust's shareholders to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.

33
<PAGE>

Code of Ethics
--------------

The Trust, the Funds' adviser and subadvisers and the Distributor have
adopted Codes of Ethics pursuant to Rule 17j-1 under the 1940 Act. The Codes of
Ethics permit employees to invest in securities for their own accounts,
including securities that may be purchased or held by the Funds. The Codes of
Ethics are on public file with, and are available from, the SEC.

--------------------------------------------------------------------------------

HOW TO BUY SHARES

--------------------------------------------------------------------------------

The procedures for purchasing shares of the Funds are summarized in the
Prospectuses. All purchases made by check should be in U.S. dollars and made
payable to Nvest Funds, or, in the case of a retirement account, the custodian
or trustee.

For purchase of Fund shares by mail, the settlement date is the first
business day after receipt of the check by the transfer agent so long as it is
received by the close of regular trading of the New York Stock Exchange (the
"Exchange") on a day when the Exchange is open; otherwise the settlement date is
the following business day. For telephone orders, the settlement date is the
third business day after the order is made.

Shares may also be purchased either in writing, by phone, by electronic
funds transfer using Automated Clearing House ("ACH"), or by exchange as
described in the Prospectuses through firms that are members of the NASD and
that have selling agreements with the Distributor. You may also use Nvest Funds
Personal Access Line(R) (800-225-5478, press 1) or Nvest Funds Web site
(www.nvestfunds.com) to purchase Fund shares. For more information, see the
section entitled "Shareholder Services" in this Statement.

A shareholder may purchase additional shares electronically through the
ACH system so long as the shareholder's bank or credit union is a member of the
ACH system and the shareholder has a completed, approved ACH application on
file. Banks may charge a fee for transmitting funds by wire. With respect to
shares purchased by federal funds, shareholders should bear in mind that wire
transfers may take two or more hours to complete.

The Distributor may at its discretion accept a telephone order for the
purchase of $5,000 or more of a Fund's shares. Payment must be received by the
Distributor within three business days following the transaction date or the
order will be subject to cancellation. Telephone orders must be placed through
the Distributor or your investment dealer.

If you wish transactions in your account to be effected by another
person under a power of attorney from you, special rules as summarized in the
Prospectus may apply.

--------------------------------------------------------------------------------

NET ASSET VALUE AND PUBLIC OFFERING PRICE

--------------------------------------------------------------------------------

The method for determining the public offering price and net asset
value per share is summarized in the Prospectus.

The total net asset value of each class of shares of a Fund (the excess
of the assets of such Fund attributable to such class over the liabilities
attributable to such class) is determined as of the close of regular trading
(normally 4:00 p.m. Eastern time) on each day that the Exchange is open for
trading. The weekdays that the Exchange is expected to be closed are New Year's
Day, Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Securities
listed on a national securities exchange or on the NASDAQ National Market System
are valued at their last sale price,

34
<PAGE>

or, if there is no reported sale during the day, the last reported bid price
estimated by a broker. Unlisted securities traded in the over-the-counter market
are valued at the last reported bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers that make a
market in the securities. U.S. government securities are traded in the over-the-
counter market. Options, interest rate futures and options thereon that are
traded on exchanges are valued at their last sale price as of the close of such
exchanges. Securities for which current market quotations are not readily
available and all other assets are taken at fair value as determined in good
faith by the Board of Trustees, although the actual calculations may be made by
persons acting pursuant to the direction of the Board.

Generally, trading in foreign government securities and other
fixed-income securities, as well as trading in equity securities in markets
outside the United States, is substantially completed each day at various times
prior to the close of the Exchange. Securities traded on a non-U.S. exchange
will be valued at their last sale price (or the last reported bid price, if
there is no reported sale during the day), on the exchange on which they
principally trade, as of the close of regular trading on such exchange except
for securities traded on the London Stock Exchange ("British Equities"). British
Equities will be valued at the mean between the last bid and last asked prices
on the London Stock Exchange. The value of other securities principally traded
outside the United States will be computed as of the completion of substantial
trading for the day on the markets on which such securities principally trade.
Securities principally traded outside the United States will generally be valued
several hours before the close of regular trading on the Exchange, generally
4:00 p.m. Eastern time, when the Funds compute the net asset value of their
shares. Occasionally, events affecting the value of securities principally
traded outside the United States may occur between the completion of substantial
trading of such securities for the day and the close of the Exchange, which
events will not be reflected in the computation of a Fund's net asset value. If
events materially affecting the value of a Fund's securities occur during such
period, then these securities will be valued at their fair value as determined
in good faith by or in accordance with procedures approved by the Trust's
trustees. The effect of fair value pricing is that securities may not be priced
on the basis of quotations from the primary market in which they are traded but
rather, may be priced by another method that the Board of Trustees believes
accurately reflects fair value.

Trading in some of the portfolio securities of some of the Funds takes
place in various markets outside the United States on days and at times other
than when the Exchange is open for trading. Therefore, the calculation of these
Funds' net asset value does not take place at the same time as the prices of
many of its portfolio securities are determined, and the value of the Fund's
portfolio may change on days when the Fund is not open for business and its
shares may not be purchased or redeemed.

The per share net asset value of a class of a Fund's shares is computed
by dividing the number of shares outstanding into the total net asset value
attributable to such class. The public offering price of a Class A share or a
Class C share of a Fund is the net asset value per share next-determined after a
properly completed purchase order is accepted by NSC or State Street Bank, plus
a sales charge as set forth in the Fund's Prospectus. The public offering price
of a Class B share of a Fund is the next-determined net asset value.

--------------------------------------------------------------------------------

REDUCED SALES CHARGES

--------------------------------------------------------------------------------

The following special purchase plans are summarized in the Prospectuses and are
described in greater detail below.

Cumulative Purchase Discount. A Fund shareholder may make an initial or
an additional purchase of Class A shares and be entitled to a discount on the
sales charge payable on that purchase. This discount will be available if the
shareholder's "total investment" in the Fund reaches the breakpoint for a
reduced sales charge in the table under "How Sales Charges Are Calculated-Class
A shares" in the Prospectus. The total investment is determined by adding the
amount of the additional purchase, including sales charge, to the current public
offering price of all series and classes of shares of the Kobrick Funds and the
Nvest Funds Trusts held by the

35
<PAGE>

shareholder in one or more accounts. If the total investment exceeds the
breakpoint, the lower sales charge applies to the entire additional investment
even though some portion of that additional investment is below the breakpoint
to which a reduced sales charge applies. For example, if a shareholder who
already owns shares of one or more Funds or other of the Nvest Funds with a
value at the current public offering price of $30,000 makes an additional
purchase of $20,000 of Class A shares of another Nvest Fund, the reduced sales
charge of 4.5% of the public offering price will apply to the entire amount of
the additional investment.

Letter of Intent. A Letter of Intent (a "Letter"), which can be
effected at any time, is a privilege available to investors which reduces the
sales charge on investments in Class A shares. Ordinarily, reduced sales charges
are available for single purchases of Class A shares only when they reach
certain breakpoints (e.g., $50,000, $100,000, etc.). By signing a Letter, a
shareholder indicates an intention to invest enough money in Class A shares
within 13 months to reach a breakpoint. If the shareholder's intended aggregate
purchases of all series and classes of the Kobrick Funds and the Nvest Funds
Trusts over a defined 13-month period will be large enough to qualify for a
reduced sales charge, the shareholder may invest the smaller individual amounts
at the public offering price calculated using the sales load applicable to the
13-month aggregate investment.

A Letter is a non-binding commitment, the amount of which may be
increased, decreased or canceled at any time. The effective date of a Letter is
the date it is received in good order by the Distributor, or, if communicated by
a telephone exchange or order, at the date of telephoning provided a signed
Letter, in good order, reaches the Distributor within five business days.

A reduced sales charge is available for aggregate purchases of all
series and classes of shares of the Nvest Funds Trusts pursuant to a written
Letter effected within 90 days after any purchase. In the event the account was
established prior to 90 days before the effective date of the Letter, the
account will be credited with the Rights of Accumulation ("ROA") towards the
breakpoint level that will be reached upon the completion of the 13 months'
purchases. The ROA credit is the value of all shares held as of the effective
dates of the Letter based on the "public offering price computed on such date."

The cumulative purchase discount, described above, permits the
aggregate value at the current public offering price of Class A shares of any
accounts with the Nvest Funds Trusts held by a shareholder to be added to the
dollar amount of the intended investment under a Letter, provided the
shareholder lists them on the account application.

State Street Bank will hold in escrow shares with a value at the
current public offering price of 5% of the aggregate amount of the intended
investment. The amount in escrow will be released when the commitment stated in
the Letter is completed. If the shareholder does not purchase shares in the
amount indicated in the Letter, the shareholder agrees to remit to State Street
Bank the difference between the sales charge actually paid and that which would
have been paid had the Letter not been in effect, and authorizes State Street
Bank to redeem escrowed shares in the amount necessary to make up the difference
in sales charges. Reinvested dividends and distributions are not included in
determining whether the Letter has been completed.

Combining Accounts. Purchases of all series and classes of the Kobrick
Funds and the Nvest Funds Trusts (excluding the Nvest Cash Management Trust and
Nvest Tax Exempt Money Market Trust (the "Money Market Funds") unless the shares
were purchased through an exchange of another Kobrick Fund or Nvest Fund) by or
for an investor, the investor's spouse, parents, children, siblings, in-laws,
grandparents or grandchildren and any other account of the investor, including
sole proprietorships, in any Trust may be treated as purchases by a single
individual for purposes of determining the availability of a reduced sales
charge. Purchases for a single trust estate or a single fiduciary account may
also be treated as purchases by a single individual for this purpose, as may
purchases on behalf of a participant in a tax-qualified retirement plan and
other employee benefit plans, provided that the investor is the sole participant
in the plan. Any other group of individuals acceptable to the Distributor may
also combine accounts for such purpose. The values of all accounts are combined
to determine the sales charge.

36
<PAGE>

Combining with Other Series and Classes of the Nvest Funds. A
shareholder's total investment for purposes of the cumulative purchase discount
includes the value at the current public offering price of any shares of series
and classes of the Kobrick Funds and the Nvest Funds Trusts that the shareholder
owns (which excludes shares of the Money Market Funds unless such shares were
purchased by exchanging shares of any other Kobrick Fund or Nvest Fund). Shares
owned by persons described in the preceding paragraph may also be included.

Unit Holders of Unit Investment Trusts. Unit investment trust
distributions may be invested in Class A shares of any Fund at a reduced sales
charge of 1.50% of the public offering price (or 1.52% of the net amount
invested); for large purchases on which a sales charge of less than 1.50% would
ordinarily apply, such lower charge also applies to investments of unit
investment trust distributions.

Clients of Advisers or Subadvisers. No front-end sales charge or CDSC
applies to investments of $25,000 or more in Class A shares and no front-end
sales charge applies to investments of $25,000 or more in Class C shares of the
Funds by (1) clients of an adviser or subadviser to any series of the Kobrick
Funds or Nvest Funds Trusts; any director, officer or partner of a client of an
adviser or subadviser to any series of the Kobrick Funds or Nvest Funds Trusts;
or the spouse, parents, children, siblings, in-laws, grandparents or
grandchildren of the foregoing; (2) any individual who is a participant in a
Keogh or IRA Plan under a prototype of an adviser or subadviser to any series of
the Kobrick Funds or Nvest Funds Trusts if at least one participant in the plan
qualifies under category (1) above; and (3) an individual who invests through an
IRA and is a participant in an employee benefit plan that is a client of an
adviser or subadviser to any series of the Kobrick Funds or Nvest Funds Trusts.
Any investor eligible for this arrangement should so indicate in writing at the
time of the purchase.

Offering to Employees of Metropolitan Life Insurance Company
("MetLife") and Associated Entities. There is no front-end sales charge, CDSC or
initial investment minimum related to investments in Class A shares of the Funds
by any of the Kobrick Funds or Nvest Funds Trusts' advisers or subadvisers, the
Distributor or any other company affiliated with New England Financial or
MetLife; current and former directors and trustees of the Kobrick Funds or Nvest
Funds Trusts; agents and general agents of New England Financial or MetLife and
their insurance company subsidiaries; current and retired employees of such
agents and general agents; registered representatives of broker-dealers who have
selling arrangements with the Distributor; the spouse, parents, children,
siblings, in-laws, grandparents or grandchildren of the persons listed above and
any trust, pension, profit sharing or other benefit plans for any of the
foregoing persons and any separate account of New England Financial or MetLife
or any insurance company affiliated with New England Financial or MetLife.

Eligible Governmental Authorities. There is no sales charge or CDSC
related to investments in Class A shares and there is no front-end sales charge
related to investments in Class C shares of any Fund by any state, county or
city or any instrumentality, department, authority or agency thereof that has
determined that a Fund is a legally permissible investment and that is
prohibited by applicable investment laws from paying a sales charge or
commission in connection with the purchase of shares of any registered
investment company.

Investment Advisory Accounts. Class A or Class C shares of any Fund may
be purchased at net asset value by investment advisers, financial planners or
other intermediaries who place trades for their own accounts or the accounts of
their clients and who charge a management, consulting or other fee for their
services; clients of such investment advisers, financial planners or other
intermediaries who place trades for their own accounts if the accounts are
linked to the master account of such investment adviser, financial planner or
other intermediary on the books and records of the broker or agent; and
retirement and deferred compensation plans and trusts used to fund those plans,
including, but not limited to, those defined in Sections 401(a), 403(b), 401(k)
and 457 of the Code and "rabbi trusts." Investors may be charged a fee if they
effect transactions through a broker or agent.

Certain Broker-Dealers and Financial Services Organizations. Class A or
Class C shares of any Fund also may be purchased at net asset value through
certain broker-dealers and/or financial services organizations without any
transaction fee. Such organizations may also receive compensation based upon the
average value of the Fund shares held by their customers. This compensation may
be paid by certain advisors out of its own assets, and/or be paid indirectly by
the Fund in the form of servicing, distribution or transfer agent fees. Class C

37
<PAGE>

shares may be purchased at net asset value by an investor who buys through a
Merrill Lynch omnibus account. However, a CDSC will apply if shares are sold
within 12 months of purchase.

Certain Retirement Plans. Class A and Class C shares of the Funds are
available at net asset value for investments by participant-directed 401(a) and
401(k) plans that have 100 or more eligible employees or by retirement plans
whose third party administrator or dealer has entered into a service agreement
with the Distributor to perform certain administrative services, subject to
certain operational and minimum size requirements specified from time to time by
the Distributor. This compensation may be paid indirectly by the Fund in the
form of service and/or distribution fees.

Bank Trust Departments or Trust Companies. Class A and Class C shares
of the Funds are available at net asset value for investments by
non-discretionary and non-retirement accounts of bank trust departments or trust
companies, but are unavailable if the trust department or institution is part of
an organization not principally engaged in banking or trust activities.

Shareholders of Reich and Tang Government Securities Trust.
Shareholders of Reich and Tang Government Securities Trust may exchange their
shares of that fund for Class A shares of the Funds at net asset value and
without imposition of a sales charge.

The reduction or elimination of the sales charges in connection with
special purchase plans described above reflects the absence or reduction of
expenses associated with such sales.

--------------------------------------------------------------------------------

SHAREHOLDER SERVICES

--------------------------------------------------------------------------------

Open Accounts
-------------

A shareholder's investment is automatically credited to an open account
maintained for the shareholder by State Street Bank. Following each transaction
in the account, a shareholder will receive a confirmation statement disclosing
the current balance of shares owned and the details of recent transactions in
the account. After the close of each calendar year, State Street Bank will send
each shareholder a statement providing federal tax information on dividends and
distributions paid to the shareholder during the year. This statement should be
retained as a permanent record. NSC may charge a fee for providing duplicate
information.

The open account system provides for full and fractional shares
expressed to three decimal places and, by making the issuance and delivery of
stock certificates unnecessary, eliminates problems of handling and safekeeping,
and the cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates. Certificates will not be issued for Class Bor Class C shares.

The costs of maintaining the open account system are paid by the Funds
and no direct charges are made to shareholders. Although the Funds have no
present intention of making such direct charges to shareholders, they each
reserve the right to do so. Shareholders will receive prior notice before any
such charges are made.

Automatic Investment Plans
--------------------------

Subject to each Fund's investor eligibility requirements, investors may
automatically invest in additional shares of a Fund on a monthly basis by
authorizing the Distributor to draw checks on an investor's bank account. The
checks are drawn under the Investment Builder Program, a program designed to
facilitate such periodic payments, and are forwarded to NSC for investment in
the Fund. A plan may be opened with an initial investment of $100 or more and
thereafter regular monthly checks of $100 or more will be drawn on the
investor's account. The reduced minimum initial investment pursuant to an
automatic investment plan is

38
<PAGE>

referred to in the Prospectus. An Investment Builder application must be
completed to open an automatic investment plan. An application may be found in
the Prospectus or may be obtained by calling the Distributor at 800-225-5478 or
your investment dealer.

This program is voluntary and may be terminated at any time by NSC upon
notice to existing plan participants.

The Investment Builder Program plan may be discontinued at any time by
the investor by written notice to NSC, which must be received at least five
business days prior to any payment date. The plan may be discontinued by State
Street Bank at any time without prior notice if any check is not paid upon
presentation; or by written notice to the shareholder at least thirty days prior
to any payment date. State Street Bank is under no obligation to notify
shareholders as to the nonpayment of any check.

Retirement Plans Offering Tax Benefits
--------------------------------------

The federal tax laws provide for a variety of retirement plans offering
tax benefits. These plans may be funded with shares of the Funds or with certain
other investments. The plans include H.R. 10 (Keogh) plans for self-employed
individuals and partnerships, individual retirement accounts (IRAs), corporate
pension trust and profit sharing plans, including 401(k) plans, and retirement
plans for public school systems and certain tax exempt organizations, i.e.,
403(b) plans.

The reduced minimum initial investment available to retirement plans
offering tax benefits is referred to in the Prospectus. For these plans, initial
investments in a Fund must be at least $250 for each participant in corporate
pension and profit sharing plans and Keogh plans, at least $500 for IRAs and at
least $100 for any subsequent investments. There is a special initial and
subsequent investment minimum of $25 for payroll deduction investment programs
for SARSEP, SEP, SIMPLE Plans, 403(b) and certain other retirement plans. Income
dividends and capital gain distributions must be reinvested (unless the investor
is over age 59 1/2 or disabled). These types of accounts may be subject to fees.
Plan documents and further information can be obtained from the Distributor.

An investor should consult a competent tax or other adviser as to the
suitability of a Fund's shares as a vehicle for funding a plan, in whole or in
part, under the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and as to the eligibility requirements for a specific plan and its
state as well as federal tax aspects.

Systematic Withdrawal Plans
---------------------------

An investor owning a Fund's shares having a value of $5,000 or more at
the current public offering price may establish a Systematic Withdrawal Plan
providing for periodic payments of a fixed or variable amount. An investor may
terminate the plan at any time. A form for use in establishing such a plan is
available from the servicing agent or your investment dealer. Withdrawals may be
paid to a person other than the shareholder if a signature guarantee is
provided. Please consult your investment dealer or the Distributor.

A shareholder under a Systematic Withdrawal Plan may elect to receive
payments monthly, quarterly, semiannually or annually for a fixed amount of not
less than $50 or a variable amount based on (1) the market value of a stated
number of shares, (2) a specified percentage of the account's market value or
(3) a specified number of years for liquidating the account (e.g., a 20-year
program of 240 monthly payments would be liquidated at a monthly rate of 1/240,
1/239, 1/238, etc.). The initial payment under a variable payment option may be
$50 or more.

In the case of shares subject to a CDSC, the amount or percentage you
specify may not, on an annualized basis, exceed 10% of the value, as of the time
you make the election, of your account with the Fund with respect to which you
are electing the Plan. Withdrawals of Class B shares of a Fund under the Plan
will be treated as redemptions of shares purchased through the reinvestment of
Fund distributions, or, to the extent such shares in

39
<PAGE>

your account are insufficient to cover Plan payments, as redemptions from the
earliest purchased shares of such Fund in your account. No CDSC applies to a
redemption pursuant to the Plan.

All shares under the Plan must be held in an open (uncertificated)
account. Income dividends and capital gain distributions will be reinvested
(without a sales charge in the case of Class A and Class C shares) at net asset
value determined on the record date.

Since withdrawal payments represent proceeds from the liquidation of
shares, withdrawals may reduce and possibly exhaust the value of the account,
particularly in the event of a decline in net asset value. Accordingly, a
shareholder should consider whether a Systematic Withdrawal Plan and the
specified amounts to be withdrawn are appropriate in the circumstances. The
Funds and the Distributor make no recommendations or representations in this
regard. It may be appropriate for a shareholder to consult a tax adviser before
establishing such a plan. See "Redemptions" and "Tax Status" below for certain
information as to federal income taxes.

It may be disadvantageous for a shareholder to purchase on a regular
basis additional Fund shares with a sales charge while redeeming shares under a
Systematic Withdrawal Plan. Accordingly, the Funds and the Distributor do not
recommend additional investments in Class A and Class C shares by a shareholder
who has a withdrawal plan in effect and who would be subject to a sales load on
such additional investments. Nvest Funds may modify or terminate this program at
any time.

Because of statutory restrictions this plan is not available to pension
or profit-sharing plans, IRAs or 403(b) plans that have State Street Bank as
trustee.

Dividend Diversification Program
--------------------------------

You may also establish a Dividend Diversification Program, which allows
you to have all dividends and any other distributions automatically invested in
shares of the same class of another Nvest Fund, subject to the investor
eligibility requirements of that other Fund and to state securities law
requirements. Shares will be purchased at the selected Fund's net asset value
(without a sales charge or CDSC) on the dividend record date. A dividend
diversification account must be in the same registration (shareholder name) as
the distributing Fund account and, if a new account in the purchased Fund is
being established, the purchased Fund's minimum investment requirements must be
met. Before establishing a Dividend Diversification Program into any other Nvest
Fund, you must obtain and carefully read a copy of that Fund's Prospectus.

Exchange Privilege
------------------

A shareholder may exchange the shares of any Fund for shares of the
same class of any other Nvest Fund (subject to the investor eligibility
requirements, if any, of the Nvest Fund into which the exchange is being made)
on the basis of relative net asset values at the time of the exchange without
any sales charge. An exchange of shares in one Fund for shares of another Fund
is a taxable event on which gain or loss may be recognized. When an exchange is
made from the Class A, Class B or Class C shares of one Fund to the same class
of shares of another Fund, the shares received by the shareholder in the
exchange will have the same age characteristics as the shares exchanged. The age
of the shares determines the expiration of the CDSC and, for the Class B shares,
the conversion date. If you own Class A, Class B or Class C shares, you may also
elect to exchange your shares of any Fund for shares of the same class of the
Money Market Funds. On all exchanges of Class A or C shares subject to a CDSC
and Class B shares into the Money Market Funds, the exchange stops the aging
period relating to the CDSC, and, for Class B shares only, conversion to Class A
shares. The aging period resumes only when an exchange is made back into Class
A, B or C shares of a Fund. Shareholders may also exchange their shares in the
Money Market Funds for shares of the same class of any other Nvest Fund listed
below, subject to those funds' eligibility requirements and sales charges. Class
C shares in accounts of Nvest Cash Management Trust - Money Market Series
established on or after December 1, 2000 may exchange into Class C shares of an
Nvest Fund subject to its sales charge and CDSC schedule. Class C shares in
accounts of Nvest Cash Management Trust - Money Market Series established prior
to December 1, 2000 or that have been previously subject to a front-end sales
charge may exchange into Class C shares of a Nvest Fund without paying a
front-end sales

40
<PAGE>

charge. These options are summarized in the Prospectus. An exchange may be
effected, provided that neither the registered name nor address of the accounts
are different and provided that a certificate representing the shares being
exchanged has not been issued to the shareholder, by (1) a telephone request to
the Fund or Nvest Services Company at 800-225-5478 or (2) a written exchange
request to the Fund or Nvest Services Company, P.O. Box 8551, Boston, MA 02266-
8551. You must acknowledge receipt of a current Prospectus for a Fund before an
exchange for that Fund can be effected. The minimum amount for an exchange is
$1,000.

Agents, general agents, directors and senior officers of New England
Financial and its insurance company subsidiaries may, at the discretion of New
England Financial, elect to exchange Class A shares of any series of the Kobrick
Funds or Nvest Funds Trusts acquired in connection with deferred compensation
plans offered by New England Financial for Class Y shares of any series of the
Kobrick Funds or Nvest Funds Trusts which offers Class Y shares. To obtain a
prospectus and more information about Class Y shares, please call the
Distributor toll free at 800-225-5478.

Except as otherwise permitted by SEC rule, shareholders will receive at
least 60 days advance notice of any material change to the exchange privilege.

The investment objectives of the Nvest Funds (including the Kobrick Funds) and
the Money Market Funds as set forth in the Prospectuses are as follows:

Stock Funds:
-----------

Nvest Equity Research Fund seeks long-term capital growth.

Nvest Mid Cap Growth Fund seeks long-term capital growth from investments
in common stocks or their equivalent.

Nvest Select Fund seeks long-term capital appreciation.

Nvest AEW Real Estate Fund seeks above-average income and long-term growth
of capital.

Nvest Growth Fund seeks long-term growth of capital through investments in
equity securities of companies whose earnings are expected to grow at a faster
rate than the United States economy.

Nvest Capital Growth Fund seeks long-term growth of capital.

Nvest Balanced Fund seeks a reasonable long-term investment return from a
combination of long-term capital appreciation and moderate current income.

Nvest Growth and Income Fund seeks opportunities for long-term growth of
capital and income.

Nvest International Equity Fund seeks total return from long-term growth of
capital and dividend income primarily through investment in a diversified
portfolio of marketable international equity securities.

Nvest Star Advisers Fund seeks long-term growth of capital.

Nvest Star Worldwide Fund seeks long-term growth of capital.

Nvest Star Small Cap Fund seeks capital appreciation.

Nvest Star Value Fund seeks a reasonable long-term investment return from a
combination of market appreciation and dividend income from equity securities.

Nvest Large Cap Value Fund seeks total return from capital growth and
dividend income.

41
<PAGE>

Nvest Bullseye Fund seeks long-term growth of capital.

Kobrick Funds:
-------------

Kobrick Capital Fund seeks maximum capital appreciation by investing
primarily in equity securities of companies with small, medium and large
capitalizations.

Kobrick Emerging Growth Fund seeks to provide growth of capital by
investing primarily in equity securities of emerging growth companies, with an
emphasis on companies with small capitalizations.

Kobrick Growth Fund seeks long-term growth of capital by investing
primarily in equity securities of companies with large capitalizations that may
have better than average long-term growth potential.

Bond Funds:
----------

Nvest Government Securities Fund seeks a high level of current income
consistent with safety of principal by investing in U.S. government securities
and engaging in transactions involving related options, futures and options on
futures.

Nvest Limited Term U.S. Government Fund seeks a high current return
consistent with preservation of capital.

Nvest Short Term Corporate Income Fund seeks a high level of current income
consistent with preservation of capital.

Nvest Strategic Income Fund seeks high current income with a secondary
objective of capital growth.

Nvest Bond Income Fund seeks a high level of current income consistent with
what the Fund considers reasonable risk.

Nvest High Income Fund seeks high current income plus the opportunity for
capital appreciation to produce a high total return.

Nvest Municipal Income Fund seeks as high a level of current income exempt
from federal income taxes as is consistent with reasonable risk and protection
of shareholders' capital.

Nvest Massachusetts Tax Free Income Fund seeks as high a level of current
income exempt from federal income tax and Massachusetts personal income taxes as
the Fund's subadviser believes is consistent with preservation of capital.

Nvest Intermediate Term Tax Free Fund of California seeks as high a level
of current income exempt from federal income tax and its state personal income
tax as is consistent with preservation of capital.

Money Market Funds:
------------------

Nvest Cash Management Trust - Money Market Series seeks maximum current
income consistent with preservation of capital and liquidity.

Nvest Tax Exempt Money Market Trust - seeks current income exempt from
federal income taxes consistent with preservation of capital and liquidity.

42
<PAGE>

As of December 31, 2000, the net assets of the Nvest Funds (including the
Kobrick Funds) and the Money Market Funds totaled over $ _____ billion.

Automatic Exchange Plan
-----------------------

As described in the Prospectus following the caption "Additional Investor
Services," a shareholder may establish an Automatic Exchange Plan under which
shares of a Fund are automatically exchanged each month for shares of the same
class of one or more of the other funds. Registration on all accounts must be
identical. The two dates each month on which exchanges may be made are the 15th
and 28th (or the first business day thereafter if either the 15th or the 28th is
not a business day) until the account is exhausted or until NSC is notified in
writing to terminate the plan. Exchanges may be made in amounts of $100 or more.
The Service Options Form is available from Nvest Services Company or your
financial representative to establish an Automatic Exchange Plan.

Broker Trading Privileges
-------------------------

The Distributor may, from time to time, enter into agreements with one or
more brokers or other intermediaries to accept purchase and redemption orders
for Fund shares until the close of regular trading on the Exchange (normally,
4:00 p.m. Eastern Time on each day that the Exchange is open for trading); such
purchase and redemption orders will be deemed to have been received by the Fund
when the authorized broker or intermediary accepts such orders; and such orders
will be priced using that Fund's net asset value next computed after the orders
are placed with and accepted by such brokers or intermediaries. Any purchase and
redemption orders received by a broker or intermediary under these agreements
will be transmitted daily to the Distributor no later than the time specified in
such agreement; but, in any event, no later than 6:00 a.m. following the day
that such purchase or redemption orders are received by the broker or
intermediary.

Self-Servicing Your Account with Nvest Funds Personal Access Line(R) and Web
----------------------------------------------------------------------------
site
----

Nvest Funds shareholders may access account information, including share
balances and recent account activity online, by visiting our Web site at
www.nvestfunds.com. Transactions may also be processed online for certain
accounts (restrictions may apply). Such transactions include purchases,
redemptions and exchanges, and shareholders are automatically eligible for these
features. Nvest Funds has taken measures to ensure the security of shareholder
accounts, including the encryption of data and the use of personal
identification (PIN) numbers. In addition, you may restrict these privileges
from your account by calling Nvest Funds at 800-225-5478, or writing to us at
P.O. Box 8551, Boston, MA 02116. More information regarding these features may
be found on our Web site at www.nvestfunds.com.

Investor activity through these mediums are subject to the terms and conditions
outlined in the following Nvest Funds Online and Telephonic Customer Agreement.
This agreement is also posted on our Web site. The initiation of any activity
through the Nvest Funds Personal Access Line(R), or Web site at
www.nvestfunds.com by an investor shall indicate agreement with the following
terms and conditions:

Nvest Funds Online and Telephonic Customer Agreement
NOTE: ACCESSING OR REQUESTING ACCOUNT INFORMATION OR TRANSACTIONS THROUGH THIS
SITE CONSTITUTES AND SHALL BE DEEMED TO BE AN ACCEPTANCE OF THE FOLLOWING TERMS
AND CONDITIONS.

The accuracy, completeness and timeliness of all mutual fund information
provided is the sole responsibility of the mutual fund company which provides
the information. No party which provides a connection between this web site and
a mutual fund or its transfer agency system can verify or ensure the receipt of
any information transmitted to or from a mutual fund or its transfer agent, or
the acceptance by, or completion of any transaction with, a mutual fund.

43
<PAGE>

The online acknowledgments or other messages which appear on your screen for
transactions entered do not mean that the transactions have been received,
accepted or rejected by the mutual fund. These acknowledgments are only an
indication that the transactional information entered by you has either been
transmitted to the mutual fund, or that it cannot be transmitted. It is the
responsibility of the mutual fund to confirm to you that it has received the
information and accepted or rejected a transaction. It is the responsibility of
the mutual fund to deliver to you a current prospectus, confirmation statement
and any other documents or information required by applicable law.

NO TRANSACTION SHALL BE DEEMED ACCEPTED UNTIL YOU RECEIVE A WRITTEN CONFIRMATION
FROM THE FUND COMPANY.

You are responsible for reviewing all mutual fund account statements received by
you in the mail in order to verify the accuracy of all mutual fund account
information provided in the statement and transactions entered through this
site. You are also responsible for promptly notifying the mutual fund of any
errors or inaccuracies relating to information contained in, or omitted from
your mutual fund account statements, including errors or inaccuracies arising
from the transactions conducted through this site.

TRANSACTIONS ARE SUBJECT TO ALL REQUIREMENTS, RESTRICTIONS AND FEES AS SET FORTH
IN THE PROSPECTUS OF THE SELECTED FUND.

THE CONDITIONS SET FORTH IN THIS AGREEMENT EXTEND NOT ONLY TO TRANSACTIONS
TRANSMITTED VIA THE INTERNET BUT TO TELEPHONIC TRANSACTIONS INITIATED THROUGH
THE NVEST FUNDS PERSONAL ACCESS LINE(R).

You are responsible for the confidentiality and use of your personal
identification numbers, account numbers, social security numbers and any other
personal information required to access the site or transmit telephonically. Any
individual that possesses the information required to pass through all security
measures will be presumed to be you. All transactions submitted by an individual
presumed to be you will be solely your responsibility.

You agree that Nvest Funds does not have the responsibility to inquire as to the
legitimacy or propriety of any instructions received from you or any person
believed to be you, and is not responsible or liable for any losses that may
occur from acting on such instructions.

Nvest Funds is not responsible for incorrect data received via the Internet or
telephonically from you or any person believed to be you. Transactions submitted
over the Internet and telephonically are solely your responsibility and Nvest
Funds makes no warranty as to the correctness, completeness, or the accuracy of
any transmission. Similarly Nvest Funds bears no responsibility for the
performance of any computer hardware, software, or the performance of any
ancillary equipment and services such as telephone lines, modems, or Internet
service providers.

The processing of transactions over this site or telephonically will involve the
transmission of personal data including social security numbers, account numbers
and personal identification numbers. While Nvest Funds has taken reasonable
security precautions including data encryption designed to protect the integrity
of data transmitted to and from the areas of our Web site that relate to the
processing of transactions, we disclaim any liability for the interception of
such data.

You agree to immediately notify Nvest Funds if any of the following occurs:

1. You do not receive confirmation of a transaction submitted via the Internet
or telephonically within five (5) business days.

2. You receive confirmation of a transaction of which you have no knowledge
and was not initiated or authorized by you.

3. You transmit a transaction for which you do not receive a confirmation
number.

44
<PAGE>

4. You have reason to believe that others may have gained access to your
personal identification number (PIN) or other personal data.

5. You notice an unexplained discrepancy in account balances or other changes
to your account, including address changes, and banking instructions on any
confirmations or statements.

Any costs incurred in connection with the use of the Nvest Funds Personal Access
Line(R) or the Nvest Funds Internet site including telephone line costs, and
Internet service provider costs are solely your responsibility. Similarly Nvest
Funds makes no warranties concerning the availability of Internet services, or
network availability.

Nvest Funds reserves the right to suspend, terminate or modify the Internet
capabilities offered to shareholders without notice.

YOU HAVE THE ABILITY TO RESTRICT INTERNET AND TELEPHONIC ACCESS TO YOUR ACCOUNTS
BY NOTIFYING NVEST FUNDS OF YOUR DESIRE TO DO SO.

Written notifications to Nvest Funds should be sent to:

Nvest Funds
P O Box 8551
Boston, MA 02266-8551

Notification may also be made by calling 800-225-5478 during normal business
hours.

--------------------------------------------------------------------------------

REDEMPTIONS

--------------------------------------------------------------------------------

The procedures for redemption of shares of a Fund are summarized in the
Prospectus. As described in the Prospectus, a CDSC may be imposed on certain
purchases of Class A, Class B and Class C shares. For purposes of the CDSC, an
exchange of shares from one fund to another fund is not considered a redemption
or a purchase. For federal tax purposes, however, such an exchange is considered
a sale and a purchase and, therefore, would be considered a taxable event on
which you may recognize a gain or loss. In determining whether a CDSC is
applicable to a redemption of Class A, Class B or Class C shares, the
calculation will be determined in the manner that results in the lowest rate
being charged. Therefore, for Class B shares it will be assumed that the
redemption is first of any Class A shares in the shareholder's Fund account,
second of shares held for over six years, third of shares issued in connection
with dividend reinvestment and fourth of shares held longest during the six-year
period. For Class C shares and Class A shares subject to CDSC, it will be
assumed that the redemption is first of any shares that have been in the
shareholder's Fund account for over a year, and second of any shares that have
been in the shareholder's Fund account for under a year. The charge will not be
applied to dollar amounts representing an increase in the net asset value of
shares since the time of purchase or reinvested distributions associated with
such shares. Unless you request otherwise at the time of redemption, the CDSC is
deducted from the redemption, not the amount remaining in the account.

To illustrate, assume an investor purchased 100 Class B shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares under dividend reinvestment. If at such time the investor
makes his or her first redemption of 50 shares (proceeds of $600), 10 shares
will not be subject to the CDSC because of dividend reinvestment. With respect
to the remaining 40 shares, the CDSC is applied only to the original cost of $10
per

45
<PAGE>

share and not to the increase in the net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 4% (the
applicable rate in the second year after purchase).

Signatures on redemption requests must be guaranteed by an "Eligible
Guarantor Institution," as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934. However, a signature guarantee will not be required if the proceeds
of the redemption do not exceed $100,000 and the proceeds check is made payable
to the registered owner(s) and mailed to the record address.

If you select the telephone redemption service in the manner described in
the next paragraph, shares of a Fund may be redeemed by calling toll free 800-
225-5478. A wire fee, currently $5.00, will be deducted from the proceeds.
Telephone redemption requests must be received by the close of regular trading
on the Exchange. Requests made after that time or on a day when the Exchange is
not open for business cannot be accepted and a new request on a later day will
be necessary. The proceeds of a telephone withdrawal will normally be sent on
the first business day following receipt of a proper redemption request, which
complies with the redemption procedures established by the Funds from time to
time.

In order to redeem shares by telephone, a shareholder must either select
this service when completing the Fund application or must do so subsequently on
the Service Options Form, available from or your investment dealer. When
selecting the service, a shareholder may have their withdrawal proceeds sent to
their bank, in which case the shareholder must designate a bank account on their
application or Service Options Form to which the redemption proceeds should be
sent as well as provide a check marked "VOID" and/or a deposit slip that
includes the routing number of their bank. Any change in the bank account so
designated may be made by furnishing to NSC or your investment dealer a
completed Service Options Form with a signature guarantee. Whenever the Service
Options Form is used, the shareholder's signature must be guaranteed as
described above. Telephone redemptions may only be made if the designated bank
is a member of the Federal Reserve System or has a correspondent bank that is a
member of the System. If the account is with a savings bank, it must have only
one correspondent bank that is a member of the System. The Funds, the
Distributor and State Street Bank are not responsible for the authenticity of
withdrawal instructions received by telephone, subject to established
verification procedures. NSC, as agreed to with the Funds, will employ
reasonable procedures to confirm that your telephone instructions are genuine,
and if it does not, it may be liable for any losses due to unauthorized or
fraudulent instructions. Such verification procedures include, but are not
limited to, requiring a form of personal identification prior to acting on an
investor's telephone instructions and recording an investor's instructions.

The redemption price will be the net asset value per share (less any
applicable CDSC) next determined after the redemption request and any necessary
special documentation are received by State Street Bank or your investment
dealer in proper form. Payment normally will be made by State Street Bank on
behalf of the Fund within seven days thereafter. However, in the event of a
request to redeem shares for which the Fund has not yet received good payment,
the Funds reserve the right to withhold payments of redemption proceeds if the
purchase of shares was made by a check which was deposited within ten calendar
days prior to the redemption request (unless the Fund is aware that the check
has cleared).

The CDSC may be waived on redemptions made from IRA accounts due to
attainment of age 59 1/2 for IRA shareholders who established accounts prior to
January 3, 1995. The CDSC may also be waived on redemptions made from IRA
accounts due to death, disability, return of excess contribution, required
minimum distributions at age 70 1/2 (waivers apply only to amounts necessary to
meet the required minimum amount), certain withdrawals pursuant to a systematic
withdrawal plan, not to exceed 10% annually of the value of the account, and
redemptions made from the account to pay custodial fees.

The CDSC may be waived on redemptions made from 403(b)(7) custodial
accounts due to attainment of age 59 1/2 for shareholders who established
custodial accounts prior to January 3, 1995.

The CDSC may also be waived on redemptions necessary to pay plan
participants or beneficiaries from qualified retirement plans under Section 401
of the Code, including profit sharing plans, money purchase plans, 401(k) and
custodial accounts under Section 403(b)(7) of the Code. Distributions necessary
to pay plan participants and beneficiaries include payment made due to death,
disability, separation from service, normal or

46
<PAGE>

early retirement as defined in the plan document, loans from the plan and
hardship withdrawals, return of excess contributions, required minimum
distributions at age 70 1/2 (waivers only apply to amounts necessary to meet the
required minimum amount), certain withdrawals pursuant to a systematic
withdrawal plan, not to exceed 10% annually of the value of your account, and
redemptions made from qualified retirement accounts or Section 403(b)(7)
custodial accounts necessary to pay custodial fees.

A CDSC will apply in the event of plan level transfers, including transfers
due to changes in investment where assets are transferred outside of Nvest
Funds, including IRA and 403(b)(7) participant-directed transfers of assets to
other custodians (except for the reasons given above) or qualified transfers of
assets due to trustee-directed movement of plan assets due to merger,
acquisition or addition of additional funds to the plan.

In order to redeem shares electronically through the ACH system, a
shareholder's bank or credit union must be a member of the ACH system and the
shareholder must have a completed, approved ACH application on file. In
addition, the telephone request must be received no later than 4:00 p.m.
(Eastern Time). Upon receipt of the required information, the appropriate number
shares will be redeemed and the monies forwarded to the bank designated on the
shareholder's application through the ACH system. The redemption will be
processed the day the telephone call is made and the monies generally will
arrive at the shareholder's bank within three business days. The availability of
these monies will depend on the individual bank's rules.

The Funds will normally redeem shares for cash; however, the Funds reserve
the right to pay the redemption price wholly or partly in kind if the Trust's
Board of Trustees determines it to be advisable and in the interest of the
remaining shareholders of a Fund. The redemptions in kind will be selected by
the Fund's subadviser in light of the Fund's objective and will not generally
represent a pro rata distribution of each security held in the Fund's portfolio.
If portfolio securities are distributed in lieu of cash, the shareholder will
normally incur brokerage commissions upon subsequent disposition of any such
securities. However, the Funds have elected to be governed by Rule 18f-1 under
the 1940 Act, pursuant to which the Funds are obligated to redeem shares solely
in cash for any shareholder during any 90-day period up to the lesser of
$250,000 or 1% of the total net asset value of the relevant Fund at the
beginning of such period. The Funds do not currently intend to impose any
redemption charge (other than the CDSC imposed by the Funds' distributor),
although it reserves the right to charge a fee not exceeding 1% of the
redemption price. A redemption constitutes a sale of shares for federal income
tax purposes on which the investor may realize a long- or short-term capital
gain or loss. See also "Income Dividends, Capital Gain Distributions and Tax
Status," below.

The Funds may also close your account and send you the proceeds if the
balance in your account falls below a minimum amount set bythe Trust's Board of
Trustees (currently $1,000 for all accounts except Keogh, pension and profit
sharing plans, automatic investment plans, IRA accounts and accounts that have
fallen below the minimum solely because of fluctuations in the net asset value
per share). Shareholders who are affected by this policy will be notified of the
Fund's intention to close the account and will have 60 days immediately
following the notice to bring the account up to the minimum.

Reinstatement Privilege (Class A and Class C shares only)
---------------------------------------------------------

The Prospectus describes redeeming shareholders' reinstatement
privileges for Class A and Class C shares. Written notice and the investment
check from persons wishing to exercise this reinstatement privilege must be
received by your investment dealer within 120 days after the date of the
redemption. The reinstatement or exchange will be made at net asset value next
determined after receipt of the notice and the investment check and will be
limited to the amount of the redemption proceeds or to the nearest full share if
fractional shares are not purchased.

Even though an account is reinstated, the redemption will constitute a sale
for federal income tax purposes. Investors who reinstate their accounts by
purchasing shares of the Funds should consult with their tax advisers with
respect to the effect of the "wash sale" rule if a loss is realized at the time
of the redemption.

47
<PAGE>

--------------------------------------------------------------------------------

STANDARD PERFORMANCE MEASURES

--------------------------------------------------------------------------------

Calculation of Total Return. Total return is a measure of the change in value of
---------------------------
an investment in a Fund over the period covered, which assumes that any
dividends or capital gains distributions are automatically reinvested in shares
of the same class of that Fund rather than paid to the investor in cash. Each
Fund may show each class' average annual total return for the one-year,
five-year and ten-year periods (or for the life of the class, if shorter)
through the end of the most recent calendar quarter. The formula for total
return used by the Funds is prescribed by the SEC and includes three steps: (1)
adding to the total number of shares of the particular class that would be
purchased by a hypothetical $1,000 investment in the Fund (with or without
giving effect to the deduction of sales charge or CDSC, if applicable) all
additional shares that would have been purchased if all dividends and
distributions paid or distributed during the period had been automatically
reinvested; (2) calculating the value of the hypothetical initial investment as
of the end of the period by multiplying the total of shares owned at the end of
the period by the net asset value per share of the relevant class on the last
trading day of the period; (3) dividing this account value for the hypothetical
investor by the amount of the initial investment, and annualizing the result for
periods of less than one year. Total return may be stated with or without giving
effect to any expense limitations in effect for a Fund. For those funds that
present returns reflecting an expense limitation or waiver, its total return
would have been lower if no limitation or waiver were in effect.

Performance Comparisons
-----------------------

Total Return. Total returns will generally be higher for Class A shares
------------
than for Class B and Class C shares of the same Fund, because of the higher
levels of expenses borne by the Class B and Class C shares. The Funds may from
time to time include their total return in advertisements or in information
furnished to present or prospective shareholders. The Funds may from time to
time include in advertisements its total return and the ranking of those
performance figures relative to such figures for groups of mutual funds
categorized by Morningstar, Inc. ("Morningstar") or Lipper, Inc. ("Lipper") as
having similar investment objectives or styles.

The Funds may cite their ratings, recognition or other mention by
Morningstar or any other entity. Morningstar's rating system is based on risk-
adjusted total return performance and is expressed in a star-rating format. The
risk-adjusted number is computed by subtracting a fund's risk score (which is a
function of the fund's monthly returns less the 3-month Treasury Bill return)
from the fund's load adjusted total return score. This numerical score is then
translated into rating categories with the top 10% labeled five star, the next
22.5% labeled four star, the next 35% labeled three star, the next 22.5% labeled
two star and the bottom 10% one star. A high rating reflects either above-
average returns or below-average risk or both. Each Fund may also compare its
performance or ranking against all funds tracked by Morningstar or another
independent service, including Lipper.

Lipper Indices and Averages are calculated and published by Lipper, an
independent service that monitors the performance of more than 30,000 funds. The
Funds may also use comparative performance as computed in a ranking by Lipper or
category averages and rankings provided by another independent service. Should
Lipper or another service reclassify a Fund to a different category or develop
(and place a Fund into) a new category, the Fund may compare its performance or
ranking against other funds in the newly assigned category, as published by the
service.

Total return may also be used to compare the performance of the Fund
against certain widely acknowledged standards or indices for stock and bond
market performance or against the U.S. Bureau of Labor Statistics' Consumer
Price Index.

The Consumer Price Index, published by the U.S. Bureau of Labor Statistics,
is a statistical measure of changes, over time, in the prices of goods and
services in major expenditure groups.

48
<PAGE>

The S&P 500 is a market capitalization-weighted and unmanaged index showing
the changes in the aggregate market value of 500 stocks relative to the base
period 1941-43. The S&P 500 is composed almost entirely of common stocks of
companies listed on the Exchange, although the common stocks of a few companies
listed on the American Stock Exchange or traded over-the-counter are included.

The Russell 3000 Index is a market capitalization-weighted index which
comprises 3,000 of the largest capitalized U.S. companies whose common stock is
traded in the United States on the Exchange, the American Stock Exchange and
NASDAQ. The Russell 2000 Index represents the smallest 2,000 companies within
the Russell 3000 Index as measured by market capitalization. The Russell 1000
Index represents the largest 1,000 companies within the Russell 3000 Index. The
Russell 1000 Growth Index is an unmanaged subset of stocks from the larger
Russell 1000 Index, selected for their greater growth orientation. The Russell
1000 Value Index is an unmanaged subset of stocks from the larger Russell 1000
Index, selected for their greater value orientation.

Russell Mid-Cap Growth Index. The Russell Mid-Cap Growth Index is a market
capitalization weighted index of medium capitalization stocks determined by
Russell to be growth stocks as measured by their price-to-book ratios and
forecasted growth values.

Articles and releases, developed by the Funds and other parties, about
the Funds regarding performance, rankings, statistics and analyses of the
individual Funds' and the fund group's asset levels and sales volumes, numbers
of shareholders by Fund or in the aggregate for Nvest Funds, statistics and
analyses of industry sales volumes and asset levels, and other characteristics
may appear in advertising, promotional literature, publications, including, but
not limited to, those publications listed in Appendix B to this Statement, and
on various computer networks, for example, the Internet. In particular, some or
all of these publications may publish their own rankings or performance reviews
of mutual funds, including, but not limited to, Lipper and Morningstar.
References to these rankings or reviews or reprints of such articles may be used
in the Funds' advertising and promotional literature. Such advertising and
promotional material may refer to Nvest Companies, its structure, goals and
objectives and the advisory subsidiaries of Nvest Companies, including their
portfolio management responsibilities, portfolio managers and their categories
and background; their tenure, styles and strategies and their shared commitment
to fundamental investment principles and may identify specific clients, as well
as discuss the types of institutional investors who have selected the advisers
to manage their investment portfolios and the reasons for that selection. The
references may discuss the independent, entrepreneurial nature of each advisory
organization and allude to or include excerpts from articles appearing in the
media regarding Nvest Companies, its advisory subsidiaries and their personnel.
For additional information about the Funds' advertising and promotional
literature, see Appendix C.

The Funds may use the accumulation charts below in their advertisements
to demonstrate the benefits of monthly savings at an 8% and 10% rate of return,
respectively.

Investments At 8% Rate of Return

5 yrs. 10 15 20 25 30
------- ------- -------- -------- -------- --------
$50 3,698 9,208 17,417 29,647 47,868 75,015
75 5,548 13,812 26,126 44,471 71,802 112,522
100 7,396 18,417 34,835 59,295 95,737 150,029
150 11,095 27,625 52,252 88,942 143,605 225,044
200 14,793 36,833 69,669 118,589 191,473 300,059
500 36,983 92,083 174,173 296,474 478,683 750,148

Investments At 10% Rate of Return

5 yrs. 10 15 20 25 30
------- -------- -------- -------- -------- --------
$50 3,904 10,328 20,896 38,285 66,895 113,966
75 5,856 15,491 31,344 57,427 100,342 170,949

49
<PAGE>

100 7,808 20,655 41,792 76,570 133,789 227,933
150 11,712 30,983 62,689 114,855 200,684 341,899
200 15,616 41,310 83,585 153,139 267,578 455,865
500 39,041 103,276 208,962 382,848 668,945 1,139,663

The Funds' advertising and sales literature may refer to historical,
current and prospective political, social, economic and financial trends and
developments that affect domestic and international investment as it relates to
any of the Nvest Funds. The Funds' advertising and sales literature may include
historical and current performance and total returns of investment alternatives
to the Nvest Funds Articles, releases, advertising and literature may discuss
the range of services offered by the Trust, the Nvest Funds Trusts, the
Distributor and the transfer agent of the Funds, with respect to investing in
shares of the Funds and customer service. Such materials may discuss the
multiple classes of shares available through the Trust and their features and
benefits, including the details of the pricing structure.

The Distributor may make reference in its advertising and sales literature
to awards, citations and honors bestowed on it by industry organizations and
other observers and raters. Such reference may explain the criteria for the
award, indicate the nature and significance of the honor and provide statistical
and other information about the award and the Distributor's selection including,
but not limited to, the scores and categories in which the Distributor excelled,
the names of funds and fund companies that have previously won the award and
comparative information and data about those against whom the Distributor
competed for the award, honor or citation.

The Distributor may publish, allude to or incorporate in its advertising
and sales literature testimonials from shareholders, clients, brokers who sell
or own shares, broker-dealers, industry organizations and officials and other
members of the public, including, but not limited to, Fund performance, features
and attributes, or service and assistance provided by departments within the
organization, employees or associates of the Distributor.

Advertising and sales literature may also refer to the beta coefficient of
the Nvest Funds. A beta coefficient is a measure of systematic or
undiversifiable risk of a stock. A beta coefficient of more than 1 means that
the company's stock has shown more volatility than the market index (e.g., the
S&P 500) to which it is being related. If the beta is less than 1, it is less
volatile than the market average to which it is being compared. If it equals 1,
its risk is the same as the market index. High variability in stock price may
indicate greater business risk, instability in operations and low quality of
earnings. The beta coefficients of the Nvest Funds may be compared to the beta
coefficients of other funds.

The Funds may enter into arrangements with banks exempted from broker-
dealer registration under the Securities Exchange Act of 1934. Advertising and
sales literature developed to publicize such arrangements will explain the
relationship of the bank to the Nvest Funds and the Distributor as well as the
services provided by the bank relative to the Funds. The material may identify
the bank by name and discuss the history of the bank including, but not limited
to, the type of bank, its asset size, the nature of its business and services
and its status and standing in the industry.

In addition, sales literature may be published concerning topics of general
investor interest for the benefit of registered representatives and the Funds'
prospective shareholders. These materials may include, but are not limited to,
discussions of college planning, retirement planning and reasons for investing
and historical examples of the investment performance of various classes of
securities, securities markets and indices.

50
<PAGE>

--------------------------------------------------------------------------------

INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
--------------------------------------------------------------------------------

As described in the Prospectus, it is the policy of each Fund to pay
its shareholders, as dividends, substantially all net investment income and to
distribute annually all net realized long-term capital gains, if any, after
offsetting any capital loss carryovers.

Ordinary income dividends and capital gain distributions are payable in
full and fractional shares of the relevant class of the particular Fund based
upon the net asset value determined as of the close of the Exchange on the
record date for each dividend or distribution. Shareholders, however, may elect
to receive their ordinary income dividends or capital gain distributions, or
both, in cash. The election may be made at any time by submitting a written
request directly to Nvest Funds. In order for a change to be in effect for any
dividend or distribution, it must be received by Nvest Funds on or before the
record date for such dividend or distribution.

If you elect to receive your dividends in cash and the dividend checks
sent to you are returned "undeliverable" to the Fund or remain uncashed for six
months, your cash election will automatically be changed and your future
dividends will be reinvested. No interest will accrue on amounts represented by
uncashed dividend or redemption checks.

As required by federal law, detailed federal tax information will be
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year.

Each Fund intends to qualify each year as a regulated investment
company under Subchapter M of the Code. In order to qualify, each Fund must,
among other things, (i) derive at least 90% of its gross income in each taxable
year from dividends, interest, payments with respect to certain securities
loans, gains from the sale of securities or foreign currencies, or other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies; (ii) distribute at least 90% of its dividend, interest
and certain other taxable income each year; and (iii) diversify its holdings so
that at the end of each fiscal quarter, (a) at least 50% of the value of its
total assets consists of cash, U.S. government securities, securities of other
regulated investment companies, and other securities limited generally, with
respect to any one issuer, to no more than 5% of the value of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (b) not
more than 25% of the value of its assets is invested in the securities (other
than those of the U.S. government or other regulated investment companies) of
any one issuer or of two or more issuers which the Fund controls and which are
engaged in the same, similar or related trades or businesses. So long as it
qualifies for treatment as a regulated investment company, a Fund will not be
subject to federal income tax on income paid to its shareholders in the form of
dividends or capital gains distributions.

An excise tax at the rate of 4% will be imposed on the excess, if any,
of each Fund's "required distribution" over its actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 (or December 31, if
the Fund is so permitted to elect and so elects) plus undistributed amounts from
prior years. Each Fund intends to make distributions sufficient to avoid
imposition of the excise tax. Distributions declared and payable by a Fund
during October, November or December to shareholders of record on a date in any
such month and paid by the Fund during the following January will be treated for
federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.

Fund distributions paid to you either in cash or reinvested in
additional shares are generally taxable to you either as ordinary income or as
capital gains. Distributions derived from short-term capital gains or investment
income are generally taxable at ordinary income rates. If you are a corporation
investing in a Fund, a

51
<PAGE>

portion of these dividends may qualify for the dividends-received deduction
provided that you meet certain holding period requirements. Distributions of net
long-term capital gains (i.e., the excess of net gains from capital assets held
for more than one year over net losses from capital assets held for not more
than one year) that are designated by a Fund as capital gain dividends will
generally be taxable to a shareholder receiving such distributions as long-term
capital gain (generally taxed at a 20% tax rate for noncorporate shareholders)
regardless of how long the shareholder has held Fund shares. To avoid an excise
tax, each Fund intends to distribute dividends prior to calendar year-end. Some
dividends paid in January may be taxable as if they were received in the
previous December.

Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when a Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.

Under the Code, the interest on so-called "private activity" bonds is
an item of tax preference, which, depending on the shareholder's particular tax
situation, might subject the shareholder to an alternative minimum tax with a
maximum rate of 28%. The interest on tax exempt bonds issued after certain dates
in 1986 is retroactively taxable from the date of issuance if the issuer does
not comply with certain requirements concerning the use of bond proceeds and the
application of earnings on bond proceeds.

Each Fund's transactions, if any, in foreign currencies and foreign
currency denominated bonds and its hedging activities are likely to result in a
difference between the Fund's book income and taxable income. This difference
may cause a portion of the Fund's income distributions to constitute a return of
capital or capital gain for tax purposes or require the Fund to make
distributions exceeding book income to avoid excise tax liability and to qualify
as a regulated investment company.

Funds investing in foreign securities may own shares in certain foreign
investment entities, referred to as "passive foreign investment companies." In
order to avoid U.S. federal income tax, and an additional charge on a portion of
any "excess distribution" from such companies or gain from the disposition of
such shares, each Fund has elected to "mark to market" annually its investments
in such entities and to distribute any resulting net gain to shareholders. Each
Fund may also elect to treat the passive foreign investment company as a
"qualified electing fund." As a result, each Fund may be required to sell
securities it would have otherwise continued to hold in order to make
distributions to shareholders to avoid any Fund-level tax.

Funds investing in foreign securities may be liable to foreign
governments for taxes relating primarily to investment income or capital gains
on foreign securities in the Fund's portfolio. Each Fund may in some
circumstances be eligible to, and in its discretion may, make an election under
the Code which would allow Fund shareholders who are U.S. citizens or U.S.
corporations to claim a foreign tax credit or deduction (but not both) on their
U.S. income tax return. If a Fund makes the election, the amount of each
shareholder's distribution reported on the information returns filed by such
Fund with the IRS must be increased by the amount of the shareholder's portion
of the Fund's foreign tax paid.

Redemptions and exchanges of each Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions.
Currently, if shares have been held for more than one year, gain or loss
realized will be taxed at long-term federal tax rates (generally 20% for
noncorporate shareholders), provided the shareholder holds the shares as a
capital asset. Furthermore, no loss will be allowed on the sale of Fund shares
to the extent the shareholder acquired other shares of the same Fund within 30
days prior to the sale of the loss shares or 30 days after such sale.

A loss on the sale of shares held for six months or less will be
disallowed for federal income tax purposes to the extent of exempt-interest
dividends received with respect to such shares and thereafter treated as a
long-term capital loss to the extent of any long-term capital gain dividend paid
to the shareholder with respect to such shares.

52
<PAGE>

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and related regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative actions.

Dividends and distributions also may be subject to state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.

Each Fund is required to withhold 31% of all income dividends and
capital gains distributions it pays to you if you do not provide a correct,
certified taxpayer identification number, if a Fund is notified that you have
underreported income in the past or if you fail to certify to a Fund that you
are not subject to such withholding. If you are a tax-exempt shareholder,
however, these backup withholding rules will not apply so long as you furnish
the Fund with an appropriate certification.

The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).

53
<PAGE>

APPENDIX A
DESCRIPTION OF BOND RATINGS

STANDARD & POOR'S RATINGS GROUP
-------------------------------

AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay interest and repay
principal.

AA -- Bonds rated AA also qualify as high quality debt obligations. Capacity to
pay interest and repay principal is very strong, and in the majority of
instances they differ from AAA issues only in small degree.

A -- Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to repay principal and pay interest for
bonds in this category than for bonds in higher rated categories.

BB, B, CCC, CC, C -- Bonds rated BB, B, CCC, CC and C are regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.

CI -- The rating CI is reserved for income bonds on which no interest is being
paid.

D -- Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.

Plus (+) or Minus (-); The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

MOODY'S INVESTORS SERVICE, INC.
-------------------------------

Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large, or by an exceptionally
stable, margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa -- Bonds that are rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.

A -- Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.

Baa -- Bonds that are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.

54
<PAGE>

Ba -- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B -- Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default of there may be present elements of danger with respect to principal or
interest.

Ca -- Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C -- Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Should no rating be assigned by Moody's, the reason may be one of the following:

1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not rated
as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed in which case the rating is not
published in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is not longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.

Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, and B1.

FITCH INVESTOR SERVICES, INC.
-----------------------------

AAA -- This is the highest rating assigned by Fitch to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.

A -- Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

CI -- The rating CI is reserved for income bonds on which no interest is being
paid.

D -- Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.

55
<PAGE>

Plus (+) or Minus (-); The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

56
<PAGE>

APPENDIX B
MEDIA THAT MAY CONTAIN FUND INFORMATION

ABC and affiliates
Adam Smith's Money World
America OnLine
Anchorage Daily News
Arizona Republic
Atlanta Constitution
Atlanta Journal
Austin American Statesman
Baltimore Sun
Bank Investment Marketing
Barron's
Bergen County Record (NJ)
Bloomberg Business News
B'nai B'rith Jewish Monthly
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
Cincinnati Post
CNBC
CNN
Columbus Dispatch
CompuServe
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghues Money Fund Report
Dorfman, Dan (syndicated column)
Dow Jones News Service
Economist
FACS of the Week
Fee Adviser
Financial News Network
Financial Planning
Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World
Fitch Insights

57
<PAGE>

Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Fund Decoder
Global Finance
(the) Guarantor
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Individual Investor
Institutional Investor
International Herald Tribune
Internet
Investment Advisor
Investment Company Institute
Investment Dealers Digest
Investment Profiles
Investment Vision
Investor's Business Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas City)
KOA-AM (Denver)
Los Angeles Times
Leckey, Andrew (syndicated column)
Lear's
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
Mutual Funds Magazine
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post

58
<PAGE>

Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UPI
US News and World Report
USA Today
USA TV Network
Value Line
Wall St. Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
WEEI
WHDH
Worcester Telegram
World Wide Web
Worth Magazine
WRKO

59
<PAGE>

APPENDIX C
ADVERTISING AND PROMOTIONAL LITERATURE

References may be included in Nvest Funds' advertising and promotional
literature to Nvest Companies and its affiliates that perform advisory and
subadvisory functions for Nvest Funds including, but not limited to: Back Bay
Advisors, Harris Associates, Loomis Sayles, CGM, Westpeak, Jurika & Voyles,
L.P., Vaughan, Nelson, Scarborough & McCullough, L.P. and Kobrick Funds LLC.
Reference also may be made to the Funds of their respective fund groups, namely,
the Loomis Sayles Funds and the Oakmark Family of Funds advised by Harris
Associates.

References may be included in Nvest Funds' advertising and promotional
literature to other Nvest Companies affiliates including, but not limited to AEW
Capital Management, L.P., Snyder Capital Management, L.P, Reich & Tang Capital
Management, Reich & Tang Funds and their fund groups.

References to subadvisers unaffiliated with Nvest Companies that
perform subadvisory functions on behalf of Nvest Funds and their respective fund
groups may be contained in Nvest Funds' advertising and promotional literature
including, but not limited to, Janus Capital, Montgomery and RS Investment
Management.

Nvest Funds' advertising and promotional material will include, but is
not limited to, discussions of the following information about both affiliated
and unaffiliated entities:

. Specific and general assessments and forecasts regarding U.S. and world
economies, and the economies of specific nations and their impact on the
Nvest Funds;

. Specific and general investment emphasis, specialties, fields of expertise,
competencies, operations and functions;

. Specific and general investment philosophies, strategies, processes,
techniques and types of analysis;

. Specific and general sources of information, economic models, forecasts and
data services utilized, consulted or considered in the course of providing
advisory or other services;

. The corporate histories, founding dates and names of founders of the
entities;

. Awards, honors and recognition given to the entities;

. The names of those with ownership interest and the percentage of ownership
interest;

. The industries and sectors from which clients are drawn and specific client
names and background information on current individual, corporate and
institutional clients, including pension and profit sharing plans;

. Current capitalizations, levels of profitability and other financial and
statistical information;

. Identification of portfolio managers, researchers, economists, principals
and other staff members and employees;

. The specific credentials of the above individuals, including, but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors;

. Specific and general reference to past and present notable and renowned
individuals including reference to their field of expertise and/or specific
accomplishments;

60
<PAGE>

. Current and historical statistics regarding:

-total dollar amount of assets managed
-Nvest Funds' assets managed in total and by fund
-the growth of assets-asset types managed
-numbers of principal parties and employees, and the length of their
tenure, including officers, portfolio managers, researchers, economists,
technicians and support staff
-the above individuals' total and average number of years of industry
experience and the total and average length of their service to the
adviser or sub-adviser;

. The general and specific strategies applied by the advisers in the
management of Nvest Funds portfolios including, but not limited to:

-the pursuit of growth, value, income oriented, risk management or other
strategies
-the manner and degree to which the strategy is pursued
-whether the strategy is conservative, moderate or extreme and an
explanation of other features and attributes
-the types and characteristics of investments sought and specific
portfolio holdings
-the actual or potential impact and result from
strategy implementation
-through its own areas of expertise and operations, the value added by
sub-advisers to the management process
-the disciplines it employs, e.g., in the case of Loomis Sayles, the
strict buy/sell guidelines and focus on sound value it employs, and goals
and benchmarks that it establishes in management, e.g., CGM pursues
growth 50% above the S&P 500
-the systems utilized in management, the features and characteristics of
those systems and the intended results from such computer analysis, e.g.,
Westpeak's efforts to identify overvalued and undervalued issues; and

. Specific and general references to portfolio managers and funds that they
serve as portfolio manager of, other than Nvest Funds, and those families of
funds, other than Nvest Funds. Any such references will indicate that Nvest
Funds and the other funds of the managers differ as to performance,
objectives, investment restrictions and limitations, portfolio composition,
asset size and other characteristics, including fees and expenses.
References may also be made to industry rankings and ratings of the Funds
and other funds managed by the Funds' advisers and sub-advisers, including,
but not limited to, those provided by Morningstar, Lipper, Forbes and Worth.

In addition, communications and materials developed by Nvest Funds will
make reference to the following information about Nvest Companies and its
affiliates:

Nvest Companies is a subsidiary of CDC Asset Management. CDC Asset
Management is part of the investment management arm of France's Caisse des
Depots et Consignations, ("CDC"), a major diversified financial institution. As
of December 31, 2000 Nvest Companies had more than $______ billion in assets
under management. In addition, promotional materials may include:

. Specific and general references to Nvest Funds multi-manager approach
through Nvest Companies' affiliates and outside firms including, but not
limited to, the following:

-that each adviser/manager operates independently on a day-to-day basis
and maintains an image and identity separate from Nvest Companies and the
other investment managers
-other fund companies are limited to a "one size fits all" approach but
Nvest Funds draws upon the talents of multiple managers whose expertise
best matches the fund objective

61
<PAGE>

-in this and other contexts reference may be made to Nvest Funds' slogan
"Where The Best Minds Meet"(R) and that Nvest Funds' ability to match the
talent to the task is one more reason it is becoming known as "Where The
Best Minds Meet."
-Nvest Management may distribute sales and advertising materials that
illustrate the Star Concept by using historical category comparisons of a
general nature. Categories from mutual fund ranking services, such as
Morningstar, Inc., are selected for each of the Fund segments based on
current investment styles and are subject to change with market
conditions. There will be differences between the performance of the
categories and the Nvest Star Fund being illustrated. The illustrations
are used for hypothetical purposes only as a general demonstration of how
the Star Concept works.

Nvest Managed Account Services ("NMAS"), Nvest Advisor Services ("NAS")
and Nvest Retirement Services ("NRS"), divisions of Nvest Companies, may be
referenced in Fund advertising and promotional literature concerning the
marketing services it provides to Nvest Companies affiliated fund groups
including: Nvest Funds, Loomis Sayles Funds, Jurika & Voyles, Back Bay Advisors,
Oakmark Funds, Delafield Fund and Kobrick Funds.

NMAS, NAS and NRS will provide marketing support to Nvest Companies
affiliated fund groups targeting financial advisers, financial intermediaries
and institutional clients who may transact purchases and other fund-related
business directly with these fund groups. Communications will contain
information including, but not limited to: descriptions of clients and the
marketplaces to which it directs its efforts; the mission and goals of NAS and
NRS and the types of services it provides which may include: seminars; its 1-800
number, web site, Internet or other electronic facilities; qualitative
information about the funds' investment methodologies; information about
specific strategies and management techniques; performance data and features of
the funds; institutional oriented research and portfolio manager insight and
commentary. Additional information contained in advertising and promotional
literature may include: rankings and ratings of the funds including, but not
limited to, those of Morningstar and Lipper; statistics about the advisers',
fund groups' or a specific fund's assets under management; the histories of the
advisers and biographical references to portfolio managers and other staff
including, but not limited to, background, credentials, honors, awards and
recognition received by the advisers and their personnel; and commentary about
the advisers, their funds and their personnel from third-party sources including
newspapers, magazines, periodicals, radio, television or other electronic media.

References may be included in Nvest Funds' advertising and promotional
literature about its 401(k) and retirement plans. The information may include,
but is not limited to:

. Specific and general references to industry statistics regarding 401(k) and
retirement plans including historical information, industry trends and
forecasts regarding the growth of assets, numbers of plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and other organizations involved in 401(k) and
retirement programs with whom Nvest Funds may or may not have a
relationship.

. Specific and general references to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the Nvest Funds as a
401(k) or retirement plan funding vehicle produced by, including, but not
limited to, Investment Company Institute and other industry authorities,
research organizations and publications.

. Specific and general discussion of economic, legislative, and other
environmental factors affecting 401(k) and retirement plans, including, but
not limited to, statistics, detailed explanations or broad summaries of:

-past, present and prospective tax regulation, Internal Revenue Service
requirements and rules, including, but not limited to, reporting
standards, minimum distribution notices, Form 5500, Form 1099R and other
relevant forms and documents, Department of Labor rules and standards and
other regulations. This includes past, current and future initiatives,
interpretive releases and positions of regulatory authorities about the
past, current or future eligibility, availability, operations,
administration, structure, features, provisions or benefits of 401(k) and
retirement plans;

62
<PAGE>

-information about the history, status and future trends of Social
Security and similar government benefit programs including, but not
limited to, eligibility and participation, availability, operations and
administration, structure and design, features, provisions, benefits and
costs; and

-current and prospective ERISA regulation and requirements.

. Specific and general discussion of the benefits of 401(k) investment and
retirement plans, and, in particular, the Nvest Funds 401(k) and retirement
plans, to the participant and plan sponsor, including explanations,
statistics and other data, about:

-increased employee retention
-reinforcement or creation of morale
-deductibility of contributions for participants
-deductibility of expenses for employers
-tax deferred growth, including illustrations and charts
-loan features and exchanges among accounts
-educational services materials and efforts, including, but not limited
to, videos, slides, presentation materials, brochures, an investment
calculator, payroll stuffers, quarterly publications, releases and
information on a periodic basis and the availability of wholesalers and
other personnel.

. Specific and general reference to the benefits of investing in mutual funds
for 401(k) and retirement plans, and Nvest Funds as a 401(k) or retirement
plan funding vehicle.

. Specific and general reference to the role of the investment dealer and the
benefits and features of working with a financial professional including:

-access to expertise on investments
-assistance in interpreting past, present and future market trends and
economic events
-providing information to clients including participants during enrollment
and on an ongoing basis after participation
-promoting and understanding the benefits of investing, including mutual
fund diversification and professional management.

63
<PAGE>

Registration Nos. 33-62061
811-7345

NVEST FUNDS TRUST III

PART C
OTHER INFORMATION

Item 23. Exhibits

(a) Articles of Incorporation.

(1) The Registrant's Agreement and Declaration of Trust dated
August 22, 1995 (the "Agreement and Declaration") is
incorporated by reference to exhibit (a)(1) to Post-Effective
Amendment ("PEA") No. 11 to the Registration Statement filed
on April 27, 2000 ("Registration Statement").

(2) Amendment No. 1 dated March 2, 1998 to the Agreement and
Declaration of Trust is incorporated by reference to exhibit
(a)(2) to PEA No. 11 to the Registration Statement filed on
April 27, 2000.

(3) Amendment No. 2 dated February 22, 1999 to the Agreement and
Declaration of Trust is incorporated by reference to exhibit
(a)(3) to PEA No. 11 to the Registration Statement filed on
April 27, 2000.

(4) Amendment No. 3 dated November 12, 1999 to the Agreement and
Declaration of Trust is incorporated by reference to exhibit
(a)(4) to Post-Effective Amendment ("PEA") PEA No. 10 to the
Registration Statement filed on February 18, 2000.

(5) Amendment No. 4 dated November 10, 2000 to the Agreement and
Declaration of Trust is filed herewith.

(6) Amendment No. 5 to the Agreement and Declaration of Trust will
be filed by Amendment.

(b) By-Laws.

The Registrant's By-Laws are incorporated by reference to
exhibit (b)(2) of the initial Registration Statement filed on
August 23, 1995.

Rights of shareholders are described in Article III, Section 6
of the Agreement and Declaration of Trust incorporated by
reference to exhibit (a)(1) to this PEA No. 11 to the
Registration Statement.

(d) Investment Advisory Contracts.

(1) (i) Advisory Agreement dated October 30, 2000 between the
Registrant, on behalf of Nvest Equity Income Fund, and Nvest
Funds Management, L.P. ("NFM") is filed herewith.

(ii) Advisory Agreement dated October 30, 2000 between the
Registrant, on behalf of Nvest Bullseye Fund, and NFM is filed
herewith.

(iii) Advisory Agreement between the Registrant, on behalf of Nvest
Equity Research Fund, Nvest Mid Cap Growth Fund and Nvest
Select Fund will be filed by Amendment.
<PAGE>

(2) (i) Subadvisory Agreement dated October 30, 2000 among the
Registrant, on behalf of Nvest Equity Income Fund, NFM and
Vaughan, Nelson, Scarborough & McCullough, L.P. ("VNSM") is
filed herewith.

(ii) Subadvisory Agreement dated October 30, 2000 among the
Registrant, on behalf of Nvest Bullseye Fund, NFM and Jurika &
Voyles, L.P. ("Jurika & Voyles") is filed herewith.

(iii) Subadvisory Agreement among the Registrant, on behalf of
Nvest Equity Research Fund and Nvest Mid Cap Growth Fund, NFM
and Loomis, Sayles & Company, L.P. ("Loomis Sayles") will be
filed by Amendment.

(iv) Subadvisory Agreement among the Registrant, on behalf of
Nvest Select Fund, NFM and Harris Associates L.P. ("Harris
Associates") will be filed by Amendment.

(e) Underwriting Contracts.

(1) Form of Distribution Agreement dated October 30, 2000 between
the Registrant on behalf of Nvest Equity Income Fund and Nvest
Funds Distributor, L.P. ("NFD") is filed herewith.

(2) Form of Distribution Agreement dated October 30, 2000 between
the Registrant, on behalf of Nvest Bullseye Fund, and the
Distributor is filed herewith.

(3) Distribution Agreement between the Registrant, on behalf of
Nvest Equity Research Fund and Nvest Mid Cap Growth Fund and
Nvest Select Fund, and NFD will be filed by Amendment.

(4) Form of Dealer Agreement used by Nvest Funds Distributor, L.P.
is filed herewith.

2
<PAGE>

(f) Bonus or Profit Sharing Contracts.

Not applicable.

(g) Custodian Agreements.

(1) Custody Agreement dated November 15, 1995 between the
Registrant on behalf of Nvest Bullseye Fund and Nvest Equity
Income Fund, and -- State Street Bank and Trust Company
("State Street Bank") will be filed by Amendment.

(2) Letter Agreement dated March 16, 1998 between Registrant and
State Street Bank relating to the applicability of the
Custodian Contract to Nvest Bullseye Fund is incorporated by
reference to exhibit (g)(2) to PEA No. 11 to the Registration
Statement filed on April 27, 2000.

(3) Amendment dated February 28, 2000 to the Custody Contract
dated November 15, 1995 is incorporated by reference to
exhibit (g)(4) to PEA No. 11 to the Registration Statement
filed on April 27, 2000.

(4) Amendment to the Custody Agreement dated November 15, 1995
between the Registrant, on behalf of Nvest Equity Research
Fund, Nvest Mid Cap Growth Fund and Nvest Select Fund, and
State Street Bank will be filed by Amendment.

(h) Other Material Contracts.

(1) (i) Transfer Agency and Service Agreement dated November 1, 1999
among the Registrant, Nvest Funds Trust I, Nvest Funds Trust
II, Nvest Cash Management Trust and Nvest Tax Exempt Money
Market Trust, on behalf of Nvest Equity Income Fund and Nvest
Bullseye Fund, and Nvest Services Company, Inc. ("NSC") is
incorporated by reference to exhibit (i)(1) to PEA No. 11 to
the Registration Statement filed on April 27, 2000.

(ii) Amendment dated December 1, 2000 to Fee Schedule of Transfer
Agency and Service Agreement dated October 30, 2000 is filed
herewith.

(iii) Amendment to Transfer Agency and Service Agreement between the
Registrant, on behalf of Nvest Equity Research Fund, Nvest Mid
Cap Growth Fund and Nvest Select Fund, and NSC will be filed
by Amendment.

(2) (i) Administrative Services Agreement dated October 30, 2000 among
the Registrant, Nvest Funds Trust I, Nvest Funds Trust II,
Nvest Cash Management Trust and Nvest Tax Exempt Money Market
Trust, on behalf of Nvest Equity Income Fund and Nvest
Bullseye Fund, and NSC will be filed by Amendment.

3
<PAGE>

(ii) Amendment dated December 1, 2000 to Administrative Services
Agreement dated October 30, 2000 will be filed by
Amendment.

(iii) Amendment to Administrative Services Agreement dated October
30, 2000 between the Registrant, on behalf of Nvest Equity
Research Fund, Nvest Mid Cap Growth Fund and Nvest Select
Fund, and NSC will be filed by Amendment.

(3) Fee Waiver/Expense Reimbursement Undertakings dated May 1,
2000 between NFM and the Registrant and its respective series
enumerated in such undertakings is incorporated by reference
to exhibit (h)(6) to PEA No. 11 to the Registration Statement
filed on April 27, 2000.

(i) Legal Opinion.

(1) Opinion of Ropes & Gray with respect to Nvest Equity Income
Fund is incorporated herein by reference to PreEA No. 3 to the
Registration Statement filed on November 22, 1995.

(2) Opinion of Ropes & Gray with respect to Nvest Bullseye Fund is
incorporated herein by reference to exhibit I to PEA No. 7 to
the Registration Statement filed on February 16, 1999.

(3) Opinion of Ropes & Gray with respect to Nvest Equity Research
Fund, Nvest Mid Cap Growth Fund and Nvest Select Fund will be
filed by Amendment

(j) Other Opinions.

Consent of PricewaterhouseCoopers LLP will be filed by
Amendment.

(k) Omitted Financial Statements.

Not applicable.

(l) Initial Capital Agreements.

Investment Letter of Loomis Sayles Funded Pension Plan and
Trust is incorporated by reference to PreEA No. 3 to the
Registration Statement filed on November 22, 1995.

4
<PAGE>

(m) Rule 12b-1 Plans.

(1) Rule 12b-1 Plan for class A shares of Nvest Equity Income Fund
will be filed by Amendment.

(2) Rule 12b-1 Plan for class B shares of Nvest Equity Income Fund
will be filed by Amendment.

(3) Rule 12b-1 Plan for class C shares of Nvest Equity Income Fund
will be filed by Amendment.

(4) Rule 12b-1 Plan for class A shares of Nvest Bullseye Fund will
be filed by Amendment.

(5) Rule 12b-1 Plan for Class B shares of Nvest Bullseye Fund will
be filed by Amendment.

(6) Rule 12b-1 Plan for Class C shares of Nvest Bullseye Fund will
be filed by Amendment.

(7) Rule 12b-1 Plan relating to Class A shares of the Registrant,
on behalf of Nvest Equity Research Fund, Nvest Mid Cap Growth
Fund and Nvest Select Fund, will be filed by Amendment.

(8) Rule 12b-1 Plan relating to Class B shares of the Registrant,
on behalf of Nvest Equity Research Fund, Nvest Mid Cap Growth
Fund and Nvest Select Fund, will be filed by Amendment.

(9) Rule 12b-1 Plan relating to Class C shares of the Registrant,
on behalf of Nvest Equity Research Fund, Nvest Mid Cap Growth
Fund and Nvest Select Fund, will be filed by Amendment.

5
<PAGE>

(n) Rule 18f-3 Plan

Registrant's Plan pursuant to Rule 18f-3(d) under the
Investment Company Act of 1940, as amended, dated December 1,
2000, is filed herewith.

(p) Code of Ethics

(1)(i) Code of Ethics for Registrant is incorporated by reference to
PEA No. 11 to the Registration Statement filed on April 27,
2000.

(ii) Code of Ethics dated August 25, 2000 for Registrant is filed
herewith.

(2)(i) Code of Ethics dated August 1999 as revised March 2000 for NFM
and NFD is incorporated by reference to PEA No. 11 to the
Registration Statement filed on April 27, 2000.

(ii) Code of Ethics dated July 1, 2000 for NFM, NFD and NSC is
filed herewith.

(3) Code of Ethics and Policy on Personal Trading effective March
21, 2000 for Jurika & Voyles is filed herewith.

(4) Code of Ethics dated June 1, 2000 for VNSM will be filed by
Amendment.

(5) Code of Ethics effective January 14, 2000 for Loomis Sayles is
filed herewith.

(6) Code of Ethics effective April 18, 2000 for Harris Associates
is filed herewith.

Item 24. Persons Controlled by or under Common Control with the Fund.

None.

Item 25. Indemnification.

Under Article 4 of the Registrant's By-laws, any past or present
Trustee or officer of the Registrant (hereinafter referred to as a "Covered
Person") shall be indemnified to the fullest extent permitted by law against all
liability and all expenses reasonably incurred by him or her in connection with
any claim, action, suit or proceeding to which he or she may be a party or
otherwise involved by reason of his or her being or having been a Covered
Person. That provision does not authorize indemnification when it is determined
that such covered person would otherwise be liable to the Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his or her duties. This description is modified in its
entirety by the provision of Article 4 of the Registrant's By-laws contained in
the initial Registration Statement filed on August 23, 1995 as exhibit (b)(2)
and is incorporated by reference.

The Distribution Agreement, the Custodian Contract, the Transfer
Agency and Service Agreement and the Administrative Services Agreement (the
"Agreements") contained herein and in various post-effective amendments and
incorporated herein by reference, provide for indemnification. The general
effect of these provisions is to indemnify entities contracting with the Trust
against liability and expenses in certain circumstances. This description is
modified in its entirety by the provisions of the Agreements as contained in
this Registration Statement and incorporated herein by reference.

6
<PAGE>

Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act "), may be permitted to
Trustees, officers and controlling persons of the Registrant pursuant to the
foregoing provisions or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a Trustee, officer or controlling person of the Registrant in connection
with the successful defense of any claim, action, suit or proceeding) is
asserted against the Registrant by such Trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

Registrant and its Trustees, officers and employees are insured, under
a policy of insurance maintained by the Registrant in conjunction with Nvest
Companies, L.P. and its affiliates, within the limits and subject to the
limitations of the policy, against certain expenses in connection with the
defense of actions, suits or proceedings, and certain liabilities that might be
imposed as a result of such actions, suits or proceedings, to which they are
parties by reason of being or having been such Trustees or officers. The policy
expressly excludes coverage for any Trustee or officer for any claim arising out
of any fraudulent act or omission, any dishonest act or omission or any criminal
act or omission of the Trustee or officer.

Item 26. Business and Other Connections of Investment Adviser

(a) NFM, a wholly-owned subsidiary of Nvest, L.P., serves as investment
adviser to Nvest Bullseye Fund, Nvest Equity Income Fund, Nvest Equity
Research Fund, Nvest Mid Cap Growth Fund and Nvest Select Fund. NFM
was organized in 1995.

The list required by this Item 26 regarding any other business,
profession, vocation or employment of a substantial nature engaged in
by officers and directors of NFM during the past two years is
incorporated herein by reference to schedules A and D of Form ADV
filed by NFM pursuant to the Investment Advisers Act of 1940, as
amended (the "Advisers Act")(File No. 801-48408).

(b) (1) VNSM, the subadviser to Nvest Equity Income Fund, provides investment
advice to a number of other registered investment companies and to
other organizations and individuals.

The list required by this Item 26 regarding any other business,
profession, vocation or employment of a substantial nature engaged in
by officers and partners of VSNM during the past two years is
incorporated herein by reference to schedules A and D of Form ADV
filed by VNSM pursuant to the Advisers Act (File No. 801-51795).

(2) Jurika & Voyles, the subadviser to Nvest Bullseye Fund, provides
investment advice to other registered investment companies and to
organizations and individuals. Jurika & Voyles succeeded Jurika &
Voyles, Inc. in January 1997.

The list required by this Item 26 regarding any other business,
profession, vocation or employment of a substantial nature engaged in
by officers and directors of Jurika & Voyles during the past two years
is incorporated herein by reference to schedules A and D of Form ADV
filed by Jurika & Voyles pursuant to the Advisers Act (File No. 801-
53366).

7
<PAGE>

(3) Loomis Sayles, subadviser of the Registrant's Nvest Equity Research
Fund and Nvest Mid Cap Growth Fund, provides investment advice to a
number of other registered investment companies and to other
organizations and individuals.

The list required by this Item 26 regarding any other business,
profession, vocation or employment of a substantial nature engaged in
by officers and directors of Loomis Sayles during the past two years
is incorporated herein by reference to schedules A and D of Form ADV
filed by Loomis Sayles pursuant to the Advisers Act (SEC File No. 801-
170).

(4) Harris Associates serves as a subadviser to the Registrant's Nvest
Select Fund. Harris Associates serves as investment adviser to mutual
funds, individuals, trusts, retirement plans, endowments and
foundations, and manages several private partnerships, and is a
registered commodity trading adviser and commodity pool operator.

The list required by this Item 26 regarding any other business,
profession or employment of a substantial nature engaged in by
officers and directors of Harris Associates during the past two years
is incorporated herein by reference to schedules A and D of Form ADV
filed by Harris Associates pursuant to the Advisers Act (SEC File No.
801-50333).

Item 27. Principal Underwriter

(a) Nvest Funds Distributor, L.P. also serves as principal underwriter
for:

Nvest Funds Trust I
Nvest Funds Trust II
Nvest Tax Exempt Money Market Trust
Nvest Cash Management Trust
Nvest Kobrick Investment Trust
Nvest Companies Trust I

(b) The general partner and officers of the Registrant's principal
underwriter, NFD, and their addresses are as follows:

<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>

Nvest Distribution Corp. General Partner None

John T. Hailer President and Chief Executive Officer President and Trustee

John E. Pelletier Senior Vice President, General Secretary and Clerk
Counsel, Secretary and Clerk

Scott E. Wennerholm Senior Vice President, Treasurer, None
Chief Financial Officer,and Chief
Operating Officer

Coleen D. Dinneen Vice President, Associate Counsel, Assistant Secretary
Assistant Secretary and Assistant
Clerk

Kristin S. Vigneaux Vice President, Assistant Secretary Assistant Secretary
and Assistant Clerk

Beatriz Pina Smith Vice President and Assistant None
Treasurer
</TABLE>

8
<PAGE>

Frank S. Maselli Senior Vice President None

Kirk Williamson Senior Vice President None

Carey Cort Vice President None

Daniel Lynch Vice President None

Marla McDougall Vice President None
</TABLE>

The principal business address of all the above persons or entities is 399
Boylston Street, Boston, MA 02116.

Item 28. Location of Accounts and Records

The following companies maintain possession of the documents required by
the specified rules:

(a) For all series of Registrant:

(i) Registrant
399 Boylston Street
Boston, MA 02116

(ii) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

(iii)Nvest Funds Management, L.P.
399 Boylston Street
Boston, MA 02116

(iv) Nvest Funds Distributor, L.P.
399 Boylston Street
Boston, Massachusetts 02116

(b) For Nvest Bullseye Fund only:
Jurika & Voyles, L.P.
Lake Merritt Plaza,
1999 Harrison, Suite 700
Oakland, CA 94612

(c) For Nvest Equity Income Fund only:
Vaughan, Nelson, Scarborough & McCollough, L.P.
600 Travis
Suite 6300
Houston, TX 77002

(d) For Nvest Equity Research Fund and Nvest Mid Cap Growth Fund only:
Loomis, Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02110

(e) For Nvest Select Fund only:
Harris Associates, L.P.
Two North LaSalle Street
Chicago, Illinois 60602

Item 29. Management Services

None.

Item 30. Undertakings

(a) The Registrant undertakes to provide a copy of the annual report of any
of its series to any person who receives a prospectus for such series
and who requests the annual report.

(b) The Registrant hereby undertakes that, if requested to do so by
holders of at least 10% of the Fund's outstanding shares, it will call
a meeting of shareholders for the purpose of voting upon the question
of removal of a trustee or trustees and will assist in communications
between shareholders for such purpose as provided in Section 16(c) of
the Investment Company Act of 1940.

9
<PAGE>

NVEST FUNDS TRUST III
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment No. 12 to
its Registration Statement under Rule 485(a) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 12 to its Registration
Statement to be signed on its behalf by the undersigned, duly authorized, in the
City of Boston and Commonwealth of Massachusetts on the 22nd day of December,
2000.

Nvest Funds Trust III

By: PETER S. VOSS *
-------------
Peter S. Voss
Chief Executive Officer

*By: /s/ John E. Pelletier
---------------------
John E. Pelletier
Attorney-In-Fact

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
PETER S. VOSS * December 22, 2000
-------------
Peter S. Voss Chairman of the Board; Chief Executive
Officer; Trustee

/s/ Thomas P. Cunningham Treasurer December 22, 2000
------------------------
Thomas P. Cunningham

GRAHAM T. ALLISON, Jr.* Trustee December 22, 2000
----------------------
Graham T. Allison, Jr.

DANIEL M. CAIN * Trustee December 22, 2000
--------------
Daniel M. Cain

KENNETH J. COWAN * Trustee December 22, 2000
----------------
Kenneth J. Cowan

RICHARD DARMAN * Trustee December 22, 2000
--------------
Richard Darman

JOHN T. HAILER * Trustee December 22, 2000
--------------
John T. Hailer

SANDRA O. MOOSE * Trustee December 22, 2000
---------------
Sandra O. Moose

JOHN A. SHANE* Trustee December 22, 2000
-------------
John A. Shane

PENDLETON P. WHITE* Trustee December 22, 2000
------------------
Pendleton P. White
</TABLE>

*By: /s/ John E. Pelletier
---------------------
John E. Pelletier
Attorney-In-Fact
December 22, 2000
<PAGE>

NVEST FUNDS TRUST III

EXHIBIT INDEX

EXHIBITS FOR ITEM 23 OF FORM N-1A

<TABLE>
<CAPTION>
EXHIBIT EXHIBIT DESCRIPTION
------- -------------------
<S> <C>
(a)(5) Amendment No. 4 dated November 10, 2000 to the Agreement and Declaration of Trust

(d)(1)(i) Advisory Agreement dated October 30, 2000 on behalf of Nvest Equity Income Fund

(d)(1)(ii) Advisory Agreement dated October 30, 2000 on behalf of Nvest Bullseye Fund

(d)(2)(i) Sub-advisory Agreement dated October 30, 2000 on behalf of Nvest Equity Income Fund

(d)(2)(ii) Sub-advisory Agreement dated October 30, 2000 on behalf of Nvest Bullseye Fund

(e)(1)) Form of Distribution Agreement on behalf of Equity Income Fund

(e)(2) Form of Distribution Agreement on behalf of Bullseye Fund

(e)(4) For of Dealer Agreement

(h)(1)(ii) Amendment dated December 1, 2000 to Fee Schedule of Transfer Agency and Service Agreement

(n)(1) Plan pursuant to Rule 18f-3

(p)(1)(ii) Code of Ethics dated August 25, 2000 for Registrant

(p)(2)(ii) Code of Ethics dated July 1, 2000 for NFM, NFD and NSC

(p)(3) Code of Ethics effective March 21, 2000 for Jurika & Voyles

(p)(5) Code of Ethics dated January 14, 2000 for Loomis Sayles

(p)(6) Code of Ethics effective April 18, 2000 for Harris Associates
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