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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NEW ENGLAND VARIABLE ANNUITY FUND I
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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NEW ENGLAND VARIABLE ANNUITY FUND I
NOTICE OF SPECIAL MEETING
OF CONTRACTHOLDERS
October 15, 1999
To the Contractholders:
Notice is hereby given that a Special Meeting of Contractholders of New
England Variable Annuity Fund I (the "Fund") will be held at the offices of New
England Life Insurance Company ("New England Financial"), 501 Boylston Street,
Boston, Massachusetts 02116, on October 15, 1999 at 2:00 p.m. (Boston time) for
the following purposes:
1. To fix the number of members of the Board of Managers at ten
members.
2. To elect a Board of Managers.
3. To replace the fundamental investment objective of the Fund with
an otherwise identical, non-fundamental investment objective.
4. To approve or disapprove certain changes to the fundamental
investment restrictions of the Fund in order to adopt a set of
standardized investment restrictions.
5. To consider and act upon any other matters which may properly
come before the meeting or any adjournment thereof.
By order of the President,
Marie C. Swift, Secretary
September __, 1999
________________________________________________________________________________
YOUR VOTE IS IMPORTANT
________________________________________________________________________________
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED INSTRUCTION FORM 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 VARIABLE ANNUITY FUND I
501 BOYLSTON STREET
BOSTON, MASSACHUSETTS 02116
PROXY STATEMENT
The enclosed Proxy is solicited on behalf of the Board of Managers of New
England Variable Annuity Fund I (the "Fund") for use at the Special Meeting of
Contractholders of the Fund called to be held at the offices of New England Life
Insurance Company ("New England Financial"), 501 Boylston Street, Boston,
Massachusetts 02116 on October 15, 1999 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 Contractholders beginning or on about September
__, 1999. A copy of the 1998 Annual Report to Contractholders [and the Fund's
semiannual report for the six months ended June 30, 1999] may be obtained
without charge from New England Financial by writing to the above address or by
calling [(800) 435-4117].
This Proxy Statement consists of four parts.
PART I contains information relating to Proposals 1 and 2, fixing the
number of and the election of the members of the Board of Managers of the Fund
(the "Managers").
PART II contains information relating to Proposal 3, the proposed
replacement of the fundamental investment objective of the Fund with an
otherwise identical, non-fundamental investment objective.
PART III contains information relating to Proposal 4, the proposed changes
to the fundamental investment restrictions of the Fund.
PART IV contains information about the Fund and other matters.
Each timely, properly executed proxy will be voted as you instruct. If no
choice is indicated, the proxy 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 Board of Managers of the Fund (c/o New England Variable
Annuity Fund I, 501 Boylston Street, Boston Massachusetts, 02116), by properly
executing a later-dated proxy or by attending the Meeting, requesting return of
the proxy and voting in person.
Proxies will be solicited primarily by mailing this Proxy Statement and its
enclosures beginning on or about September __, 1999, but supplementary
solicitations may also be made by personal interview, mail, telephone and
telegraph by officers or Managers of the Fund or by officers, employees or
agents of New England Financial, and its subsidiaries. The entire
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cost of the solicitation will be borne by Metropolitan Life Insurance Company
("MetLife"), of which the Fund is a separate account.
VOTING
The Board of Managers of the Fund has fixed the close of business on July
30, 1999 as the record date (the "Record Date") for determination of the
Contractholders entitled to receive notice of and to vote at the meeting and of
the number of votes to which such persons are entitled.
Each Contractholder at the close of business on the Record Date is entitled
to cast at the meeting the number of votes attributable to its contract on such
Record Date. The number of votes which the Contractholder is entitled to cast
is shown on the Proxy. The number of votes which a Contractholder may cast on a
contract in the accumulation period is equal to the number of accumulation units
standing to the credit of the contract. During the annuity period a
Contractholder may cast the number of votes equal to (i) the amount of assets
established in the Fund to meet the obligation for future payments under
variable options elected under the contract divided by (ii) the value of an
accumulation unit. (Fractional units are counted.) Based on the foregoing,
there are [ ] votes eligible to be cast at the meeting.
All notices and proxy materials will be provided to the Contractholders,
including such number thereof as are necessary to enable each Contractholder to
distribute copies thereof to any persons who have the right to instruct such
Contractholder with respect to votes attributable to such Contractholder's
contract. Neither the Fund, New England Financial nor MetLife shall be under a
duty to inquire as to (1) the receipt by a Contractholder of instructions from
persons, if any, who may have the right to instruct the Contractholder with
respect to votes attributable to the Contractholder's contract, (2) the validity
or effect of any voting instructions received by a Contractholder or (3) the
authority of the Contractholder to cast votes. Except to the extent that the
Fund, New England Financial or MetLife has actual knowledge to the contrary, the
votes cast by the Contractholders shall be valid and effective as they affect
the Fund, New England Financial, MetLife and any others having voting rights
with respect to the Fund.
I. FIX NUMBER OF MEMBERS AND ELECTION OF BOARD OF MANAGERS
The Rules and Regulations of the Fund provide that the number of members of
the Board shall be fixed by the Contractholders at any number not less than
three nor more than fifteen. It is proposed that the size of the Board be fixed
at 10 members and that 10 persons be elected as Board of Managers of the Fund.
Of the ten nominees, only Mr. Benjamin and Ms. Brown are not currently Managers.
The nominees, their ages at July 30, 1999 and their principal occupations and
directorships during the past five years are listed below.
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<TABLE>
<CAPTION>
Name of Nominee Age Principal Occupations for Last Five Years
- --------------- --- -----------------------------------------
<S> <C> <C>
John J. Arena 61 Manager of the Fund since ____; retired;
formerly, Vice Chairman of the Board of
Directors of Bay Banks, Inc. and President of
Bay Banks Investment Management
Edward A. Benjamin* 61 Retired; formerly, Partner, Ropes & Gray (law
firm)
Mary Ann Brown* [ ] President, New England Products and
Services, New England Financial; formerly,
Executive Vice President and Director,
Worldwide Life Insurance, Swiss Reinsurance
Company; Principal, Tillinghast/Towers
Perrin (life insurance)
John W. Flynn 59 Manager of the Fund since _____; retired;
formerly, Vice Chairman, Chief Financial
Officer, Fleet Financial Group (banking)
Anne M. Goggin* 50 Manager of the Fund since _____; Chairman
of the Board and President of the Fund; Senior
Vice President and Associate General
Counsel, New England Financial; Chairman
of the Board and President, New England
Investment Management, Inc. ("NEIM")
Nancy Hawthorne 48 Manager of the Fund since _____; formerly,
Chief Executive Officer and Managing
Partner, Hawthorne, Krauss and Associates
(corporate financial advisor); Executive Vice
President, Enterprise Transformation,
MediaOne (cable television company);
Director, Perini Corporation (construction);
Director, Avid Technologies (computer
software company); Director, CGU (property
and casualty insurance company)
Joseph M. Hinchey 74 Manager of the Fund since _____; retired;
formerly, Senior Vice President-Finance,
Analog Devices, Inc. (manufacturer of
electronic devices); Trustee, Union College
and Citizens Scholarship Foundation of
America, Inc.
</TABLE>
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<TABLE>
<CAPTION>
Name of Nominee Age Principal Occupations for Last Five Years
- --------------- --- -----------------------------------------
<S> <C> <C>
Robert B. Kittredge 78 Manager of the Fund since _____; retired;
Trustee, CGM Fund and CGM Capital
Development Fund; formerly, Vice President,
General Counsel, and Director, Loomis,
Sayles & Company, Inc. (investment
management)
John T. Ludes 62 Manager of the Fund since _____; Vice
Chairman, formerly, President and Chief
Operating Officer, American Brands (global
conglomerate); formerly, President and CEO,
Acushnet Company (athletic equipment)
Dale R. Marshall 62 Manager of the Fund since _____; President,
Wheaton College
</TABLE>
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* Mr. Benjamin is an "interested person" of the Fund, as defined in the 1940
Act, because until December 1998 he was a partner of Ropes & Gray, a law firm
that acted as counsel to the Fund and certain of its affiliated companies. He
will continue to be classified as an "interested person" of the Fund until
December 31, 2000. Mses. Goggin and Brown are considered "interested persons" of
the Fund due to their positions with New England Financial, and in the case of
Ms. Goggin, with the Fund and NEIM.
Each current Manager, and each new nominee if elected, will serve as
Manager until the next meeting held for the purpose of electing Managers and
until his or her successor is elected and qualified, or until his or her earlier
death, resignation, removal or retirement. However, Messrs. Hinchey and
Kittredge are scheduled to retire from the Board of Managers on December 31,
1999. If any of the nominees should be unavailable for election at the time of
the Meeting (which is not presently anticipated), the persons named as proxies
may vote for other persons in their discretion, or the Managers may vote to fix
the number of Managers at less than 10.
The Fund's Rules and Regulations do not provide for the annual election of
Managers. However, in accordance with the 1940 Act, (i) the Fund will hold a
shareholders' meeting for the election of Managers at such times as less than a
majority of the Managers holding office have been elected by shareholders, and
(ii) if, after filling a vacancy on the Board of Managers, less than two-thirds
of the Managers holding office would have been elected by the shareholders, that
vacancy may only be filled by a vote of the shareholders. In addition, the
Fund's Rules and Regulations provide that a Manager (including persons elected
by the Managers to fill vacancies in the Board of Managers) may be removed from
office (a) with or without cause by the vote of a
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majority of all votes entitled to be cast at a meeting of Contractholders or (b)
for cause by a majority of the Managers then in office.
None of the nominees is a Contractholder, annuitant or other payee with
respect to Contracts issued by the Fund.
COMMITTEES OF THE BOARD
The Managers have delegated certain functions to two committees, the Audit
Committee and the Contract Review and Governance Committee, each of which
consists of certain Managers who are not "interested persons" of the Fund.
Currently, the members of the Audit Committee are Messrs. Flynn, Hinchey and
Ludes and Ms. Marshall, and the members of the Contract Review and Governance
Committee are Messrs. Arena, Hinchey and Kittredge and Mses. Hawthorne and
Marshall.
The Audit Committee's responsibilities include (i) review of financial and
accounting controls and procedures; (ii) recommendations as to the selection of
the independent accountants; (iii) review of the scope of the audit; (iv) review
of financial statements and audit reports; and (v) review of the independence of
the independent accountants and approval of fees and assignments relating to
both audit and non-audit activities of the independent accountants. Mr. Hinchey
currently serves as chairman of the Audit Committee, which met twice in 1998.
The Contract Review and Governance Committee reviews and makes
recommendations to the board as to contracts requiring approval of a majority of
the Managers who are not interested persons of the Fund or the adviser, Capital
Growth Management, L.P. ("CGM"), and any other contracts which may be referred
to it by the board. This Committee also makes recommendations to the board
regarding nominees for election as Board of Managers of the Fund and the
compensation of the Managers who are not "interested persons" of the Fund. The
Committee will consider nominees recommended by Contractholders. Written
recommendations together with supporting information should be directed to the
Committee in care of the Fund. Mr. Arena currently serves as chairman of the
Contract Review and Governance Committee, which met twice in 1998.
During the fiscal period ended December 31, 1998, the Board of Directors of
the Fund held five meetings. Each of the Managers attended each of these
meetings.
BOARD COMPENSATION
The Fund does not pay any remuneration to its officers, or its Managers who
are "interested persons" of the Fund.
Each Manager who is not an "interested person" of the Fund currently
receives, in the aggregate for serving on the boards of the Fund and New England
Zenith Fund (the "Zenith
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Fund"), a retainer fee at the annual rate of $20,000 and meeting attendance fees
of $2,500 for each board meeting he or she attends. Committee chairmen also
receive an additional retainer fee at the annual rate of $6,000 for the Contract
Review and Governance Committee chairman and $4,000 for the Audit Committee
chairman. These fees are allocated among the Fund and the Zenith Fund based on a
formula that takes into account, among other factors, the net assets of each, or
in such other manner as the board deems appropriate.
During the fiscal year ended December 31, 1998, the current Board of
Managers of the Fund received the amounts set forth below for serving as Board
of Managers of the Fund and also for serving on the governing board of the
Zenith Fund which, as of December 31, 1998, had fourteen funds.
Compensation Table
for the fiscal period ended December 31, 1998
---------------------------------------------
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Total
Pension or Estimated Compensation from
Aggregate Retirement as Annual Benefits Fund and Fund
Name of Compensation Part of Upon Complex*
Person, Position from Fund Fund Expenses Retirement Paid to Manager
- --------------------- ----------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
John J. Arena $1,502 -- -- $ 41,000
John W. Flynn 1,220 -- -- 32,500
Anne M. Goggin 0 -- -- 0
Nancy Hawthorne 1,386 -- -- 35,000
Joseph M. Hinchey 1,464 -- -- 39,000
Robert B. Kittredge 1,386 -- -- 72,000**
John T. Ludes 1,220 -- -- 32,500
Dale R. Marshall 1,220 -- -- 32,500
Frederick K. 0 -- -- 0
Zimmermann***
</TABLE>
- ------------------------------
* The current Managers who are not "interested persons" of the Fund receive
compensation for serving on the boards of the Fund and the Zenith Fund.
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<PAGE>
** Mr. Kittredge's compensation includes amounts paid to him as a trustee of the
CGM Fund, an affiliate of the Fund.
*** Mr. Zimmermann retired from the Board of Managers on June 17, 1999.
EXECUTIVE OFFICERS OF THE FUND
The following table lists the executive officers of the Fund. Each such
person has been elected to the indicated office by the Fund's Managers, and each
such person's term is until his or her successor is elected and qualified, or
earlier resignation, retirement or removal. Each such person's principal
occupation is as an employee or officer of, and each such person serves as an
officer of the Fund at the request of one or more of CGM, New England
Securities, New England Financial or the parent companies of one or more of the
foregoing. Each officer's current principal occupation is listed; similar prior
positions within the same company (or with corporate predecessors) are omitted.
<TABLE>
<CAPTION>
OFFICE WITH PRINCIPAL OCCUPATION;
NAME AND OFFICE WITH THE FUND BUSINESS EXPERIENCE FOR AT
FUND (AGE AT JULY 30, 1999) HELD SINCE LEAST THE PAST FIVE YEARS
- -------------------------------- -------------- -----------------------------------
<S> <C> <C>
Anne M. Goggin, Chairman of June 17, 1999 Senior Vice President and Associate
the Board, Chief Executive General Counsel, New England
Officer, President (50) Financial; Chairman of the Board
and President, NEIM
Marie C. Swift, Secretary (46) April 23, 1993 Second Vice President and Counsel,
New England Financial
</TABLE>
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The address of each of the officers of the Fund is 501 Boylston Street,
Boston, Massachusetts 02116.
MANAGER RECOMMENDATION
THE CURRENT BOARD OF MANAGERS OF THE FUND UNANIMOUSLY RECOMMEND THAT THE
CONTRACTHOLDERS VOTE FOR THE PROPOSAL TO FIX THE NUMBER OF MANAGERS AT TEN AND
FOR THE PROPOSAL TO ELECT EACH OF THE NOMINEES.
Fixing the number of Managers and electing the Board of Managers will each
be by a majority of the votes represented at the Meeting either in person or by
proxy, assuming that a quorum (30% of all votes which may be cast by
Contractholders) is present either in person or by proxy.
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<PAGE>
II. REPLACING THE FUND'S FUNDAMENTAL INVESTMENT OBJECTIVE WITH A NON-
FUNDAMENTAL INVESTMENT OBJECTIVE
Currently, the Fund has an investment objective of "growth of capital
through investment primarily in equity securities of a diversified group of
companies and industries." This objective is fundamental, which means that it
may be changed only by shareholder vote. The purpose of Proposal 3 is to replace
the fundamental investment objective of the Fund with an otherwise identical,
non-fundamental investment objective.
If the investment objective of the Fund becomes non-fundamental, the
Managers would be able to change the investment objective for the Fund in the
future without first seeking shareholder approval. That ability is generally
desirable for the Fund because the Managers may determine that it would be in
the best interests of the Contractholders to change investment techniques in
response to changing market conditions, but their ability to do so is currently
limited by the fundamental nature of the Funds' investment objective. The
Managers have no current intention of changing the investment objective of the
Fund, but, if Proposal 3 is adopted, the Managers could thereafter change the
Fund's investment objective at any time. If the Fund's objective were changed,
the change would be disclosed in a supplement to the Fund's prospectus.
THE BOARD OF MANAGERS OF THE FUND UNANIMOUSLY RECOMMEND THAT THE
CONTRACTHOLDERS VOTE TO APPROVE A CHANGE IN THE INVESTMENT OBJECTIVE OF THE FUND
FROM A FUNDAMENTAL POLICY TO AN OTHERWISE IDENTICAL, NON-FUNDAMENTAL POLICY.
The required vote for approval of a change to the Fund's fundamental
investment objective is the lesser of (1) 67% of the voting interests of the
Fund represented at the Meeting, if more than 50% of the outstanding voting
interests of the Fund are represented at the Meeting or (2) more than 50% of the
outstanding voting interests of the Fund. The new, non-fundamental investment
objective will take effect when disclosure is revised to reflect the change. If
the Proposal is not approved by the Fund, the Fund's current fundamental
investment objective will remain unchanged.
III. ADOPTION OF STANDARDIZED INVESTMENT RESTRICTIONS
As described in the following Proposal, the Managers recommend that
Contractholders approve elimination of and revisions to certain investment
restrictions currently observed by the Fund. The purpose of these proposed
changes is to increase the Fund's investment flexibility and reduce
administrative and compliance burdens by simplifying, modernizing and making
uniform, with other funds managed by CGM and for which New England Financial
or an affiliate serves as administrator, those investment restrictions that are
still required under federal securities laws. In addition to changes to the
existing fundamental investment restrictions of the Fund, the Managers plan to
add new fundamental investment restrictions and revise existing non-
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fundamental investment restrictions. These activities do not require a
Contractholder vote, and therefore are not included among the Proposals in the
enclosed Proxy.
BACKGROUND
The proposed elimination of and revisions to certain of the fundamental
investment restrictions of the Fund are discussed below. Please refer to
Appendix A for a complete description of the current and proposed fundamental
and non-fundamental investment restrictions for the Fund. By revising the
Fund's fundamental investment restrictions, the Managers believe that the
adviser of the Fund will be better able to manage the Fund's portfolio in a
changing regulatory or investment environment. In addition, the process of
monitoring the Fund's compliance with investment restrictions will be
simplified.
Proposals
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4A. ELIMINATE FUNDAMENTAL INVESTMENT RESTRICTION RELATING TO INVESTMENTS
IN A SINGLE ISSUER.
If this Proposal is approved, the fundamental investment restriction of the
Fund relating to investments in a single issuer will be eliminated. The Fund
will become subject to the following proposed non-fundamental investment
restrictions:
The Fund may not:
With respect to 75% of its total assets, invest in the securities of any
issuer if, immediately after such investment, more than 5% of the total
assets of the Fund would be invested in the securities of such issuer;
provided that this limitation does not apply to obligations issued or
guaranteed as to interest or principal by the U.S. Government or its
agencies or instrumentalities, or to securities of any registered
investment company.
With respect to 75% of its total assets, acquire more than 10% of the
outstanding voting securities of any issuer (as of the time of
acquisition).
Discussion. The Fund is classified as "diversified" under the 1940 Act,
-----------
which means that the Fund must comply with, among other requirements, the
investment restrictions set forth above, which limit the percentage of the
Fund's assets invested in a single issuer. These investment restrictions need
not be fundamental. The Managers believe that the proposed changes to these
investment restrictions will enhance investment flexibility and could assist
these Fund in achieving their investment objectives.
Should the Fund desire to become non-diversified in the future, the Fund
would need to obtain a shareholder vote approving its reclassification from
diversified to non-diversified. Until the Fund obtains such a shareholder vote,
it must continue to comply with the diversification requirements of the 1940
Act, which are in substance the same as the proposed non-fundamental restriction
set forth above.
4B. REVISE THE FUNDAMENTAL INVESTMENT RESTRICTION RELATING TO
CONCENTRATION OF INVESTMENT IN ONE INDUSTRY.
If this Proposal is approved, the fundamental investment restriction of the
Fund relating to concentration of investment in one industry will be revised.
The proposed revised fundamental investment restriction is set forth below:
The Fund may not:
Purchase securities (other than (i) securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, (ii) securities of a
registered investment company) if, as a result of such purchase, more than
25% of the total assets of the Fund (as of the time of investment) would be
invested in any one industry.
Discussion. The 1940 Act imposes restrictions on an investment company's
-----------
ability to concentrate its investments in any particular industry or group of
industries. This revised investment restriction is intended to simplify and the
language of the Fund's policies concerning industry concentration and to remove
from investment restrictions unnecessary explanatory language that may or may
not accurately reflect future industry groupings and SEC staff policy positions.
4C. REVISE THE FUNDAMENTAL RESTRICTION RELATING TO BORROWINGS.
If this Proposal is approved, the fundamental investment restriction of the
Fund relating to borrowing money will be revised. The proposed revised
fundamental investment restriction is set forth below:
The Fund may not:
Borrow money, except to the extent permitted by applicable law, regulation
or order.
Discussion. The Fund is currently allowed to borrow only in an amount not
-----------
in excess of 10% of the value of the Fund's total assets. The 1940 Act prohibits
mutual funds from borrowing more than 33 1/3% of their assets, including the
amount borrowed, and permits borrowing only from banks. Accordingly, the revised
policy on borrowing would provide the Fund with additional authority to borrow
and a more flexible investment restriction that will not need to be revised if
additional borrowings become permissible under the 1940 Act.
The Managers believe that amending this fundamental investment restriction
as set forth above would provide the Fund with the needed flexibility to respond
quickly to legal, regulatory and market developments regarding the borrowing of
money and could assist the Fund in achieving its investment objective. The Fund
occasionally borrows money to fund substantial shareholder redemptions or
exchange requests or for the clearance of transactions when available cash is
not sufficient for these needs. Although the Fund have not experienced
difficulties under the current restrictions, the Managers believe that the
proposed change would enhance flexibility. The proposed change would also afford
the Fund the same capacity to satisfy net redemptions of its shares on a
temporary basis without having to resort to sales of portfolio securities at
possibly disadvantageous prices.
This Proposal will also allow the Fund to borrow money to take advantage of
investment opportunities. This type of borrowing involves the additional risk
that interest expense may be greater that the income from or appreciation of the
securities financed and the value of such securities may decline below the
amount borrowed. If the Fund were to follow this practice, any investment gains
made on the securities in excess of the interest paid on the borrowing would
cause the net asset value of the Fund to rise faster than would otherwise be the
case. Conversely, if the investment performance of the additional securities
purchased failed to cover their cost (including any accrued interest on the
money borrowed) to the Fund, the net asset value would decrease faster than
would otherwise be the case. This effect is known as "leverage." The Fund has
no current intention to borrow money for leverage, but the proposed revised
restriction would permit borrowing for such purposes, to the extent approved
from time to time by the Managers.
4D. REVISE THE FUNDAMENTAL INVESTMENT RESTRICTION RELATING TO
UNDERWRITING OF SECURITIES.
If this Proposal is approved, the fundamental investment restriction of the
Fund relating to the underwriting of securities issued by others will be
revised. The Fund will in turn become subject to the following revised
fundamental restriction:
The Fund may not:
Underwrite securities issued by other persons except to the extent, in
connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under certain federal securities laws.
Discussion. The federal securities laws limit and regulate an investment
-----------
company's ability to act as an underwriter of securities issued by others. This
investment restriction is intended to state clearly and simply that the limits
set forth in those laws will apply to the Fund.
4E. ELIMINATE THE FUNDAMENTAL INVESTMENT RESTRICTION RELATING TO THE
PURCHASE OF RESTRICTED SECURITIES.
If this Proposal is approved, the fundamental investment restriction of the
Fund relating to the purchase of restricted securities will be eliminated. The
Fund will, in turn, become subject to the following proposed non-fundamental
restriction:
The Fund may not:
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<PAGE>
Invest more than 15% of the value of the net assets of the Fund in illiquid
securities (as of the time of investment), including variable amount and
master demand notes (if such notes provide for prepayment penalties) and
repurchase agreements with remaining maturities in excess of seven days.
(If, through a change in security values or net assets, or due to other
circumstances, the value of illiquid securities held by the Fund exceeds
15% of the net assets of the Fund, the Fund shall consider appropriate
steps to protect liquidity).
Discussion. The Managers believe that fundamental restriction relating to
-----------
restricted securities is unnecessary in light of current regulatory requirements
and the proposed non-fundamental investment restriction of the Fund, which would
prohibit the Fund from investing more than 15% of its net assets in illiquid
securities, including restricted securities.
The Fund may benefit from the added flexibility of having the policy with
respect to illiquid investments, including restricted securities, contained in a
non-fundamental investment restriction. The Fund would then have greater
flexibility to respond quickly to legal, regulatory and market developments
regarding illiquid investments. If this investment restriction were no longer
required, the Managers could modify or eliminate the restriction to increase the
Fund's investment flexibility without the need for shareholder approval.
To the extent that the Fund invests in illiquid investments, it may
encounter difficulty in determining the fair value of such securities for
purposes of computing net asset value. In addition, the Fund could encounter
difficulty satisfying redemption requests within seven days if it could not
readily dispose of its illiquid investments.
4F. REVISE THE FUNDAMENTAL INVESTMENT RESTRICTION RELATING TO
INVESTMENTS IN REAL ESTATE.
If this Proposal is approved, the fundamental investment restriction of the
Fund relating to investments in real estate will be revised. The proposed
revised investment restriction of the Fund relating to real estate is set forth
below:
The Fund may not:
Purchase or sell real estate except that, consistent with its investment
policies, the Fund 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.
-11-
<PAGE>
Discussion. This revised investment restriction is intended to
-----------
simplify and standardize the language of the Fund's policies concerning
real estate.
4G. REVISE THE FUNDAMENTAL INVESTMENT RESTRICTION RELATING TO
INVESTMENTS IN COMMODITIES.
If this Proposal is approved, the fundamental investment restriction of the
Fund relating to investments in commodities will be revised. The proposed
revised investment restriction of the Fund relating to commodities is set forth
below:
The Fund may not:
Purchase or sell commodities or commodity contracts except that, consistent
with its investment policies, the Fund may purchase and sell financial
futures contracts and options and may enter into swap agreements, foreign
exchange contracts and other financial transactions not requiring the
delivery of physical commodities.
Discussion. These revised investment restrictions are intended to
-----------
simplify and standardize the language of the Fund's policies concerning
commodities.
4H. REVISE THE FUNDAMENTAL INVESTMENT RESTRICTION RELATING TO MAKING
LOANS.
If this Proposal is approved, the fundamental restriction of the Fund
relating to making loans will be revised to standardize the language of the
restriction and to allow the Fund to enter into securities loans. The proposed
revised fundamental restriction is set forth below:
The Fund may not:
Make loans, except by purchasing debt obligations in which the Fund may
invest consistent with its investment policies, by entering into repurchase
agreements, by lending its portfolio securities, and as otherwise permitted
by applicable law, regulation or order.
Discussion. If this Proposal is approved, the Fund will be able to lend
-----------
its portfolio securities to brokers, dealers and other financial institutions
under this standardized, simplified investment restriction. The Managers
believe that this investment flexibility may assist the Fund in achieving its
investment objective. Under the proposed revised restriction, the Fund could
engage in such lending at any time, to the extent authorized by the Managers.
In lending its portfolio securities, the Fund receives income while
retaining the securities' potential for capital appreciation. Such loans are at
all times secured by cash or equivalent collateral. The advantage of such loans
is that the Fund continues to earn interest and dividends on the loaned
securities while at the same time earning a return on the invested collateral.
Such a loan involves some risk to the Fund if the other party should default on
its obligation. If the other party should become involved in bankruptcy
proceedings, it is possible that the Fund may encounter a delay in recovery or
even a loss of rights in the collateral. However, loans of the Fund's securities
will only be made to borrowers deemed by CGM to be creditworthy.
The proposed revised investment restriction would also permit the Fund to
purchase debt obligations and engage in transactions in repurchase agreements.
These functions are already permitted under the Fund's current investment
restrictions.
-12-
<PAGE>
MANAGER RECOMMENDATION
THE BOARD OF MANAGERS OF THE FUND UNANIMOUSLY RECOMMENDS THAT THE
CONTRACTHOLDERS OF THE FUND VOTE TO APPROVE THE PROPOSED REVISIONS TO THE
FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE FUND.
The required vote for approval of revisions to the Fund's fundamental
investment restrictions is the lesser of (1) 67% of the voting interests of the
Fund represented at the Meeting, if more than 50% of the outstanding voting
interests of the Fund are represented at the Meeting or (2) more than 50% of the
outstanding voting interests of the Fund. The new, non-fundamental investment
objective will take effect upon approval by the Fund's Contractholders. If the
Proposal is not approved by the Fund, the Fund's current fundamental investment
objective will remain unchanged.
IV. OTHER MATTERS
Votes cast by proxy or in person at the Meeting will be counted by persons
appointed by the Fund as tellers of the Meeting. With respect to each Proposal,
abstentions from voting will have the effect of a negative vote in that
Proposal.
In the event that sufficient votes in favor of any Proposal are not
received by October 15, 1995, the persons named as proxies may vote on those
matters 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 voting
interest 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 such Proposal. They
will vote against any such adjournment those proxies required to be voted
against such Proposal and will not vote any proxies that direct them to abstain
from voting on such Proposal.
Although the Meeting is called to transact any other business that may
properly come before it, the only business that the Board of Managers intends to
present or knows that others will present are Proposals 1 through 4 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.
New England Securities Corporation, 399 Boylston Street, Boston,
Massachusetts 02116, is the Fund's principal underwriter.
Contractholder proposals will be included in the Fund's proxy material for
any future meetings of Contractholders of the Fund provided that they are
received by the Fund within a
-13-
<PAGE>
reasonable time before the Fund solicits proxies relating to such future
meetings, and provided that they are otherwise appropriate for inclusion.
October 15, 1999
-14-
<PAGE>
Appendix A
----------
PROPOSED INVESTMENT RESTRICTIONS FOR
------------------------------------
NEW ENGLAND VARIABLE ANNUITY FUND I (THE "FUND")
------------------------------------------------
FUNDAMENTAL RESTRICTIONS
THE FUND WILL NOT:
- ------------------
1. Borrow money, except to the extent permitted by applicable law, regulation
or order;
2. Underwrite securities issued by other persons except to the extent that, in
connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under certain federal securities laws;
3. Purchase or sell real estate, except that, consistent with its investment
policies, the Fund 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;
4. Purchase or sell commodities or commodity contracts, except that,
consistent with its investment policies, the Fund may purchase and sell
financial futures contracts and options and may enter into swap agreements,
foreign exchange contracts and other financial transactions not requiring
the delivery of physical commodities;
5. Make loans, except by purchasing debt obligations in which the Fund may
invest consistent with its investment policies, by entering into repurchase
agreements, by lending its portfolio securities, or as otherwise permitted
by applicable law, regulation or order;
6. Purchase securities (other than (i) securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, (ii) securities of a
registered investment company) if, as a result of such purchase, more than
25% of the total assets of the Fund (as of the time of investment) would be
invested in any one industry, except to the extent permitted by applicable
law, regulation or order; or
7. Issue any senior securities except as permitted by applicable law,
regulation or order. (For purposes of this restriction, collateral
arrangements with respect to any type of swap, option, forward contract or
future contract and collateral arrangements with respect to initial and
variation margin are not deemed to involve the issuance of a senior
security).
A-1
<PAGE>
NON-FUNDAMENTAL RESTRICTIONS
THE FUND WILL NOT:
- ------------------
1) Invest in securities of other investment companies except to the
extent permitted by applicable law, regulation or order;
2) Invest more than 15% of the value of the net assets of the Fund in
illiquid securities (as of the time of investment), including variable
amount master demand notes (if such notes provide for prepayment
penalties) and repurchase agreements with remaining maturities in
excess of seven days. (If, through a change in security values or net
assets, or due to other circumstances, the value of illiquid
securities held by the Fund exceeds 15% of the value of the net assets
of the Fund, the Fund shall consider appropriate steps to protect
liquidity);
3) Sell securities short or purchase any securities on margin, except to
the extent permitted by applicable law, regulation or order;
4) With respect to 75% of its total assets, invest in the securities of
any issuer if, immediately after such investment, more than 5% of the
total assets of the Fund would be invested in the securities of such
issuer; provided that this limitation does not apply to obligations
issued or guaranteed as to interest or principal by the U.S.
government or its agencies or instrumentalities, or to securities of
any registered investment company; or
5) With respect to 75% of its total assets, acquire more than 10% of the
outstanding voting securities of any issuer (as of the time of
acquisition).
A-2
<PAGE>
CURRENT INVESTMENT RESTRICTIONS OF
----------------------------------
NEW ENGLAND VARIABLE ANNUITY FUND I (THE "FUND")
------------------------------------------------
FUNDAMENTAL RESTRICTIONS
THE FUND WILL NOT:
- -----------------
1. Purchase any security (other than United States Government
obligations) if, as a result, more than 5% of the Fund's total assets (taken at
current value) would be invested in securities of any one issuer or more than
10% of the outstanding voting securities of any one issuer would be held by
the Fund;
2. Concentrate its investments in particular industries, although it may
invest up to 25% of its total assets (taken at current value) in a single
industry;
3. Borrow money, except as a temporary measure for extraordinary or
emergency purposes, but not for investment purposes, and in an amount not in
excess of 5% of its total assets (taken at current value) at the time of such
borrowing;
4. Underwrite the securities of other issuers, except that it may acquire
portfolio securities under circumstances where, upon the subsequent sale of such
securities, the Fund might be deemed to be an underwriter for purposes of the
Securities Act of 1933;
5. Purchase or sell commodities or commodity securities;
6. Purchase or sell interests in real estate except such as are
represented by marketable securities of companies, including real estate trusts,
whose assets consist substantially of mortgages and other liens on real property
and interests therein and which therefore may represent indirect interests in
real estate;
7. Make loans. Neither the purchase of a portion of an issue of
publicly-distributed bonds, debentures, corporate notes or other evidences of
indebtedness, nor the purchase of short-term debt securities issued by a company
whose equity securities are listed on the New York Stock Exchange, nor the
entering into of a repurchase agreement shall constitute the making of a loan
for purposes of this investment restriction; or
8. Purchase any security restricted as to disposition under Federal
securities laws, or otherwise not readily transferable.
NON-FUNDAMENTAL RESTRICTIONS
THE FUND WILL NOT:
- -----------------
1. Make investments for the purpose of exercising control or management;
2. Acquire securities or other investment companies except through
purchases in the open market involving only customary broker's commissions and
only if after any such acquisition not more than 5% of the total assets of the
Fund (taken at current value) would be so invested and not more than 3% of the
total outstanding voting stock of any one investment company would be held;
3. Purchase securities on margin (except that it may obtain such short-
term credits as are necessary for the clearance of transactions);
A-3
<PAGE>
4. Make short sales;
5. Participate on a joint or joint several basis in any trading account
in securities; or
6. Write, purchase or sell puts, calls or combinations thereof or write
warrants.
A-4
<PAGE>
THE BOARD OF MANAGERS RECOMMENDS A VOTE FOR EACH [X] Please mark your
---
OF THE PROPOSALS BELOW. vote as in this
example.
IF NO SPECIFICATION IS MADE FOR A PROPOSAL, THE PROXY SHALL BE VOTED FOR THAT
---
PROPOSAL.
[_] To vote FOR all Proposals, mark NOTE: Please sign exactly as your name
this box and sign, date and appears on this Proxy. When signing in a
return this instruction form. fiduciary capacity, such as executor,
(No additional vote is necessary.) administrator, trustee, attorney,
guardian, etc, please so indicate.
[If you wish to vote by Corporate and partnership proxies should
telephone, please see be signed by an authorized person
the enclosed instruction card.] indicating the person's title.
Date ____________________________, 1999
________________________________________
________________________________________
Signature(s), Title(s), (if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
1. To fix the number of members of the Board of Managers at ten members.
2. To elect a Board of Managers.
FOR WITHHOLD FOR ALL
ALL (except as noted below)
[_] [_]
Managers: John J. Arena, Edward A. Benjamin, Mary Ann Brown,
John W. Flynn, Anne M. Goggin, Nancy Hawthorne, Joseph M. Hinchey,
Robert B. Kittredge, John T. Ludes and Dale Rogers Marshall.
Instruction: To withhold authority to vote for any individual Manager, strike a
line through the Manager's name in the list above.
<TABLE>
<S> <C> <C> <C>
3. To replace the fundamental investment objective of the Fund with an FOR AGAINST ABSTAIN
otherwise identical, non-fundamental investment objective. [_] [_] [_]
4. Adoption of Standardized Investment Restrictions for the Fund. FOR AGAINST ABSTAIN
[_] [_] [_]
4a. To eliminate the fundamental restriction relating to investments in a FOR AGAINST ABSTAIN
single issuer. [_] [_] [_]
4b. To revise the fundamental restriction relating to concentration of FOR AGAINST ABSTAIN
investments in one industry. [_] [_] [_]
4c. To revise the fundamental restriction relating to borrowings. FOR AGAINST ABSTAIN
[_] [_] [_]
4d. To revise the fundamental restriction relating to underwriting of FOR AGAINST ABSTAIN
securities. [_] [_] [_]
4e. To eliminate the fundamental restriction relating to the purchase of FOR AGAINST ABSTAIN
restricted securities. [_] [_] [_]
4f. To revise the fundamental restrictions relating to investments in FOR AGAINST ABSTAIN
real estate. [_] [_] [_]
4g. To revise the fundamental restrictions relating to investments in FOR AGAINST ABSTAIN
commodities. [_] [_] [_]
4h. To revise the fundamental restriction relating to making loans. FOR AGAINST ABSTAIN
[_] [_] [_]
</TABLE>
<PAGE>
INSTRUCTION FORM
THE PROXY TO WHICH THESE INSTRUCTIONS RELATE IS SOLICITED ON BEHALF OF THE
MANAGERS OF THE NEW ENGLAND VARIABLE ANNUITY FUND I
The undersigned hereby instructs that all shares of the New England Variable
Annuity Fund I (the "Fund") deemed attributable to the undersigned's contracts
with the issuing insurance company to be voted at the Special Meeting of
Contractholders of the Fund on October 15, 1999 (the Notice and Proxy Statement
with respect to which have been received by the undersigned), and at all
adjournments thereof, on each proposal described in said Notice as set forth on
the reverse side hereof.
The issuing insurance company is authorized to vote in its discretion on any
other matters which may properly come before the meeting.
YOUR VOTE IS IMPORTANT. Please vote as soon as possible
PLEASE SEE REVERSE SIDE
PLEASE FOLD AT LINE TO RETURN
- --------------------------------------------------------------------------------
