SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
(Amendment No. )
Filed by the Registrant [__]
Filed by a Party other than the Registrant [__]
Check the appropriate box:
[__] Preliminary Proxy Statement
[__] Confidential, for Use of the Commission Only (as Permitted by
Rule 141-6(e)(2))
[X] Definitive Proxy Statement
[__] Definitive Additional Materials
[__] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
New England Funds Trust II
(Name of Registrant as Specified In Its Charter)
New England Funds Trust II
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[__] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(2),
15a-6(i)(2) or Item 22(a)(2) of Schedule 14A
[__] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
[__] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or ther underlying value of transaction
computed pursuatn to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it was
determined.
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[X] Fee paid previously with preliminary materials
[__] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
[LOGO]
NEW ENGLAND GROWTH OPPORTUNITIES FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
April 24, 1995
To the Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of New
England Growth Opportunities Fund (the "Fund"), a series of New England Funds
Trust II (the "Trust"), will be held at the offices of New England Funds,
L.P., 399 Boylston Street, Boston, Massachusetts, on April 24, 1995 at 2:00
p.m. (Boston time) for the following purposes:
1. To approve or disapprove a new Advisory Agreement with New England
Funds Management, L.P., which would increase the fee payable by the
Fund.
2. To approve or disapprove a proposed Sub-Advisory Agreement relating to
the Fund between New England Funds Management, L.P. and Westpeak
Investment Advisors, L.P.
3. To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
By order of the President of the Trust,
SHEILA M. BARRY, Secretary pro tem
March 6, 1995
- ------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
- ------------------------------------------------------------------------------
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE
MEETING. YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE>
NEW ENGLAND GROWTH OPPORTUNITIES FUND
PROXY STATEMENT
This statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of New England Funds Trust II (the "Trust")
for use at the Special Meeting of Shareholders of New England Growth
Opportunities Fund (the "Fund"), a series of the Trust, to be held at the
offices of New England Funds, L.P. ("NEF"), 399 Boylston Street, Boston,
Massachusetts on April 24, 1995 at 2:00 p.m. (Boston time) and at any
adjournment or adjournments thereof (the "Meeting"). This statement and its
enclosures are being mailed to shareholders beginning or on about March 6,
1995. A copy of the Annual Report of the Fund for the fiscal year ended
December 31, 1994 may be obtained without charge by calling (800) 225-5478.
All shareholders of record on February 23, 1995, the record date for
determining shareholders entitled to vote at the Meeting (the "Record Date")
are entitled to one vote for each share of beneficial interest of the Trust
held as of that date. The number of shares of beneficial interest of each Fund
issued and outstanding as of the Record Date was 8,716,182.
Timely, properly executed proxies will be voted as you instruct. If no
choice is indicated, proxies will be voted in favor of the proposals set forth
in the attached Notice of Meeting. At any time before it has been voted, the
enclosed proxy may be revoked by the signer by a written revocation received
by the Secretary of the Trust, by properly executing a later-dated proxy or by
attending the Meeting, requesting return of any previously delivered proxy and
voting in person.
The costs of solicitation of proxies will be borne by the Fund.
Solicitation of proxies by personal interview, mail, telephone and telegraph
may be made by officers and Trustees of the Trust and employees of NEF. In
addition, the firm of D.F. King & Co. has been retained to assist in the
solicitation of proxies, at a cost to the Fund which is not expected to exceed
$15,000, plus reimbursement of the firm's out-of-pocket expenses.
The Trustees of the Trust are recommending that the Fund's shareholders
vote to restructure the management arrangements of the Fund. The proposed
restructuring includes two components:
(1) appointment of New England Funds Management, L.P. ("NEF Management")
as the Fund's adviser (replacing the
1
<PAGE>
current adviser, Back Bay Advisors, L.P. ("Back Bay Advisors")), and
(2) appointment of Westpeak Investment Advisors, L.P. ("Westpeak") as the
Fund's sub-adviser, to manage the day-to-day investment operations of
the Fund under the oversight of NEF Management.
Proposal 1 in the attached Notice of Special Meeting relates to the proposed
Advisory Agreement (the "New Advisory Agreement") under which NEF Management
would become the Fund's adviser. Proposal 2 relates to the proposed
Sub-Advisory Agreement under which Westpeak would act as the Fund's
subadviser. Although shareholders of the Fund will vote separately on
Proposals 1 and 2, neither the New Advisory Agreement nor the Sub-Advisory
Agreement will take effect unless shareholders vote to approve both.
Current Management Arrangements
Back Bay Advisors has acted as the Fund's adviser since July 27, 1988,
pursuant to an Advisory Agreement dated July 27, 1988 (the "Old Agreement").
The Old Agreement was approved by the Fund's shareholders on July 22, 1988, in
connection with Back Bay Advisors' assumption of management responsibilities
from the Fund's prior adviser, Moseley Capital Management Inc. ("MCM"). The
Trustees of the Fund have voted to approve the continuation of the Old
Agreement from year to year since 1988, most recently on May 18, 1994, when
they voted to continue the Old Agreement in effect for a one-year period
beginning June 1, 1994.
Since assuming management responsibility for the Fund in 1988, Back Bay
Advisors has managed the Fund's portfolio using a relatively passive
investment strategy. This strategy has involved investing approximately 80% of
the Fund's assets in the common stocks included in the Standard & Poor's 500
Stock Index (the "Index"), in approximately the same proportions as those
stocks are represented in the Index. The other 20% of the Fund's assets have
been invested primarily in common stocks with relatively low price-to-earnings
ratios. Unlike many other managers of mutual funds that invest primarily in
common stocks, Back Bay Advisors has not relied on extensive fundamental
analysis of industries and individual companies in selecting investments for
the Fund. Back Bay Advisors' relatively passive approach to the management of
the Fund is reflected in the fee rate payable to Back Bay Advisors under the
Old Agreement. This fee rate is 0.50% annually of the Fund's average net
assets. This fee
2
<PAGE>
rate compares to the annual rate of 0.60% on the first $100 million of average
net assets and 0.50% of the excess of such assets over $100 million payable
under the Fund's previous advisory agreement with MCM, and to the median
advisory and administration fee rate of 0.65% annually that, according to the
third quarter 1994 edition of Lipper Directors' Analytical Data, was paid by
279 funds that, like the Fund, are classified by Lipper Analytical Services,
Inc. as "growth and income" funds.
The Old Agreement obligates Back Bay Advisors to furnish the Fund with
both portfolio management services and certain administrative and general
management services. Since assuming management responsibilities for the Fund
in 1988, Back Bay Advisors has itself provided the Fund with portfolio
management services, but has subcontracted to an affiliated company (currently
NEF, which also acts as the Fund's principal underwriter and transfer agent)
responsibility for providing certain administrative and general management
services.
Proposed New Arrangements
Based on a review of the investment approach used by Back Bay Advisors in
managing the Fund's portfolio, the Fund's performance record under Back Bay
Advisors' management, the performance record of Westpeak in managing other
accounts and the performance of other "growth and income" mutual funds, the
Trustees of the Trust have determined that it would be appropriate for
Westpeak to assume responsibility for the day-to-day management of the Fund's
portfolio. Westpeak proposes to manage the Fund's investments using its
proprietary investment process which selects stocks for investment from a
large universe of stocks that are continually evaluated by Westpeak. Westpeak
evaluates the stocks in this universe based on a large number of factors
relating to the individual company, the industry or industries of which it is
a part and overall market conditions and developments. In managing the Fund's
investments, Westpeak would select some stocks that Westpeak believes are
relatively undervalued ("value" stocks) and some stocks issued by companies
that Westpeak believes have good growth potential ("growth" stocks). The
relative percentages of "value" and "growth" stocks in the Fund's portfolio at
any time will vary, based on Westpeak's assessment of current and future
market conditions.
Concurrently with transferring day-to-day portfolio management
responsibility to Westpeak, the Trustees believe that it is desirable to
appoint NEF Management to be responsible for the general adminis-
3
<PAGE>
tration and management of the Fund's operations and affairs. These operations
and affairs are currently conducted or overseen primarily by NEF, under
sub-contract from Back Bay Advisors. NEF, which acts as administrator,
distributor and transfer agent for the 20 mutual funds in the New England
group of funds, has recently established NEF Management to provide
comprehensive administrative and general management services to mutual funds.
In determining to recommend the proposed Sub-Advisory Agreement for
shareholder approval, the Trustees considered the policies of Back Bay
Advisors and Westpeak with respect to the placing of portfolio transactions
for the Fund. See "Certain Brokerage Matters" below. The Trustees also
considered Westpeak's estimate of the one-time costs the Fund would incur in
restructuring its portfolio to conform to Westpeak's investment approach, and
of the ongoing effect of Westpeak's investment approach on the Fund's
portfolio turnover rate. The anticipated restructuring would involve selling
approximately 30-35% of the dollar value of the securities in the Fund's
portfolio, resulting in various costs and the realization of approximately
$0.75 per share of taxable long-term capital gains. See "Restructuring Costs"
and "Portfolio Turnover Considerations" below.
The Proposed New Advisory Agreement. The proposed New Advisory Agreement
provides that NEF Management will, subject to its rights to delegate such
responsibilities, provide to the Fund with both (1) Portfolio Management
Services (defined to mean managing the investment and reinvestment of the
assets of the Fund, subject to the supervision and control of the Trustees of
the Trust) and (2) Administrative Services (defined to mean furnishing or
paying the expenses of the Fund for office space, facilities and equipment,
services of executive and other personnel of the Trust and certain other
administrative and general management services). Under the New Advisory
Agreement, NEF Management will receive from the Fund compensation at the
annual rate of 0.70% of the first $200 million of the Fund's average daily net
assets, 0.65% of the next $300 million of such assets and 0.60% of such assets
in excess of $500 million. These rates compare to the fee rate of 0.50%
annually of net assets payable by the Fund under the Old Agreement with Back
Bay Advisors. At December 31, 1994, the Fund's net assets were approximately
$109 million.
Under the New Advisory Agreement, if the total ordinary business expenses
of the Fund or the Trust as a whole for any fiscal year exceed the lowest
applicable limitation (based on percentages of
4
<PAGE>
average net assets or income) prescribed by any state in which shares of the
Fund are qualified for sale, NEF Management shall pay such excess. The term
"expenses" is defined in the New Advisory Agreement and excludes brokerage
commissions, taxes, interest, distribution-related expenses and extraordinary
expenses. The Old Agreement contains a substantially identical provision
obligating Back Bay Advisors to bear expenses in excess of those permitted by
relevant state law.
The New Advisory Agreement does not require NEF Management to delegate
responsibility for Portfolio Management Services to any sub-adviser. NEF
Management and the Trust will not enter into the proposed New Advisory
Agreement, however, unless the proposed Sub-Advisory Agreement with Westpeak
is also entered into at the same time. The New Advisory Agreement would
nevertheless permit NEF Management to continue as the Fund's investment
adviser (subject to the Fund's rights to terminate the New Advisory Agreement
as described below) even after termination of the proposed Sub-Advisory
Agreement. If at any time the Sub-Advisory Agreement with Westpeak is
terminated without simultaneous termination of the New Advisory Agreement with
NEF Management, the Trustees of the Trust would consider whether to appoint a
new sub-adviser or adviser (subject in each case to approval of the Fund's
shareholders).
The New Advisory Agreement provides that it will continue in effect for
two years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
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 Investment Company Act
of 1940 (the "1940 Act"), cast in person at a meeting called for the purpose
of voting on such approval. Any amendment to the New Advisory Agreement must
be approved by vote of a majority of the outstanding voting securities of the
Fund, and by vote of a majority of the Trustees who are not such interested
persons, cast in person at a meeting called for the purpose of voting on such
approval. The New Advisory Agreement may be terminated without penalty by vote
of the Board of Trustees or by vote of a majority of the outstanding voting
securities of the Fund, upon sixty days' written notice, or by NEF Management
upon ninety days' written notice, and terminates automatically in the event of
its assignment. In addition, the New Advisory Agreement will automatically
terminate if the Trust or the Fund shall at any time be required by NEF to
eliminate all references
5
<PAGE>
to the words "TNE" or "New England" in the name of the Trust or the Fund,
unless the continuance of the New Advisory Agreement after such change of name
is approved by a majority of the outstanding voting securities of the Fund and
by a majority of the Trustees who are not interested persons of the Trust or
NEF Management. The New Advisory Agreement provides that NEF Management shall
not be subject to any liability in connection with the performance of its
services thereunder in the absence of willful misfeasance, bad faith,
negligence or reckless disregard of its obligations and duties.
The Sub-Advisory Agreement. The proposed Sub-Advisory Agreement requires
Westpeak to manage the investment and reinvestment of the assets of the Fund,
subject to the supervision of NEF Management. Westpeak is authorized to effect
portfolio transactions for the Fund in the discretion of Westpeak and without
prior consultation with NEF Management. Westpeak is required to report
periodically to NEF Management and the Trustees of the Trust.
The Sub-Advisory Agreement provides that NEF Management shall compensate
Westpeak at the annual rate of 0.50% of the first $25 million of the Fund's
average daily net assets, 0.40% of the next $75 million of such assets, 0.35%
of the next $100 million of such assets and 0.30% of such assets in excess of
$200 million.
The Sub-Advisory Agreement provides that it will continue in effect for
two years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Fund and (ii) by vote of a majority of the Trustees who are not "interested
persons," as that term is defined in the 1940 Act, of the Trust, NEF
Management or Westpeak, cast in person at a meeting called for the purpose of
voting on such approval. Any amendment to the Sub-Advisory Agreement must be
approved by NEF Management and Westpeak and, if required by law, by vote of a
majority of the outstanding voting securities of the Fund, and by vote of a
majority of the Trustees who are not such interested persons, cast in person
at a meeting called for the purpose of voting on such approval. The
Sub-Advisory Agreement may be terminated without penalty by vote of the Board
of Trustees or by vote of a majority of the outstanding voting securities of
the Fund, upon sixty days' written notice, or by Westpeak or NEF Management
upon ninety days' written notice, and terminates automatically in the event of
its assignment. The Sub-Advisory Agreement will automatically terminate if the
New Advisory Agreement is terminated. The Sub-Advisory Agreement provides that
Westpeak
6
<PAGE>
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.
Comparison of the Current and Proposed Arrangements
The proposed new management arrangements for the Fund differ from the
current arrangements in the following important respects:
1. Under the new arrangements, NEF Management would assume overall
responsibility for the Fund's operations, subject to the supervision
of the Trustees. Back Bay Advisors currently has such overall
responsibility.
2. Westpeak would become responsible for day-to-day management of the
Fund's investment operations, succeeding Back Bay Advisors. Westpeak
would implement its more active, "value/growth" management style in
place of Back Bay Advisors' approach.
3. The advisory fees payable by the Fund would increase from the current
annual rate of 0.50% of average net assets to the new rate of 0.70% of
the first $200 million of such assets, 0.65% of the next $300 million
of such assets and 0.60% of the excess of such assets over $500
million. In 1994, the Fund paid advisory fees of $555,258. If the
proposed new arrangements had been in effect throughout 1994, the Fund
would have paid advisory fees of $777,360, or 0.20% more than under
the existing arrangements. In addition, the new arrangements would not
obligate NEF Management, as the Fund's adviser, to provide the Fund
with, or to pay for, certain legal and accounting services that are
currently provided by NEF at the expense of Back Bay Advisors. If the
New Advisory Agreement is adopted, NEF or an affiliate will continue
to provide these services, but will charge the Fund for them. The
estimated charge for these services in 1994, had the new arrangements
then been in effect, is approximately $20,000 (or 0.02% of Fund
average net assets in 1994).
4. NEF has informed the Trustees that, if the proposed new arrangements
are adopted, it intends to reduce the Rule 12b-1 fees payable by the
Fund's Class A shares from the current annual rate of 0.35% of Class A
net assets to 0.25% of such assets. This fee reduction would affect
only the Class A
7
<PAGE>
shares. On the Record Date, Class A shares represented approximately
95% of the outstanding shares of the Fund.
The following table summarizes the maximum transaction costs from
investing in the Fund and the annual expenses borne by the Fund's Class A and
Class B shares in the fiscal year ended December 31, 1994, as well as such
annual expenses calculated on a pro forma basis assuming the proposed New
Advisory Agreement (and reduced Class A Rule 12b-1 fee) had been in effect
beginning January 1, 1994:
Shareholder Transaction Expenses
Class A Class B
------- -------
Maximum Initial Sales Charge Imposed on a Purchase
(as a percentage of offering price)(1)(2)......... 5.75% None
Maximum Contingent Deferred Sales Charge (as a
percentage of offering price)(2).................. (3) 4.00%
- ---------------
(1) Reduced Class A sales charges apply in some cases.
(2) Does not apply to reinvested distributions.
(3) A 1.00% contingent deferred sales charge applies with respect to any
portion of certain purchases greater than $1,000,000 redeemed from Class A
within approximately one year after purchase.
Annual Fund
Operating Expenses
(as a percentage of
average net assets)
during the
years ended
December 31, 1994
-------------------
Actual Pro Forma
------------------- -------------------
Class A Class B Class A Class B
------- ------- ------- -------
Advisory Fees............... 0.50% 0.50% 0.70% 0.70%
12b-1 Fees.................. 0.35% 1.00% 0.25% 1.00%
Other Expenses.............. 0.43% 0.43% 0.43% 0.43%
------- ------- ------- -------
Total Fund Operating
Expenses.................. 1.28% 1.93% 1.38% 2.13%
Example
A $1,000 investment in each Class of the Fund would incur the following
dollar amount of transaction costs and operating expenses, assuming a 5%
annual return and, unless otherwise noted, redemption at period end. The 5%
return and the expense levels used in calculat-
8
<PAGE>
ing this example should not be regarded as predictions of future investment
return or Fund expenses, both of which will vary:
1 Year 3 Years 5 Years 10 Years(2)
------ ------- ------- -----------
Based on Actual Expenses
Incurred During the Year
Ended December 31, 1994
Class A................... $ 70 $96 $ 124 $ 203
Class B................... $ 60 $91 $ 114 $ 208
Class B(1)................ $ 20 $61 $ 105 $ 208
Based on Pro Forma Expenses For
The Year Ended December 31,
1994, Assuming the Proposed
New Advisory Agreement and
Class A 12b-1 Fee Reduction
Had Been in Effect since
January 1, 1994
Class A................... $ 71 $99 $ 129 $ 214
Class B................... $ 62 $97 $ 124 $ 227
Class B(1)................ $ 22 $67 $ 114 $ 227
- ---------------
(1) Assumes no redemption.
(2) Class B shares automatically convert to Class A eight years after
purchase; therefore, Class B amounts are calculated using Class A expenses
in years 9 and 10.
Restructuring Costs
Westpeak has reviewed the existing portfolio holdings of the Fund to
determine what holdings it would expect to sell in order to conform the Fund's
portfolio to Westpeak's "value/growth" investment style. Based on this review,
Westpeak has informed the Trustees that it would expect to sell approximately
30-35% of the dollar value of the Fund's existing portfolio, and to reinvest
the sale proceeds in other stocks. Westpeak estimates that these transactions
would result in brokerage costs of approximately $60,000 to the Fund. In
addition to these commissions costs, the transactions will involve additional
costs to the Fund in the form of "market impact." Market impact is the effect
on the market price of securities that results when the Fund attempts to sell
(or buy) significant amounts of securities. Although these market impact costs
cannot be predicted with great certainty, Westpeak estimates that they would
be approximately $230,000. In addition, Westpeak estimates that the
transactions, based on late 1994 market prices, would result in the
realization of approximately
9
<PAGE>
$6.1 million of long-term capital gains (or approximately $0.75 per share of
the Fund). These gains, together with any other long-term capital gains
realized by the Fund in 1995 (reduced by any realized capital losses), would
be distributed to Fund shareholders at the end of the year and would
constitute taxable long-term capital gains in the hands of the recipient Fund
shareholders.
The foregoing estimates were prepared in late 1994 based on then-current
Fund holdings and market information available to Westpeak. The actual costs
of restructuring the Fund's portfolio could be higher or lower, depending on
market conditions and other factors. Westpeak expects that the restructuring
would be completed within a few weeks after Westpeak assumes responsibility
for the Fund's portfolio.
Portfolio Turnover Considerations
As explained above, Westpeak's investment approach generally involves a
higher level of portfolio trading activity than Back Bay Advisors' approach.
During the six full calendar years of Back Bay Advisors' management of the
Fund, the Fund's annual portfolio turnover rate ranged between 4% and 17%. (A
fund's portfolio turnover rate is calculated by dividing the dollar value of
purchases or sales of securities in the Fund's portfolio by the average value
of its portfolio holdings during the same period.) Although it is not possible
to predict the Fund's future portfolio turnover rates with certainty, Westpeak
estimates that, under normal market conditions, the Fund's annual portfolio
turnover rate under Westpeak's management would be between 80% and 100%. This
higher level of portfolio turnover will involve higher levels of ongoing
brokerage costs than the Fund has incurred under Back Bay Advisors'
management. In addition, the higher level of portfolio turnover may result in
the realization of more capital gains, which would be taxable when distributed
to Fund shareholders.
Information About NEF Management
NEF Management is a limited partnership. Its sole general partner, NEF
Corporation, is a wholly-owned subsidiary of NEIC Holdings, Inc. ("NEIC
Holdings"), which is a wholly-owned subsidiary of New England Investment
Companies, L.P. ("NEIC"). NEF Corporation is also the sole general partner of
NEF. NEIC owns the entire limited partnership interest in each of NEF and NEF
Management. The sole general partner of NEIC is New England Investment
Companies, Inc. ("NEIC Inc."), which is a wholly-owned subsidiary
10
<PAGE>
of New England Mutual Life Insurance Company ("The New England"). The
principal executive officer of NEF and NEF Management is Henry L.P. Schmelzer,
who is President and a Trustee of the Trust and whose principal occupation is
his positions with NEF and NEF Management. The address of NEF, NEF Management,
NEF Corporation, NEIC Holdings, NEIC, NEIC Inc. and Mr. Schmelzer is 399
Boylston Street, Boston, Massachusetts 02116. The address of The New England
is 501 Boylston Street, Boston, Massachusetts 02116.
Information About Westpeak
Westpeak is a limited partnership. Its sole general partner, Westpeak
Investment Advisors, Inc. ("Westpeak Inc."), is a wholly-owned subsidiary of
NEIC Holdings. NEIC owns the entire limited partnership interest in Westpeak.
The principal executive officer of Westpeak is Gerald H. Scriver, whose
principal occupation is his position with Westpeak. The address of Westpeak,
Westpeak Inc. and Mr. Scriver is 1050 Walnut Street, Boulder, Colorado 80302.
Westpeak currently acts as investment adviser to another mutual fund that
has an investment objective similar to the Fund. This other mutual fund is the
Value Growth Series of New England Zenith Fund. At December 31, 1994, the
Value Growth Series had net assets of $23 million. The advisory fee rate
currently payable by the Value Growth Series to Westpeak is 0.70% annually of
the first $200 million of average net assets, 0.65% of the next $300 million
of such assets and 0.60% of such assets in excess of $500 million.
Shareholders of the Value Growth Series will be asked, at a meeting called to
be held in April 1995, to adopt new management arrangements for the Series.
Under the proposed new arrangements, a subsidiary of The New England would
become the adviser of the Series, and would receive compensation at the same
fee rates as Westpeak currently receives. Westpeak would become the Series's
sub-adviser, and would be paid by the Series's adviser at the annual rate of
0.50% of the first $25 million of the Series's average daily net assets, 0.40%
of the next $75 million of such assets, 0.35% of the next $100 million of such
assets and 0.30% of such assets in excess of $200 million.
Information About Back Bay Advisors
Back Bay Advisors is a limited partnership. Its sole general partner,
Back Bay Advisors, Inc., is a wholly-owned subsidiary of NEIC Holdings. NEIC
owns the entire limited partnership interest in Back Bay Advisors. The
principal executive officer of Back Bay
11
<PAGE>
Advisors is Charles T. Wallis, who is Executive Vice President of the Trust
and whose principal occupation is his position with Back Bay Advisors. The
address of Back Bay Advisors, Back Bay Advisors, Inc. and Mr. Wallis is 399
Boylston Street, Boston, Massachusetts 02116.
Certain Brokerage Matters
In determining to recommend the proposed New Advisory Agreement and
Sub-Advisory Agreement, the Trustees considered the following policies of Back
Bay Advisors and Westpeak with respect to certain matters relating to the
execution of portfolio transactions for the Fund:
In placing orders for the purchase and sale of portfolio securities for
the Fund, Back Bay Advisors always seeks the best price and execution. Some
portfolio transactions are placed with brokers and dealers who provide Back
Bay Advisors with supplementary investment and statistical information or
furnish market quotations to the Fund or other investment companies or
accounts advised by Back Bay Advisors. The business would not be so placed if
the Fund would not thereby obtain the best price and execution. Although it is
not possible to assign an exact dollar value to these services, they may, to
the extent used, tend to reduce the expenses of Back Bay Advisors. The
services may also be used by Back Bay Advisors in connection with its other
advisory accounts and in some cases may not be used with respect to the Fund.
In placing orders for the purchase and sale of securities for its
clients, Westpeak always seeks best execution. Westpeak selects only brokers
or dealers which it believes are financially responsible, will provide
efficient and effective services in executing, clearing and settling an order
and will charge commission rates which, when combined with the quality of the
foregoing services, will produce best price and execution. This does not
necessarily mean that the lowest available brokerage commission will be paid.
Westpeak will use its best efforts to obtain information as to the general
level of commission rates being charged by the brokerage community from time
to time and will evaluate the overall reasonableness of brokerage commissions
paid on transactions by reference to such data. In making such evaluation, all
factors affecting liquidity and execution of the order, as well as the amount
of the capital commitment by the broker in connection with the order, are
taken into account. The proposed Sub-Advisory Agreement provides that Westpeak
may cause the Fund to pay a broker-dealer that provides brokerage and research
services to Westpeak an amount of commission for effecting a
12
<PAGE>
securities transaction for the Fund in excess of the amount another
broker-dealer would have charged for effecting that transaction. Westpeak must
determine in good faith that such greater commission is reasonable in relation
to the value of the brokerage and research services provided by the executing
broker-dealer viewed in terms of that particular transaction or Westpeak's
overall responsibilities to the Fund and Westpeak's other clients. Westpeak's
authority to cause the Fund to pay such greater commissions would also be
subject to such policies as the Trust's Trustees may adopt from time to time.
Certain Payments to Affiliates
In addition to advisory fees payable to Back Bay Advisors, the Fund pays
NEF (an affiliate of Back Bay Advisors, NEF Management and Westpeak) for
providing various services to the Fund and its shareholders. In 1994, these
payments amounted to $155,764 for transfer agency services, $376,217 for
service and distribution (Rule 12b-1) fees for Class A shares and $35,509 for
service and distribution (Rule 12b-1 fees) for Class B shares. In addition, in
1994 NEF received from Fund shareholders $226,644 in sales loads on Class A
shares and $5,261 in contingent deferred sales loads on Class A and B shares.
NEF will continue to receive transfer agency and Rule 12b-1 fees, as well
as sales loads and contingent deferred sales loads, if the proposed new
management arrangements are adopted. In addition, NEF Management intends to
delegate to NEF responsibility for certain administrative services to the Fund
under the New Advisory Agreement. (NEF is currently carrying out these
administrative responsibilities under sub-contract from Back Bay Advisors.)
NEF Management would compensate NEF for providing these services. Also, as
mentioned above under "Comparison of the Current and Proposed Arrangements,"
NEF would provide certain legal and accounting services to the Fund, at a
current estimated cost to the Fund of approximately $20,000 annually.
Certain Trustees and Officers of the Trust
The following persons are both (1) Trustees or officers of the Trust and
(2) officers or employees of one or more of NEF Management, Westpeak or Back
Bay Advisors (or officers or directors of those firms' corporate general
partners): Peter S. Voss, Henry L.P. Schmelzer, Charles T. Wallis, Harold B.
Bjornson, Catherine L. Bunting, Charles G. Glueck, Eric Gutterson, Scott A.
Millimet, J. Scott Nicholson, Edgar M. Reed, James S. Welch, Nathan R.
13
<PAGE>
Wentworth, Frank Nesvet, and Sheila M. Barry. If the proposed New Advisory
Agreement and Sub-Advisory Agreement are adopted, the Trustees expect to elect
Gerald H. Scriver and Philip J. Cooper, who are officers of Westpeak, to be
Senior Vice President and Vice President, respectively, of the Trust.
Trustee Action; Required Shareholder Vote
At a meeting held on January 27, 1995, the Trustees of the Trust voted
unanimously (1) to approve the New Advisory Agreement and the Sub-Advisory
Agreement and (2) to terminate the Old Agreement, effective at such time as
the New Advisory Agreement and the Sub-Advisory Agreement became effective. If
shareholders approve the New Advisory Agreement and the Sub-Advisory
Agreement, they are expected to become effective on or about May 1, 1995.
Although shareholders of the Fund will vote on the proposed Sub-Advisory
Agreement separately from the proposed New Advisory Agreement, neither the
Sub-Advisory Agreement nor the New Advisory Agreement will take effect unless
shareholders of the Fund vote to approve both such Agreements. The required
vote for each Agreement is the lesser of (1) 67% of the shares of the Fund
represented at the Meeting, if more than 50% of the shares of the Fund are
represented at the Meeting, or (2) more than 50% of the outstanding shares of
the Fund. If shareholders of the Fund do not approve both the New Advisory
Agreement and the Sub-Advisory Agreement, the Old Agreement will remain in
effect, and the Trustees will consider such alternative actions as may be in
the best interests of the Fund.
The Trustees unanimously recommend that shareholders of the Fund vote to
approve the proposed New Advisory and Sub-Advisory Agreements.
VI. Other Matters
Forty percent of the shares of the Fund outstanding on the Record Date,
present in person or represented by proxy, constitutes a quorum for the
transaction of business at the Meeting. Votes cast by proxy or in person at
the Meeting will be counted by persons appointed by persons appointed by the
Trust as tellers for the Meeting. The tellers will count the total number of
votes cast "for" approval of the proposals for purposes of determining whether
sufficient affirmative votes have been cast. The tellers will count all shares
represented by proxies that reflect abstentions and "broker non-votes"
14
<PAGE>
(i.e., shares held by brokers or nominees as to which instructions have not
been received from the beneficial owners or the persons entitled to vote) for
purposes of determining the presence of a quorum. With respect to each of
Proposals 1 and 2, abstentions and broker non-votes have the effect of a
negative vote on the proposal.
In the event that a quorum is not present, or if sufficient votes in
favor of either Proposal 1 or Proposal 2 are not received by April 24, 1995,
the persons named as proxies may vote on those matters for which a quorum is
present and as to which sufficient votes have been received and may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a majority
of the shares present in person or by proxy at the session of the Meeting to
be adjourned. The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in favor of
Proposals 1 and 2. They will vote against any such adjournment those proxies
required to be voted against either of Proposals 1 and 2 and will not vote any
proxies that direct them to abstain from voting on such Proposals. Any
proposals for which sufficient favorable votes have been received by the time
of the Meeting will be acted upon and considered closed regardless of whether
the Meeting is adjourned to permit additional solicitation with respect to any
other proposal.
Although the Meeting is called to transact any other business that may
properly come before it, the only business that management intends to present
or knows that others will present is Proposals 1 and 2 mentioned in the Notice
of Special Meeting. However, you are being asked on the enclosed proxy to
authorize the persons named therein to vote in accordance with their judgment
with respect to any additional matters which properly come before the Meeting,
and on all matters incidental to the conduct of the Meeting.
Shareholder proposals to be presented at any future meeting of
shareholders of the Trust must be received by the Trust a reasonable time
before the Trust's solicitation of proxies for that meeting in order for such
proposals to be considered for inclusion in the proxy materials relating to
that meeting.
March 6, 1995
15
<PAGE>
Appendix A
ADVISORY AGREEMENT
New England Growth Opportunities Fund
AGREEMENT made this 1st day of May, 1995 by and between NEW ENGLAND FUNDS
TRUST II, a Massachusetts business trust (the "Fund") with respect to its New
England Growth Opportunities Fund series (the "Series"), and NEW ENGLAND FUNDS
MANAGEMENT, L.P., a Delaware limited partnership (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting
pursuant to delegation from the Manager) will perform certain services for the
Series;
NOW THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1.(a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof. The
Manager hereby accepts such employment and agrees, at its own expense, to
furnish such services (either directly or pursuant to delegation to other
parties as permitted by Sections 1(b) and (c) hereof) and to assume the
obligations herein set forth, for the compensation herein provided. The
Manager shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be deemed
an agent of the Fund.
(b) The Manager may delegate any or all of its responsibilities hereunder
with respect to the provision of Portfolio Management Services (and assumption
of related expenses) to one or more other parties (each such party, a
"Sub-Adviser"), pursuant in each case to a written agreement with such
Sub-Adviser that meets the requirements of Section 15 of the Investment
Company Act of 1940 and the rules thereunder (the "1940 Act") applicable to
contracts for service as investment adviser of a registered investment company
(including
A-1
<PAGE>
without limitation the requirements for approval by the trustees of the Fund
and the shareholders of the Series), subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission. Any Sub-Adviser may
(but need not) be affiliated with the Manager. If different Sub-Advisers are
engaged to provide Portfolio Management Services with respect to different
segments of the portfolio of the Series, the Manager shall determine, in the
manner described in the prospectus of the Series from time to time in effect,
what portion of the assets belonging to the Series shall be managed by each
Sub-Adviser.
(c) The Manager may delegate any or all of its responsibilities hereunder
with respect to the provision of Administrative Services to one or more other
parties (each such party, an "Administrator") selected by the Manager. Any
Administrator may (but need not) be affiliated with the Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and
financial data and information and undertaking such additional investment
research as shall be necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the Series' investment objectives and policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the
provision to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon from
time to time by the Fund and the Manager, and all necessary office
supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be
A-2
<PAGE>
performed under contract for custodial, transfer, dividend and plan
agency services by the entity or entities selected to perform such
services and exclusive of any managerial functions described in Section
4);
(c) compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Manager, any Sub-Adviser or any
Administrator or of any affiliated person (other than a registered
investment company) of the Manager, any Sub-Adviser or any Administrator;
and
(d) supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Fund's
investment policies, restrictions and guidelines, if the Manager has
delegated to one or more Sub-Advisers any or all of its responsibilities
hereunder with respect to the provision of Portfolio Management Services.
4. Nothing in section 3 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred to
in sub-section (n) of this section 4;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of trustees of the Fund who are not directors,
officers or employees of the Manager, any Sub-Adviser or any
Administrator or of any affiliated person (other than a registered
investment company) of the Manager, any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants retained by the
Fund;
(g) charges and expenses of any transfer agents and registrars
appointed by the Fund;
A-3
<PAGE>
(h) brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is
a party;
(i) taxes and fees payable by the Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the
Fund including registering and qualifying its shares with federal and
state regulatory authorities;
(l) expenses of meetings of shareholders and trustees of the Fund;
(m) interest, including interest on borrowings by the Fund;
(n) the costs of services, including services of counsel, required
in connection with the preparation of the Fund's registration statements
and prospectuses, including amendments and revisions thereto, annual,
semiannual and other periodic reports of the Fund, and notices and proxy
solicitation material furnished to shareholders of the Fund or regulatory
authorities; and
(o) the Fund's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to
like authority.
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation at the annual rate of 0.70% of the first $200 million of the
Series's average daily net assets, 0.65% of the next $300 million of such
assets and 0.60% of such assets in excess of $500 million. Such compensation
shall be payable monthly in arrears or at such other intervals, not less
frequently than quarterly, as the Board of Trustees of the Fund may from time
to time determine and specify in
A-4
<PAGE>
writing to the Manager. The Manager hereby acknowledges that the Fund's
obligation to pay such compensation is binding only on the assets and property
belonging to the Series.
8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding interest, taxes, portfolio
brokerage commissions, distribution-related expenses and extraordinary
expenses) for any fiscal year exceeds the lowest applicable percentage of
average net assets or income limitations prescribed by any state in which
shares of the Series are qualified for sale, the Manager shall pay such
excess. Solely for purposes of applying such limitations in accordance with
the foregoing sentence, the Series and the Fund shall each be deemed to be a
separate fund subject to such limitations. Should the applicable state
limitation provisions fail to specify how the average net assets of the Fund
or belonging to the Series are to be calculated, that figure shall be
calculated by reference to the average daily net assets of the Fund or the
Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any
affiliated person of the Manager, any organization in which the Manager may
have an interest or any organization which may have an interest in the
Manager; that the Manager, any such affiliated person or any such organization
may have an interest in the Fund; and that the existence of any such dual
interest shall not affect the validity hereof or of any transactions hereunder
except as otherwise provided in the Agreement and Declaration of Trust of the
Fund, the partnership agreement of the Manager or specific provisions of
applicable law.
10. This Agreement shall become effective as of the date of its
execution, and
(a) unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Trustees of the Fund or by vote of a
majority of the outstanding voting securities of the Series, and (ii) by
vote of a majority of the trustees of the Fund who are not interested
persons of the Fund or the Manager, cast in person at a meeting called
for the purpose of voting on such approval;
A-5
<PAGE>
(b) this Agreement may at any time be terminated on sixty days'
written notice to the Manager either by vote of the Board of Trustees of
the Fund or by vote of a majority of the outstanding voting securities of
the Series;
(c) this Agreement shall automatically terminate in the event of its
assignment;
(d) this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund;
(e) if New England Funds, L.P., the Fund's principal underwriter,
requires the Fund or the Series to change its name so as to eliminate all
references to the words "New England" or the letters "TNE" pursuant to
the provisions of the Fund's Distribution Agreement relating to the
Series with said principal underwriter, this Agreement shall
automatically terminate at the time of such change unless the continuance
of this Agreement after such change shall have been specifically approved
by vote of a majority of the outstanding voting securities of the Series
and by vote of a majority of the trustees of the Fund who are not
interested persons of the Fund or the Manager, cast in person at a
meeting called for the purpose of voting on such approval.
Termination of this Agreement pursuant to this section 10 shall be
without the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the trustees of the Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person"
and "assignment" shall have their respective meanings defined in the 1940 Act,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under the 1940 Act. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the
meaning defined in the Fund's Agreement and Declaration of Trust as amended
from time to time.
13. In the absence of willful misfeasance, bad faith or negligence on the
part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the
A-6
<PAGE>
Fund, to any shareholder of the Fund or to any other person, firm or
organization, for any act or omission in the course of, or connected with,
rendering services hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
NEW ENGLAND FUNDS TRUST II, NEW ENGLAND FUNDS
on behalf of its New England MANAGEMENT, L.P.
Growth Opportunities Fund
series
By: By:
NOTICE
A copy of the Agreement and Declaration of Trust establishing New England
Funds Trust II is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Fund's New England Growth Opportunities Fund series on behalf
of the Fund by officers of the Fund as officers and not individually and that
the obligations of or arising out of this Agreement are not binding upon any
of the trustees, officers or shareholders individually but are binding only
upon the assets and property belonging to the Series.
A-7
<PAGE>
Appendix B
NEW ENGLAND GROWTH OPPORTUNITIES FUND
SUB-ADVISORY AGREEMENT
(Westpeak Investment Advisors, L.P.)
This Sub-Advisory Agreement (this "Agreement") is entered into as of May
1, 1995 by and between New England Funds Management, L.P., a Delaware limited
partnership (the "Manager"), and Westpeak Investment Advisors, L.P., a
Delaware limited partnership (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated May 1,
1995 (the "Advisory Agreement") with New England Funds Trust II (the "Trust"),
pursuant to which the Manager provides portfolio management and administrative
services to New England Growth Opportunities Fund, a series of the Trust (the
"Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the Trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the Manager
and of any administrator appointed by the Manager (the "Administrator"),
manage the investment and reinvestment of the assets of the Series. The
Sub-Adviser shall manage the Series in conformity with (1) the investment
objective, policies and restrictions of the Series set forth in the
Trust's prospectus and statement of additional information relating to
the Series, (2) any additional policies or guidelines established by the
Manager or by the Trust's trustees that have been furnished in writing to
the Sub-Adviser and (3) the provisions of the Internal Revenue Code (the
"Code") applicable to "regulated investment companies" (as defined in
Section 851 of the Code), all as
B-1
<PAGE>
from time to time in effect (collectively, the "Policies"), and with all
applicable provisions of law, including without limitation all applicable
provisions of the Investment Company Act of 1940 (the "1940 Act") and the
rules and regulations thereunder. Subject to the foregoing, the
Sub-Adviser is authorized, in its discretion and without prior
consultation with the Manager, to buy, sell, lend and otherwise trade in
any stocks, bonds and other securities and investment instruments on
behalf of the Series, without regard to the length of time the securities
have been held and the resulting rate of portfolio turnover or any tax
considerations; and the majority or the whole of the Series may be
invested in such proportions of stocks, bonds, other securities or
investment instruments, or cash, as the Sub-Adviser shall determine.
b. The Sub-Adviser shall furnish the Manager and the Administrator
monthly, quarterly and annual reports concerning portfolio transactions
and performance of the Series in such form as may be mutually agreed
upon, and agrees to review the Series and discuss the management of it.
The Sub-Adviser shall permit all books and records with respect to the
Series to be inspected and audited by the Manager and the Administrator
at all reasonable times during normal business hours, upon reasonable
notice. The Sub-Adviser shall also provide the Manager with such other
information and reports as may reasonably be requested by the Manager
from time to time, including without limitation all material requested by
or required to be delivered to the Trustees of the Trust pursuant to
Section 15(c) of the 1940 Act.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission and a list of the persons whom the Sub-Adviser wishes to have
authorized to give written and/or oral instructions to custodians of
assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Fund's custodian to
provide) timely information to the Sub-Adviser regarding such matters as
the composition of assets of the Series, cash requirements and cash
available for investment in the Series, and all other information as may
be reasonably necessary for the Sub-Adviser to perform its
responsibilities hereunder.
B-2
<PAGE>
b. The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Series and
agrees during the continuance of this Agreement to furnish the
Sub-Adviser copies of any revisions or supplements thereto at, or, if
practicable, before the time the revisions or supplements become
effective. The Manager agrees to furnish the Sub-Adviser with minutes of
meetings of the trustees of the Trust applicable to the Series to the
extent they may affect the duties of the Sub-Adviser, and with copies of
any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the
Sub-Adviser may reasonably request to enable it to perform its functions
under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of
the Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions
of the Custodian, unless such act or omission is taken in reliance upon
instruction given to the Custodian by a representative of the Sub-Adviser
properly authorized to give such instruction under the Custody Agreement. Any
assets added to the Series shall be delivered directly to the Custodian.
4. Expenses. Except for expenses specifically assumed or agreed to be
paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable
for any organizational, operational or business expenses of the Manager or the
Trust including, without limitation, (a) interest and taxes, (b) brokerage
commissions and other costs in connection with the purchase or sale of
securities or other investment instruments with respect to the Series, and (c)
custodian fees and expenses. Any reimbursement of advisory fees required by
any expense limitation provision of any law shall be the sole responsibility
of the Manager. The Manager and the Sub-Adviser shall not be considered as
partners or participants in a joint venture. The Sub-Adviser will pay its own
expenses incurred in furnishing the services to be provided by it pursuant to
this Agreement. Neither the Sub-Adviser nor any affiliated person thereof
shall be entitled to any
B-3
<PAGE>
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager
pursuant to Section 6 hereof).
5. Purchase and Sale of Assets. The Sub-Adviser shall place all orders
for the purchase and sale of securities for the Series with brokers or dealers
selected by the Sub-Adviser, which may include brokers or dealers affiliated
with the Sub-Adviser, provided such orders comply with Rule 17e-1 under the
1940 Act in all respects. To the extent consistent with applicable law,
purchase or sell orders for the Series may be aggregated with contemporaneous
purchase or sell orders of other clients of the Sub-Adviser. The Sub-Adviser
shall use its best efforts to obtain execution of transactions for the Series
at prices which are advantageous to the Series and at commission rates that
are reasonable in relation to the benefits received. However, the Sub-Adviser
may select brokers or dealers on the basis that they provide brokerage,
research or other services or products to the Series and/or other accounts
serviced by the Sub-Adviser. To the extent consistent with applicable law, the
Sub-Adviser may pay a broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission or dealer spread
another broker or dealer would have charged for effecting that transaction if
the Sub-Adviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research products
and/or services provided by such broker or dealer. This determination, with
respect to brokerage and research services or products, may be viewed in terms
of either that particular transaction or the overall responsibilities which
the Sub-Adviser and its affiliates have with respect to the Series or to
accounts over which they exercise investment discretion. Not all such services
or products need be used by the Sub-Adviser in managing the Series.
6. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-Adviser compensation at the annual
rate of 0.50% of the first $25 million of the average daily net assets of the
Series, 0.40% of the next $75 million of such assets, 0.35% of the next $100
million of such assets and 0.30% of such assets in excess of $200 million.
Such compensation shall be payable monthly in arrears or at such other
intervals, not less frequently than quarterly, as the Manager is paid by the
Series pursuant to the Advisory Agreement.
B-4
<PAGE>
7. Non-Exclusivity. The Manager and the Series agree that the services
of the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other
services to various investment companies and other managed accounts, except as
the Sub-Adviser and the Manager or the Administrator may otherwise agree from
time to time in writing before or after the date hereof. This Agreement shall
not in any way limit or restrict the Sub-Adviser or any of its directors,
officers, employees or agents from buying, selling or trading any securities
or other investment instruments for its or their own account or for the
account of others for whom it or they may be acting, provided that such
activities do not adversely affect or otherwise impair the performance by the
Sub-Adviser of its duties and obligations under this Agreement. The Manager
and the Series recognize and agree that the Sub-Adviser may provide advice to
or take action with respect to other clients, which advice or action,
including the timing and nature of such action, may differ from or be
identical to advice given or action taken with respect to the Series. The Sub-
Adviser shall for all purposes hereof be deemed to be an independent
contractor and shall, unless otherwise provided or authorized, have no
authority to act for or represent the Series or the Manager in any way or
otherwise be deemed an agent of the Series or the Manager.
8. Liability. Except as may otherwise be provided by the 1940 Act or
other federal securities laws, neither the Sub-Adviser nor any of its
officers, directors, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties. The
Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser under
this Agreement.
9. Effective Date and Termination. This Agreement shall become effective
as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue in
effect for two years from the date of execution, and from
B-5
<PAGE>
year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the Board of Trustees of the Trust or
by vote of a majority of the outstanding voting securities of the Series,
and (ii) by vote of a majority of the trustees of the Trust who are not
interested persons of the Trust, the Manager or the Sub-Adviser, cast in
person at a meeting called for the purpose of voting on such approval;
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of Trustees
of the Trust or by vote of a majority of the outstanding voting
securities of the Series;
c. this Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Advisory Agreement;
d. this Agreement may be terminated by the Sub-Adviser on ninety
days' written notice to the Manager and the Trust, or by the Manager on
ninety days' written notice to the Sub-Adviser.
Termination of this Agreement pursuant to this Section 9 shall be without
the payment of any penalty.
10. Amendment. This Agreement may be amended at any time by mutual
consent of the Manager and the Sub-Adviser, provided that, if required by law,
such amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of
voting on such approval.
11. Certain Definitions. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "interested
person," "affiliated person" and "assignment" shall have their respective
meanings defined in the 1940 Act, subject, however, to such exemptions as may
be granted by the Securities and Exchange Commission under the 1940 Act.
12. General.
a. The Sub-Adviser may perform its services through any employee,
officer or agent of the Sub-Adviser, and the Manager shall not be
entitled to the advice, recommendation or judgment of any specific
person; provided, however, that the persons
B-6
<PAGE>
identified in the prospectus of the Series shall perform the portfolio
management duties described therein until the Sub-Adviser notifies the
Manager that one or more other employees, officers or agents of the
Sub-Adviser, identified in such notice, shall assume such duties as of a
specific date.
b. If any term or provision or this Agreement or the application
thereof to any person or circumstances is held to be invalid or
unenforceable to any extent, the remainder of this Agreement or the
application of such provision to other persons or circumstances shall not
be affected thereby and shall be enforced to the fullest extent permitted
by law.
c. This Agreement shall be governed by and interpreted in accordance
with the laws of the Commonwealth of Massachusetts.
NEW ENGLAND FUNDS
MANAGEMENT, L.P.
By: ______________________________________
Name: ________________________________
Title: _______________________________
WESTPEAK INVESTMENT
ADVISORS, L.P.
By: ______________________________________
Name: ________________________________
Title: _______________________________
B-7
