<PAGE>
Registration Nos. 2-68348
811-2819
- - - - - - - - - - - - - - -
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
- - - - - - - - - - - - - - -
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 27 [ X ]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY [ X ]
ACT OF 1940
Amendment No. 28 [ X ]
(Check appropriate box or boxes)
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NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
(Exact Name of Registrant as Specified in Charter)
399 Boylston Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices, including Zip Code)
(617) 578-1669
(Registrant's Telephone Number, including Area Code)
- - - - - - - - - - - - - - -
John E. Pelletier, Esq.
New England Funds, L.P.
399 Boylston Street
Boston, Massachusetts 02116
(Name and address of agent for service)
Copy to:
John Loder, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
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It is proposed that this filing will become effective (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
[Logo](R)
NEW ENGLAND FUNDS(R)
WHERE THE BEST MINDS MEET(R)
- --------------------------------------------------------------------------------
New England
Money Market Funds
--------------------------------------
TAXABLE MONEY MARKET FUND
[Graphic Omitted] New England Cash Management Trust --
Money Market Series
TAX EXEMPT MONEY MARKET FUND
New England Tax Exempt
Money Market Trust
--------------------------------------
The Securities and Exchange Commission has not approved any Fund's shares or
determined whether this Prospectus is accurate or complete. Anyone who tells you
otherwise is committing a crime.
For general information on the Funds or any of their services and for assistance
in opening an account, contact your financial representative or call New England
Funds.
PROSPECTUS
SEPTEMBER 1, 1999
WHAT'S INSIDE
[Graphic GOALS, STRATEGIES & RISKS
Omitted] PAGE 2
[Graphic FUND FEES & EXPENSES
Omitted] PAGE 6
[Graphic MANAGEMENT TEAM
Omitted] PAGE 8
[Graphic FUND SERVICES
Omitted] PAGE 9
[Graphic FUND PERFORMANCE
Omitted] PAGE 18
New England Funds
399 Boylston Street, Boston, Massachusetts 02116
800-225-5478
<PAGE>
TABLE OF CONTENTS
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GOALS, STRATEGIES & RISKS
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New England Cash Management Trust - Money Market Series .................. 2
New England Tax Exempt Money Market Trust ................................ 4
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FUND FEES & EXPENSES
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Fund Fees & Expenses ..................................................... 6
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MORE ABOUT RISK
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More About Risk .......................................................... 7
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MANAGEMENT TEAM
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Meet the Funds' Investment Adviser and Subadviser ........................ 8
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FUND SERVICES
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Investing in the Funds ................................................... 9
It's Easy to Open an Account ............................................. 9
Buying Shares ............................................................ 10
Selling Shares ........................................................... 11
Selling Shares in Writing ................................................ 12
Exchanging Shares ........................................................ 13
Restrictions on Buying, Selling and Exchanging Shares .................... 14
How Fund Shares Are Priced ............................................... 15
Dividends and Distributions .............................................. 16
Tax Consequences ......................................................... 16
Additional Investor Services ............................................. 17
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FUND PERFORMANCE
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New England Cash Management Trust - Money Market Series .................. 18
New England Tax Exempt Money Market Trust ................................ 19
Glossary of Terms ........................................................ 20
If you have questions about any of the terms used in this Prospectus, please
refer to the "Glossary of Terms."
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
-------------------------- Stability Income Growth
New England Cash Management -----------------------
Trust -- Money Market Series High X
ADVISER: New England Funds Management, L.P. --------- ------ ------
("NEFM") Mod.
--------- ------ ------
SUBADVISER: Back Bay Advisors, L.P. Low X X
("Back Bay Advisors")
TICKER SYMBOL: CLASS A CLASS B CLASS C
---------------------------
NEMXX NMBXX NECXX
INVESTMENT GOAL
The Fund seeks maximum current income consistent with preservation of capital
and liquidity.
INVESTMENT STRATEGIES
The Fund will invest up to 100% of its assets in high-quality, short-term,
dollar-denominated money market investments issued by U.S. and foreign issuers.
To preserve its investors' capital, the Fund seeks to maintain a stable $1.00
share price. Some of the Fund's portfolio positions include:
x Certificates of deposit
x Bankers' acceptances or bank notes
x Securities issued or guaranteed by the U.S. government
x Commercial paper
x Repurchase agreements
x Other corporate debt obligations
x Cash
Back Bay Advisors will manage the Fund's portfolio in compliance with
industry-standard requirements for money market funds. These requirements
include:
o Credit quality -- The Fund's investments are generally rated in the two
highest rating categories as rated by a major credit agency.
o Maturity -- Each of the Fund's investments has a maturity of 397 days or less
and the average portfolio maturity is 90 days or less.
o Diversification -- The Fund is diversified which limits its exposure to any
given issuer.
The Fund's portfolio manager may adjust the Fund's holdings or its average
maturity based on actual or anticipated changes in interest rates or credit
quality. The Fund is appropriate for investors who seek a conservative
investment for their portfolio or who are comfortable with the risks described
below and need cash immediately.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report.
INVESTMENT RISKS
Money market securities: Subject to credit risk and interest rate risk. Credit
risk relates to the ability of an issuer to make payments of principal and
interest when due and includes the risk of default. Although generally
considered unlikely, the risk of default could cause the Fund's share price or
yield to fall. Interest rate risk relates to changes in a security's value as
a result of changes in interest rates. Generally, the value of money market
securities rises when prevailing interest rates fall and falls when interest
rates rise.
Risks of foreign investments include a lack of issuer information, the risk of
political uncertainties as well as different regulatory requirements.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks
to preserve the net asset value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
To learn more about the possible risks of investing in a Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Funds may engage. Please read this section carefully
before you invest.
<PAGE>
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in New England Cash Management Trust - Money Market Series. The Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows the Fund's total returns for Class A shares for each of the
last ten calendar years.+
(total return)
1989 8.5%
1990 8.3%
1991 7.2%
1992 4.6%
1993 2.8%
1994 2.7%
1995 4.8%
1996 5.0%
1997 4.8%
1998 5.0%
/\ Highest Quarterly Return: Second Quarter 1989, up 2.32%
\/ Lowest Quarterly Return: Third Quarter 1993 , up 0.61%
+ The Fund's Class A shares total return year-to-date as of June 30, 1999 was
4.6%.
The table below shows the Fund's average annual total returns for the one-year,
five-year and ten-year periods (or since the class's inception if shorter).
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AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended June 30, 1999) PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
- -------------------------------------------------------------------------------
New England Cash Management Trust -
Money Market Series:
Class A (Inception 7/10/78) 4.6% 4.8% 4.9%
New England Cash Management Trust -
Money Market Series:
Class B (Inception 9/13/93) 4.6% 4.8% 4.5%*
New England Cash Management Trust -
Money Market Series:
Class C (Inception 3/1/98) 4.6% 4.7%* 4.7%*
*Since Inception
- -------------------------------------------------------------------------------
For actual past expenses of Class A, B and C shares, see the section entitled
"Fund Fees and Expenses."
For current yield information about the Fund, shareholders or their financial
representatives may call New England Funds Personal Access Line(TM) 24 hours a
day at 800-225-5478, press 1.
<PAGE>
[graphic omitted] Goals, Strategies & Risks FUND FOCUS
-------------------------- Stability Income Growth
New England Tax Exempt -----------------------
Money Market Trust High X
ADVISER: New England Funds Management, L.P. --------- ------ ------
("NEFM") Mod.
--------- ------ ------
SUBADVISER: Back Bay Advisors, L.P. Low X X
("Back Bay Advisors")
TICKER SYMBOL: CLASS A CLASS B
-----------------
NEEXX TEBXX
INVESTMENT GOAL
The Fund seeks current income exempt from federal income taxes consistent with
the preservation of capital and liquidity.
INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest in high-quality, short-term
instruments that pay interest that is exempt from federal income tax ("Municipal
Securities"). Municipal Securities are generally issued by states and local
governments and their agencies. Unless it has adopted a temporary defensive
position, it is a fundamental policy of the Fund that it will invest at least
80% of its net assets in Municipal Securities. To preserve its investors'
capital, the Fund seeks to maintain a stable $1.00 share price. Some of the
Fund's portfolio positions include:
x Notes or bonds
x Commercial paper
x When-issued securities or securities purchased from a broker-dealer with the
right to sell them back at a certain time and price (a "put")
x Variable or floating interest rate obligations
x Taxable, high-quality money market securities including certificates of
deposit, bankers' acceptances or bank notes, and other corporate debt
obligations
x Repurchase Agreements
x Cash
Back Bay Advisors will manage the Fund's portfolio in compliance with
industry-standard requirements for money market funds. These requirements
include:
o Credit quality -- The Fund's investments are generally rated in the two
highest rating categories as rated by a major credit agency.
o Maturity -- Each of the Fund's investments has a maturity of 397 days or less
and the average portfolio maturity is 90 days or less.
o Diversification -- The Fund is diversified which limits its exposure to any
given issuer.
The Fund's portfolio manager may adjust the Fund's holdings or its average
maturity based on actual or anticipated changes in interest rates or credit
quality. The Fund is appropriate for investors who seek a conservative
investment exempt from federal taxes for their portfolio or who are comfortable
with the risks described below and need cash immediately.
A "snapshot" of the Fund's investments may be found in the current annual or
semiannual report.
INVESTMENT RISKS
MONEY MARKET SECURITIES: Subject to credit risk and interest rate risk. Credit
risk relates to the ability of an issuer to make payments of principal and
interest when due and includes the risk of default. Although generally
considered unlikely, the risk of default could cause the Fund's share price or
yield to fall. Interest rate risk relates to changes in a security's value as
a result of changes in interest rates. Generally, the value of money market
securities rises when prevailing interest rates fall and falls when interest
rates rise.
The Fund's price stability and liquidity may not be equal to that of a taxable
money market fund, because the market for Municipal Securities is not as broad
as the market for taxable money market securities and the average portfolio
maturity is generally greater for the Fund than for a taxable money market
fund.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks
to preserve the value of your investment at $1.00 per share, it is possible to
lose money by investing in the Fund.
To learn more about the possible risks of investing in a Fund, please refer to
the section entitled "More About Risk." This section details the risks of
practices in which the Funds may engage. Please read this section carefully
before you invest.
EVALUATING THE FUND'S PAST PERFORMANCE
The bar chart and table shown below give an indication of the risks of investing
in New England Tax Exempt Money Market Trust. The Fund's past performance does
not necessarily indicate how the Fund will perform in the future.
The bar chart shows the Fund's total returns for Class A shares for each of the
last ten calendar years.+
(total return)
1989 5.5%
1990 5.6%
1991 4.9%
1992 3.4%
1993 2.2%
1994 2.1%
1995 3.2%
1996 3.3%
1997 3.2%
1998 3.3%
/\ Highest Quarterly Return: Second Quarter 1989, up 1.51%
\/ Lowest Quarterly Return: First Quarter 1993, up 0.48%
+ The Fund's Class A shares total return year-to-date as of June 30, 1999 was
2.8%.
The table below shows the Fund's average annual total returns for the one-year,
five-year and ten-year periods (or since the class's inception if shorter).
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AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended June 30, 1999) PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
- -------------------------------------------------------------------------------
New England Tax Exempt Money
Market Trust -
Class A (Inception 4/21/83) 2.8% 3.2% 3.4%
New England Tax Exempt Money
Market Trust -
Class B (Inception 9/13/93) 2.8% 3.2%* 3.0%*
*Since Inception
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For actual past expenses of Class A and B shares, see the section entitled
"Fund Fees and Expenses."
For current yield information about the Fund, shareholders or their financial
representatives may call New England Funds Personal Access Line(TM) 24 hours a
day at 800-225-5478, press 1.
<PAGE>
[graphic omitted] FUND FEES & EXPENSES
The following tables describe the fees and expenses that you may pay if you buy
and hold shares of each Fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
- -------------------------------------------------------------------------------
CASH MANAGEMENT TRUST -- TAX EXEMPT
MONEY MARKET SERIES MONEY MARKET TRUST
CLASS A CLASS B CLASS C CLASS A CLASS B
- ------------------------------------------------------------------------------
Maximum sales charge (load)
imposed on purchases None None None None None
Maximum deferred sales charge
(load) None* None* None* None* None*
Redemption fees None** None** None** None** None**
* Shares of each class are sold without any sales charge. However, Class A, B
and C shares may be subject to a Contingent Deferred Sales Charge ("CDSC") if
the shares were purchased by exchange from another New England Fund. See the
section entitled "Exchanging Shares."
** Generally, a transaction fee will be charged for expedited payment of
redemption proceeds such as by wire or overnight delivery.
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, as a percentage of average net
assets)
- -------------------------------------------------------------------------------
CASH MANAGEMENT TRUST -- TAX EXEMPT
MONEY MARKET SERIES MONEY MARKET TRUST
CLASS A CLASS B CLASS C CLASS A CLASS B
- -------------------------------------------------------------------------------
Management fees 0.42% 0.42% 0.42% 0.40% 0.40%
Distribution and/or service
(12b-1) fees 0.00% 0.00% 0.00% 0.00% 0.00%
Other expenses 0.42% 0.42% 0.42% 0.40% 0.40%
Total annual fund operating
expenses 0.84% 0.84% 0.84% 0.80% 0.80%
Fee Waiver 0.00% 0.00% 0.00% 0.15%* 0.15%*
Net Expenses 0.84% 0.84% 0.84% 0.65% 0.65%
- -------------------------------------------------------------------------------
* NEFM has given a binding undertaking to New England Tax Exempt Money Market
Trust to limit the amount of the Fund's total fund operating expenses to 0.65%
of the Fund's total net assets for Class A and B shares. This undertaking will
be in effect for the life of this Prospectus.
EXAMPLE
- ------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in each Fund
with the cost of investing in other mutual funds.
The example assumes that:
o You invest $10,000 in the Fund for the time periods indicated;
o Your investment has a 5% return each year; and
o The Fund's operating expenses remain the same.
Although your actual costs and returns may be higher or lower, based on these
assumptions your costs would be:
- -------------------------------------------------------------------------------
CASH MANAGEMENT TRUST -- TAX EXEMPT
MONEY MARKET SERIES MONEY MARKET TRUST
CLASS A CLASS B CLASS C CLASS A CLASS B
- -------------------------------------------------------------------------------
(1) (1)
1 year $ 86 $ 86 $ 86 $ 66 $ 66
3 years $ 268 $ 268 $ 268 $ 208 $ 208
5 years $ 466 $ 466 $ 466 $ 362 $ 362
10 years $ 1,037 $ 1,037 $ 1,037 $ 810 $ 810
- -------------------------------------------------------------------------------
(1) Assumes CDSC does not apply to the redemption. See the section entitled
"Exchanging Shares."
<PAGE>
MORE ABOUT RISK
The Funds have principal investment strategies that come with inherent risks.
The following is a list of risks to which each Fund may be subject by investing
in various types of securities or engaging in various practices
MARKET RISK (Both Funds) The risk that the market value of a security may move
up and down, sometimes rapidly and unpredictably, based upon change in an
issuer's financial condition as well as overall market and economic conditions.
MANAGEMENT RISK (Both Funds) The risk that a strategy used by a Fund's portfolio
management may fail to produce the intended result.
CREDIT RISK (Both Funds) The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to honor a
financial obligation.
INTEREST RATE RISK (Both Funds) The risk of market losses attributable to
changes in interest rates. With fixed-income securities, a rise in interest
rates typically causes a fall in a security's value.
FOREIGN RISK (Cash Management Trust - Money Market Series) A foreign security
may be affected by limited liquidity and higher volatility than securities held
by a U.S. bank. Political, economic and information risks as well as different
regulatory requirements are also associated with securities held by a foreign
bank.
INFORMATION RISK (Both Funds) The risk that key information about a security is
inaccurate or unavailable.
OPPORTUNITY RISK (Both Funds) The risk of missing out on an investment
opportunity because the assets necessary to take advantage of such opportunity
are tied up in less advantageous investments.
LIQUIDITY RISK (Both Funds) The risk that certain securities may be difficult or
impossible to sell at the time and at the price that the seller would like. This
may result in a loss or may be costly to a Fund.
VALUATION RISK (Both Funds) The risk that the Fund has valued certain securities
at a higher price than it can sell them for.
POLITICAL RISK (Both Funds) The risk of losses directly attributable to
government or political actions.
YEAR 2000 (Both Funds) Many computer systems today cannot distinguish between
the year 1900 and the year 2000. New England Funds does not currently anticipate
that computer problems related to the year 2000 will have a material effect on
any Fund. However, there can be no assurances in this area, including the
possibility that year 2000 computer problems could negatively affect
communication systems or investment markets, including investments by a Fund or
the economy in general.
<PAGE>
[graphic omitted] MANAGEMENT TEAM
---------------
MEET THE FUNDS' INVESTMENT ADVISER
AND SUBADVISER
The New England Funds family includes 22 mutual funds with a total of $7.8
billion in assets under management as of June 30, 1999. New England Funds are
distributed through New England Funds, L.P. (the "Distributor"). This Prospectus
covers New England Cash Management Trust - Money Market Series and New England
Tax Exempt Money Market Trust (the "Money Market Funds" and each a "Fund"). New
England Stock Funds, New England Bond Funds, New England Star Funds and New
England State Tax-Free Funds constitute the "New England Funds."
NEW ENGLAND FUNDS MANAGEMENT, L.P.
NEFM, located at 399 Boylston Street, Boston, Massachusetts 02116, serves as the
adviser to each of the Funds. NEFM is a subsidiary of Nvest Companies, L.P.
("Nvest Companies"), which is part of an affiliated group including Nvest, L.P.,
a publicly traded company listed on the New York Stock Exchange. Nvest
Companies' 14 principal subsidiary or affiliated asset management firms,
collectively, had more than $136 billion in assets under management as of June
30, 1999. NEFM oversees, evaluates and monitors the subadvisory services
provided to each Fund. It also provides general business management and
administration to the Funds. Back Bay Advisors makes the investment decisions
for each Fund.
The combined advisory and subadvisory fees paid by the Funds for the year ended
June 30, 1999, as a percentage of each Fund's average daily net assets, were
0.42% for the Cash Management Trust - Money Market Series and 0.40% for the Tax
Exempt Money Market Trust.
SUBADVISER
Back Bay Advisors, located at 399 Boylston Street, Boston, Massachusetts 02116,
serves as the subadviser for each Fund. Back Bay Advisors is a subsidiary of
Nvest Companies. Back Bay Advisors, founded in 1986, provides discretionary
investment management services for approximately $9 billion of assets as of June
30, 1999 for mutual funds and other institutional investors.
SUBADVISORY AGREEMENTS
Each Fund has received an exemptive order from the Securities and Exchange
Commission (the "SEC") which permits NEFM to amend or continue existing
subadvisory agreements when approved by the Funds' Board of Trustees, without
shareholder approval. The exemption also permits NEFM to enter into new
subadvisory agreements with subadvisers that are not affiliated with NEFM if
approved by the Funds' Board of Trustees. Shareholders will be notified of any
subadviser changes.
PORTFOLIO TRADES
In placing portfolio trades, each Fund's adviser or subadviser may use brokerage
firms that market the Fund's shares or are affiliated with Nvest Companies, NEFM
or Back Bay Advisors. In placing trades, Back Bay Advisors will seek to obtain
the best combination of price and execution, which involves a number of
judgmental factors. Such portfolio trades are subject to applicable regulatory
restrictions and related procedures adopted by the Funds' Board of Trustees.
<PAGE>
FUND SERVICES
-------------
INVESTING IN THE FUNDS [graphic omitted]
CHOOSING A SHARE CLASS
New England Cash Management Trust - Money Market Series offers Class A, Class B
and Class C shares to the public and New England Tax Exempt Money Market Trust
offers only Class A and Class B shares. The classes of each Fund enable
shareholders in the same classes of another New England Fund to invest in the
Money Market Funds through an exchange of shares.
IT'S EASY TO OPEN AN ACCOUNT
TO OPEN AN ACCOUNT WITH NEW ENGLAND FUNDS:
1. Read this Prospectus carefully.
2. Determine how much you wish to invest. The following chart shows the
investment minimums for various types of accounts:
- -------------------------------------------------------------------------------
MINIMUM TO
OPEN AN
MINIMUM TO ACCOUNT USING MINIMUM
OPEN AN INVESTMENT FOR EXISTING
TYPE OF ACCOUNT ACCOUNT BUILDER ACCOUNTS
Any account other than those
listed below $2,500 $100 $100
Accounts registered under the
Uniform Gifts to Minors Act or
the Uniform Transfers to Minors Act $2,000 $100 $100
Individual Retirement Accounts (IRAs) $500 $100 $100
Retirement plans with tax benefits
such as corporate pension, profit
sharing and Keogh plans $250 $100 $100
Payroll Deduction Investment Programs
for 401(k), SARSEP, SEP, SIMPLE,
403(b)(7) and certain other
retirement plans $25 N/A $25
- -------------------------------------------------------------------------------
3. Complete the appropriate parts of the account application, carefully
following the instructions. If you have any questions, please call your
financial representative or New England Funds at 800-225-5478. For more
information on New England Funds' investment programs, refer to the section
entitled "Additional Investor Services" in this Prospectus.
4. Use the following sections as your guide for purchasing shares.
- ------------------------------------------------------------------------------
SELF-SERVICING YOUR ACCOUNT
Buying or selling shares is easy with the services described below:
NEW ENGLAND FUNDS PERSONAL ACCESS NEW ENGLAND FUNDS WEB SITE
LINE(TM) ("PAL")
800-225-5478, PRESS 1 WWW.MUTUALFUNDS.COM
You have access to your account 24 hours a day by calling PAL from a touch-tone
telephone or by visiting us online.
Using these customer service options, you may:
o purchase, exchange or redeem shares in your existing accounts (certain
restrictions may apply);
o view your account balances, recent transactions, Fund prices and recent
performance;
o order duplicate account statements; and
o obtain tax information.
Please see the following pages for other ways to buy, exchange or sell your
shares.
<PAGE>
[graphic omitted] FUND SERVICES
-------------
BUYING SHARES
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
<S> <C>
THROUGH YOUR
INVESTMENT DEALER
o Call your investment dealer for o Call your investment dealer for
information information
BY MAIL
[graphic omitted]
o Make out a check in U.S. dollars for the o Make out a check in U.S. dollars for the
investment amount, payable to "New England investment amount, payable to "New
Funds." Third party checks will generally England Funds." Third party checks will
not be accepted. generally not be accepted.
o Mail the check with your completed o Fill out the detachable investment slip
application to New England Funds, P.O. Box from an account statement. If no slip is
8551, Boston, MA 02266-8551. available, include with the check a
letter specifying the Fund name, your
class of shares, your account number and
the registered account name(s). To make
investing even easier, you can order more
investment slips by calling 800-225-5478.
BY EXCHANGE
[graphic omitted]
o The exchange must be for a minimum of $1,000 o The exchange must be for a minimum of
or for all of your shares. $1,000 or for all of your shares.
o Obtain a current prospectus for the Fund o Call your investment dealer or New
into which you are exchanging by calling England Funds at 800-225-5478 to request
your investment dealer or New England an exchange.
Funds at 800-225-5478.
o See the section entitled "Exchanging
o Call your investment dealer or New England Shares." for more details.
Funds to request an exchange.
o See the section entitled "Exchanging
Shares." for more details.
BY WIRE
[graphic omitted]
o Call New England Funds at 800-225-5478 to o Instruct your bank to transfer funds to
obtain an account number and wire transfer State Street Bank & Trust Company, ABA#
instructions. Your bank may charge you for 011000028, DDA# 99011538.
such a transfer.
o Specify the Fund name, your class of
shares, your account number and the
registered account name(s). Your bank may
charge you for such a transfer.
AUTOMATIC INVESTING THROUGH INVESTMENT BUILDER
[graphic omitted]
o Indicate on your application that you o Please call New England Funds at
would like to begin an automatic 800-225-5478 for a Service Options Form.
investment plan through Investment Builder A signature guarantee may be required to
and the amount of the monthly investment add this privilege.
($100 minimum).
o Send a check marked "Void" or a deposit o See the section entitled "Additional
slip from your bank account along with Investor Services."
your application.
THROUGH AUTOMATED CLEARING HOUSE (ACH)
[graphic omitted]
o Ask your bank or credit union whether it o Call New England Funds at 800-225-5478 to
is a member of the ACH system. add shares to your account through ACH.
o Complete the "Telephone Withdrawal and o If you have not signed up for the ACH
Exchange" and "Bank Information" sections system, please call New England Funds for
on your account application. a Service Options Form. A signature
guarantee may be required to add this
o Mail your completed application to New privilege.
England Funds, P.O. Box 8551, Boston, MA
02266-8551.
</TABLE>
<PAGE>
FUND SERVICES
-------------
SELLING SHARES [graphic omitted]
TO SELL SOME OR ALL OF YOUR SHARES
Certain restrictions may apply. See section entitled "Restrictions on Buying,
Selling and Exchanging Shares."
THROUGH YOUR INVESTMENT DEALER
o Call your investment dealer for information.
BY MAIL
[graphic omitted]
o Write a letter to request a redemption specifying the name of the Fund, the
class of shares, your account number, the exact registered account name(s),
the number of shares or the dollar amount to be redeemed and the method by
which you wish to receive your proceeds. Additional materials may be
required. See the section entitled "Selling Shares in Writing."
o The request must be signed by all of the owners of the shares including the
capacity in which they are signing, if appropriate.
o Mail your request to New England Funds, P.O. Box 8551, Boston, MA
02266-8551.
o Your proceeds (less any applicable CDSC) will be delivered by the method
chosen in your letter. If you choose to have your proceeds delivered by
mail, they will generally be mailed to you on the business day after the
request is received. You may also choose to redeem by wire or through ACH
(see below).
BY EXCHANGE
[graphic omitted]
o Obtain a current prospectus for the Fund into which you are exchanging by
calling your investment dealer or New England Funds at 800-225-5478.
o Call New England Funds to request an exchange.
o See the section entitled "Exchanging Shares" for more details.
BY WIRE
[graphic omitted]
o Fill out the "Telephone Withdrawal and Exchange" and "Bank Information"
sections on your account application.
o Call New England Funds at 800-225-5478 or indicate in your redemption
request letter (see above) that you wish to have your proceeds wired to your
bank.
o Proceeds (less any applicable CDSC) will generally be wired on the next
business day. A wire fee (currently $5.00) will be deducted from the
proceeds.
THROUGH AUTOMATED CLEARING HOUSE (ACH)
[graphic omitted]
o Ask your bank or credit union whether it is a member of the ACH system.
o Complete the "Telephone Withdrawal and Exchange" and "Bank Information"
sections on your account application.
o If you have not signed up for the ACH system on your application, please
call New England Funds at 800-225-5478 for a Service Options Form.
o Call New England Funds to request a redemption through this system.
o Proceeds (less any applicable CDSC) will generally arrive at your bank
within three business days.
BY SYSTEMATIC WITHDRAWAL PLAN
[graphic omitted]
o Please refer to the section entitled "Additional Investor Services" or call
New England Funds at 800-225-5478 or your financial representative for
information.
o Because withdrawal payments may have tax consequences, you should consult
your tax adviser before establishing such a plan.
By Telephone
[graphic omitted]
o You may receive your proceeds by mail, by wire or through ACH (see above).
o Call New England Funds at 800-225-5478 to choose the method you wish to use
to redeem your shares.
By Check (for Class A only)
[graphic omitted]
o Select the checkwriting option on your account application and complete the
attached signature card.
o To add this privilege to an existing account, call New England Funds at
800-225-5478 for a Service Options Form.
o Each check must be written for $250 or more.
o You may not close your account by withdrawal check. Please call your
financial representative or New England Funds to close an account.
<PAGE>
[graphic omitted] FUND SERVICES
-------------
SELLING SHARES IN WRITING
If you wish to redeem your shares in writing, all owners of the shares must sign
the redemption request in the exact names in which the shares are registered and
indicate any special capacity in which they are signing. In certain situations,
you will be required to make your request to sell shares in writing. In these
instances, a letter of instruction signed by the authorized owner is necessary.
In certain situations we also may require a signature guarantee or additional
documentation.
A signature guarantee protects you against fraudulent orders and is necessary
if:
o your address of record has been changed within the past 30 days;
o you are selling more than $100,000 worth of shares and you are requesting
the proceeds by check; or
o a proceeds check for any amount is mailed to an address other than the
address of record or not payable to the registered owner(s).
A notary public cannot provide a signature guarantee. A signature guarantee can
be obtained from one of the following sources:
o a financial representative or securities dealer;
o a federal savings bank, cooperative or other type of bank;
o a savings and loan or other thrift institution;
o a credit union; or
o a securities exchange or clearing agency.
The following table shows situations in which additional documentation may be
necessary. Please call your financial representative or New England Funds
regarding requirements for other account types.
SELLER (ACCOUNT TYPE) REQUIREMENTS FOR WRITTEN REQUESTS
- ------------------------------------------------------------------------------
INDIVIDUAL, JOINT, SOLE PROPRIETORSHIP, o The signatures on the letter
UGMA/UTMA (MINOR ACCOUNTS) must include all persons
authorized to sign, including
title, if applicable.
o Signature guarantee, if
applicable (see above).
CORPORATE OR ASSOCIATION ACCOUNTS o The signatures on the letter
must include all persons
authorized to sign, including
title.
OWNERS OR TRUSTEES OF TRUST ACCOUNTS o The signature on the letter
must include all trustees
authorized to sign, including
title.
o If the names of the trustees
are not registered on the
account, please provide a copy
of the trust document
certified within the past 60
days.
o Signature guarantee, if
applicable (see above).
JOINT TENANCY WHOSE CO-TENANTS o The signatures on the letter
ARE DECEASED must include all surviving
tenants of the account.
o Copy of the death certificate.
o Signature guarantee if
proceeds check is issued to
other than the surviving
tenants.
POWER OF ATTORNEY (POA) o The signatures on the letter
must include the
attorney-in-fact, indicating
such title.
o A signature guarantee.
o Certified copy of the POA
document stating it is still
in full force and effect,
specifying the exact Fund and
account number, and certified
within 30 days of receipt of
instructions.*
QUALIFIED RETIREMENT BENEFIT PLANS o The signature on the letter
(EXCEPT NEW ENGLAND FUNDS PROTOTYPE must include all signatures of
DOCUMENTS) those authorized to sign,
including title.
o Signature guarantee, if
applicable (see above).
EXECUTORS OF ESTATES, ADMINISTRATORS, o The signature on the letter
GUARDIANS, CONSERVATORS must include those authorized
to sign, including capacity.
o A signature guarantee.
o Certified copy of court
document where signer derives
authority, e.g.: Letters of
Administration,
Conservatorship, Letters
Testamentary.*
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) o Additional documentation and
distribution forms are
required.
* Certification may be made on court documents by the court, usually certified
by the clerk of the court. POA certification may be made by a commercial
bank, broker/member of a domestic stock exchange or a practicing attorney.
<PAGE>
FUND SERVICES
-------------
EXCHANGING SHARES [graphic omitted]
In general, you may exchange shares of your Fund for shares of the other Money
Market Fund or a New England Fund subject to certain restrictions shown below.
An exchange must be for a minimum of $1,000 (or the total net asset value of
your account, whichever is less), or $100 if made under the Automatic Exchange
Plan (see the section entitled "Additional Investor Services"). All exchanges
are subject to the eligibility requirements of the Fund into which you are
exchanging. The exchange privilege may be exercised only in those states where
shares of the Funds may be legally sold. Please refer to the Statement of
Additional Information (the "SAI") for more detailed information on exchanging
Fund shares.
EXCHANGE OPTIONS
Class A shares of a Money Market Fund not previously subject to a sales charge
or CDSC may exchange into:
o Class A, B or C shares of a Money Market Fund without paying a sales charge or
CDSC.
o Class A, B or C shares of a New England Fund plus the applicable sales charge
or CDSC.
Class A shares of a Money Market Fund previously subject to a sales charge or
CDSC may exchange into:
o Class A shares of the other Money Market Fund without a sales charge or CDSC.
o Class A shares of a New England Fund without paying a sales charge or CDSC
(unless you exchanged into a Money Market Fund from shares of the New England
Intermediate Tax Free Fund of California that you held for less than 6 months,
which would subject you to pay the difference between the sales charge
previously paid on your California Fund shares and the sales charge currently
imposed on other New England Fund shares).
Class B shares of a Money Market Fund may exchange into:
o Class B shares of the other Money Market Fund without paying a sales charge or
CDSC.
o Class B shares of a New England Fund subject to its CDSC schedule.
Class C shares of Cash Management Trust - Money Market Series may exchange into:
o Class C shares of a New England Fund subject to its CDSC schedule.
If you exchange shares of a New England Fund into shares of the Money Market
Funds, the holding period for purposes of determining the CDSC for Class A, B or
C shares and conversion from Class B into Class A shares stops until you
exchange back into shares of another New England Fund. If you choose to redeem
those Money Market Fund shares, a CDSC may therefore apply.
<PAGE>
[graphic omitted] FUND SERVICES
-------------
RESTRICTIONS ON BUYING, SELLING
AND EXCHANGING SHARES
Purchase and Exchange Restrictions
- ------------------------------------------------------------------------------
Although the Funds do not anticipate doing so, they reserve the right to suspend
or change the terms of purchasing or exchanging shares. The Funds and the
Distributor reserve the right to refuse or limit any purchase or exchange order
by a particular purchaser (or group of related purchasers) if the transaction is
deemed harmful to the best interest of the Fund's other shareholders or would
disrupt the management of the Fund. The Funds and the Distributor reserve the
right to restrict purchases and exchanges for the accounts of "market timers" by
limiting the transaction to a maximum dollar amount. An account will be deemed
to be one of a market timer if: (i) more than two exchange purchases of a given
Fund are made for the account in a calendar quarter or (ii) the account makes
one or more exchange purchases of a given Fund in a calendar quarter in an
aggregate amount in excess of 1% of the Fund's total net assets.
SELLING RESTRICTIONS
The table below describes restrictions placed on selling shares of any Fund
described in this Prospectus:
RESTRICTION SITUATION
The Fund may suspend the right of redemption or o When the New York Stock
postpone payment for more than 7 days: Exchange is closed
(other than a
weekend/holiday)
o During an emergency
o Any other period
permitted by the SEC
The Fund reserves the right to suspend account o With a notice of a
services or refuse transaction requests: dispute between
registered owners
o With suspicion/evidence
of a fraudulent act
The Fund may pay the redemption price in whole or o When it is detrimental
part by a distribution in kind of readily for a Fund to make cash
marketable securities in lieu of cash or may take payments as determined
up to 7 days to pay a redemption request in order in the sole discretion
to raise capital: of the adviser or
subadviser
The Fund may close your account and send you the o When the Fund account
proceeds. You will have 60 days after being falls below a set
notified of the Fund's intention to close your minimum (currently
account to increase the account to the set $1,000 as set by the
minimum. This does not apply to certain qualified Fund's Board of
retirement plans, automatic investment plans or Trustees)
accounts that have fallen below the minimum solely
because of fluctuations in a Fund's net asset
value per share:
The Fund may withhold redemption proceeds until o When redemptions are
the check or funds have cleared: made within 10 calendar
days of purchase by
check or ACH of the
shares being redeemed
Telephone redemptions are not accepted for tax-qualified retirement accounts. If
you hold certificates representing your shares, they must be sent with your
request for it to be honored. The Funds recommend that certificates be sent by
registered mail.
CERTIFICATES
Certificates will not be automatically issued for any class of shares. Upon
written request, you may receive certificates for Class A shares only.
<PAGE>
FUND SERVICES
-------------
HOW FUND SHARES ARE PRICED [graphic omitted]
"Net asset value" is the price of one share of a Fund without a sales charge,
and is calculated each business day using this formula:
TOTAL VALUE OF SECURITIES + CASH AND
NET ASSET VALUE = OTHER ASSETS - LIABILITES
-------------------------------------------
NUMBER OF OUTSTANDING SHARES
Fund securities are generally valued at amortized cost on each day that the New
York Stock Exchange (the "Exchange") is open for trading. Amortized cost
approximates market value of the security at the time of purchase. By using
amortized cost valuation, the Funds seek to maintain a constant net asset value
of $1.00 per share despite minor shifts in the market value of their portfolio
securities.
The net asset value of Fund shares is determined according to this
schedule:
o A share's net asset value is determined at the close of regular trading on the
Exchange on the days the Exchange is open for trading. This is normally 4:00
p.m. Eastern time.
o The price you pay for purchasing, redeeming or exchanging a share will be
based upon the net asset value next calculated after your order is received
"in good order" by State Street Bank and Trust Company, the Funds' custodian.
o Requests received by the Distributor after the Exchange closes will be
processed based upon the net asset value determined at the close of regular
trading on the next day that the Exchange is open, with the exception that
those orders received by your investment dealer before the close of the
Exchange and received by the Distributor before 5:00 p.m. Eastern time* on the
same day will be based on the net asset value determined on that day.
* Under limited circumstances, the Distributor may enter into a contractual
agreement where it may accept orders after 5:00 p.m., but not later than 8:00
p.m.
Generally, during times of substantial economic or market change it may be
difficult to place your order by phone. During these times, you may deliver your
order in person to the Distributor or send your order by mail as described in
"Buying Shares" and "Selling Shares."
<PAGE>
[graphic omitted] FUND SERVICES
-------------
DIVIDENDS AND DISTRIBUTIONS
The Funds generally distribute most or all of their net investment income (other
than long-term capital gains) in the form of dividends. Each Fund declares
dividends daily and pays them monthly. Each Fund distributes all net realized
long- and short-term capital gains annually, after applying any available
capital loss carryovers. If all of your shares of a Fund are redeemed at any
time during a month, all dividends accrued to date will be paid together with
the redemption proceeds. Each Fund's Board of Trustees may adopt a different
schedule as long as payments are made at least annually.
Depending on your investment goals and priorities, you may choose to:
o participate in the Dividend Diversification Program, which allows you to have
all dividends and distributions automatically invested at net asset value
(plus an applicable sales charge or CDSC) in shares of the same class of a
Money Market Fund or New England Fund registered in your name. Class A
shareholders may also have dividends and distributions automatically invested
in Class C shares of a New England Fund. Certain investment minimums and
restrictions may apply. For more information about this program, see the
section entitled "Additional Investor Services."
o receive distributions from dividends and interest in cash while reinvesting
distributions from capital gains in additional shares of the same class of a
Money Market Fund or in the same class of a New England Fund.
o receive all distributions in cash.
Unless you select one of the above options, distributions will automatically be
reinvested in shares of the same class of the Fund at net asset value. For more
information or to change your distribution option, contact New England Funds in
writing or call 800-225-5478.
If you earn more than $10 annually in taxable income from a non-retirement plan
Fund, you will receive a Form 1099 to help you report the prior calendar year's
distributions on your federal income tax return. Be sure to keep the 1099 as a
permanent record. A fee may be charged for any duplicate information requested.
TAX CONSEQUENCES
Each Fund intends to meet all requirements of the Internal Revenue Code
necessary to qualify as a "regulated investment company" and thus does not
expect to pay any federal income tax on income and capital gains distributed to
shareholders.
Fund distributions paid to you either in cash or reinvested in additional shares
are generally taxable to you as ordinary income (except for exempt-interest
dividends earned by Tax Exempt Money Market Trust - see below) or as capital
gains. Distributions derived from short-term capital gains or investment income
are generally taxable at ordinary income rates. The Funds usually do not realize
a substantial amount of long-term capital gains. Distributions of gains from
investments that a Fund owned for more than one year that are designated by a
Fund as capital gain dividends will generally be taxable to a shareholder
receiving such distributions as long-term capital gains regardless of how long
the shareholder has held Fund shares. Distributions are taxable to you even if
they are paid from income or gains earned by the Fund before your investment
(and thus were included in the price you paid).
An exchange of shares for shares of another Fund is treated as a sale, and any
resulting gain or loss may be subject to federal income tax. If you purchase
shares of a Fund shortly before it declares a capital gain distribution or a
dividend, a portion of the purchase price may be returned to you as a taxable
distribution.
Dividends derived from interest on U.S. government securities for the New
England Cash Management Trust - Money Market Series may be exempt from state and
local income taxes. The Fund intends to advise shareholders of the proportion of
its dividends that are derived from such interest. You should consult your tax
adviser about any federal, state and local taxes that may apply to the
distributions you receive.
SPECIAL TAX CONSIDERATIONS FOR TAX EXEMPT MONEY MARKET TRUST
Dividends paid to you as a shareholder of the Tax Exempt Money Market Trust that
are derived from interest on Municipal Securities are "exempt-interest
dividends" and may be excluded from gross income on your federal tax return.
However, if you receive Social Security benefits, you may be taxed on a portion
of those benefits as a result of receiving tax-exempt income. Also, if the Fund
invests in "private activity" municipal securities, a portion of the Fund's
dividends may constitute a tax preference item subject to the alternative
minimum tax.
The federal exemption for "exempt-interest dividends" does not necessarily
result in exemption from state and local taxes. Distributions of these dividends
may be exempt from local and state taxation to the extent they are derived from
the state and locality in which you reside. You should check the consequences
under your local and state tax laws before investing in the Fund. The Fund will
report annually on a state-by-state basis the source of income the Fund receives
on tax-exempt bonds that was paid out as dividends during the preceding year.
<PAGE>
FUND SERVICES
-------------
ADDITIONAL INVESTOR SERVICES [graphic omitted]
RETIREMENT PLANS
New England Funds offers a range of retirement plans, including IRAs, SEPs,
SARSEPs, SIMPLEs, 401(k) plans, 403(b) plans and other pension and profit
sharing plans. Refer to the section entitled "It's Easy to Open an Account" for
investment minimums. For more information about our Retirement Plans, call us at
800-225-5478.
INVESTMENT BUILDER PROGRAM
This is New England Funds' automatic investment plan. You may authorize
automatic monthly transfers of $100 or more from your bank checking or savings
account to purchase shares of one or more New England Funds. To join the
Investment Builder Program, please refer to the section entitled "Buying
Shares."
DIVIDEND DIVERSIFICATION PROGRAM
This program allows you to have all dividends and any other distributions
automatically invested in shares of the same class of a New England Fund or
Money Market Fund, subject to the eligibility requirements of that other Fund
and to state securities law requirements. Shares will be purchased at the
selected Fund's net asset value (plus the applicable sales charge or CDSC) on
the dividend record date. Before establishing a Dividend Diversification Program
into a New England Fund or Money Market Fund, please read its prospectus
carefully.
AUTOMATIC EXCHANGE PLAN
New England Funds has an automatic exchange plan under which shares of a class
of a Fund are automatically exchanged each month for shares of the same class of
other New England Funds or Money Market Fund. There is no fee for exchanges made
under this plan, but there may be a sales charge in certain circumstances.
Please refer to the SAI for more information on the Automatic Exchange Plan.
SYSTEMATIC WITHDRAWAL PLAN
This plan allows you to redeem shares and receive payments from your Fund on a
regular schedule. Redemption of shares that are part of the Systematic
Withdrawal Plan are not subject to a CDSC. However, the amount or percentage you
specify in the plan may not exceed, on an annualized basis, 10% of the value of
your Fund account based upon the value of your Fund account on the day you
establish your plan. To establish a Systematic Withdrawal Plan, please refer to
the section entitled "Selling Shares."
NEW ENGLAND FUNDS PERSONAL ACCESS LINE(TM) ("PAL")
This automated customer service system allows you to have access to your account
24 hours a day by calling 800-225-5478, press 1. With a touch-tone telephone,
you can obtain information about current yields, your current account balances,
recent transactions, Fund prices and recent performance. You may also use PAL to
purchase, exchange or redeem shares in any of your existing accounts. Certain
restrictions may apply.
NEW ENGLAND FUNDS WEB SITE
Visit us at www.mutualfunds.com to review your account balance and recent
transactions, to view daily prices and performance information or to order
duplicate account statements and tax information. You may also go online to
purchase, exchange or redeem shares in your existing accounts. Certain
restrictions may apply.
<PAGE>
[graphic omitted] FUND PERFORMANCE
----------------
The financial highlights tables are intended to help you understand each Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the return that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report, along with each Fund's financial
statements, are included in the Statement of Additional Information, which is
available upon request.
<TABLE>
NEW ENGLAND CASH MANAGEMENT TRUST -- MONEY MARKET SERIES
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A, B, C
YEAR ENDED JUNE 30,
1995 1996 1997 1998(b) 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.0469 0.0482 0.0467 0.0488 0.0445
Net Realized and Unrealized Gain on Investments 0.0000 0.0002 0.0000 0.0000 0.0000
------- ------- ------- ------- -------
Total From Investment Operations 0.0469 0.0484 0.0467 0.0488 0.0445
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends From Net Investment Income (0.0469) (0.0484)(a) (0.0465) (0.0488)(a) (0.0445)
Dividends From Net Realized Capital Gains 0.0000 0.0000 (0.0002) 0.0000 (0.0000)
------- ------- ------- ------- -------
Total Distributions (0.0469) (0.0484) (0.0467) (0.0488) (0.0445)
------- ------- ------- ------- -------
Net Asset Value, End of the Year $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
TOTAL RETURN (%) 4.8 5.0 4.8 5.0 4.6
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%) 0.88 0.90 0.88 0.84 0.84
Ratio of Net Investment Income to Average Net Assets (%) 4.67 4.85 4.66 4.88 4.46
Net Assets, End of Year (000,000) $ 650 $ 664 $ 699 $ 607 $ 665
- ----------------------------------------------------------------------------------------------------------------------
(a) Including net realized gain on investments.
(b) Class C shares commenced operations March 1, 1998.
</TABLE>
<PAGE>
FUND PERFORMANCE [graphic omitted]
----------------
<TABLE>
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A AND B
YEAR ENDED JUNE 30,
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.0314 0.0327 0.0314 0.0323 0.0276
Net Realized and Unrealized Gain on Investments 0.0000 0.0000 0.0001 0.0000 0.0000
------- ------- ------- ------- -------
Total From Investment Operations 0.0314 0.0327 0.0315 0.0323 0.0276
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends From Net Investment Income (0.0314) (0.0327) (0.0315)(a) (0.0323) (0.0276)
------- ------- ------- ------- -------
Total Distributions (0.0314) (0.0327) (0.0315) (0.0323) (0.0276)
------- ------- ------- ------- -------
Net Asset Value, End of the Year $1.0000 $1.0000 $1.0000 $1.0000 1.000
======= ======= ======= ======= =======
TOTAL RETURN (%) 3.2 3.3 3.2 3.3 2.8
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets (%)(b) 0.56 0.56 0.56 0.60 0.65
Ratio of Net Investment Income to Average Net Assets (%) 3.15 3.29 3.17 3.23 2.76
Net Assets, End of Year (000,000) $ 68 $ 65 $ 68 $ 74 $ 85
- ----------------------------------------------------------------------------------------------------------------------
(a) Including net realized gain on investments.
(b) The ratio of operating expenses to average net assets without giving effect to the voluntary expense limitation
and voluntary fee waiver described in Note 3 to the financial statements contained in the SAI would have been
0.85% for 1995, 0.90% for 1996, 0.85% for 1997, 0.85% for 1998 and 0.80% for 1999.
</TABLE>
<PAGE>
GLOSSARY OF TERMS
BANKERS' ACCEPTANCE -- A bill of exchange drawn on and accepted by a bank. The
bank as the drawee of the bill becomes responsible for payment of the bill at
maturity.
BID PRICE -- The price a prospective buyer is ready to pay. This term is used by
traders who maintain firm bid and offer prices in a given security by standing
ready to buy or sell security units at publicly quoted prices.
CAPITAL GAIN DISTRIBUTIONS -- Payments to a Fund's shareholders of profits
earned from selling securities in a Fund's portfolio. Capital gain distributions
are usually paid once a year.
CREDIT RATING -- Independent evaluation of a bond's creditworthiness. This
measurement is usually calculated through an index compiled by companies such as
S&P or Moody's Investors Service. Bonds with a credit rating of BBB or higher by
S&P or Baa or higher by Moody's are generally considered investment grade.
DISCOUNTED PRICE -- The difference between a bond's current market price and its
face or redemption value.
DIVERSIFICATION -- The strategy of investing in a wide range of securities
representing different market sectors to reduce the risk if an individual
company or sector suffers losses.
DIVIDEND YIELD -- The current or estimated annual dividend divided by the market
price per share of a security.
DURATION -- An estimate of how much a bond's price inversely fluctuates with
changes in prevailing interest rates.
INCOME DISTRIBUTIONS -- Payments to a Fund's shareholders resulting from the net
interest or dividend income earned by a Fund's portfolio.
INFLATION -- A general increase in prices coinciding with a fall in the real
value of money, as measured by the Consumer Price Index.
INTEREST RATE -- Rate of interest charged for the use of money, usually
expressed at an annual rate.
MATURITY -- The final date on which the payment of a debt instrument (e.g.
bonds, notes, repurchase agreements) becomes due and payable. Short-term bonds
generally have maturities of up to 5 years; intermediate-term bonds between 5
and 15 years; and long-term bonds over 15 years.
NET ASSET VALUE (NAV) -- The market value of one share of a mutual fund on any
given day without sales charge or CDSC. It is determined by dividing a fund's
total net assets by the number of shares outstanding.
REPURCHASE AGREEMENT -- An agreement to buy a security at one price and a
simultaneous agreement to sell it back at an agreed upon price.
TOTAL RETURN -- The change in value of a mutual fund investment over a specific
time period expressed as a percentage. Total returns assume all earnings are
reinvested in additional shares of a Fund.
VARIABLE OR FLOATING-RATE DEBT SECURITIES -- Securities which pay a rate of
interest that is adjusted on a periodic basis and determined by reference to a
prescribed formula.
VOLATILITY -- The general variability of a portfolio's value resulting from
price fluctuations of its investments. In most cases, the more diversified a
portfolio is, the less volatile it will be.
YIELD -- The rate at which a Fund earns income, expressed as a percentage.
Mutual fund yield calculations are standardized, based upon a formula developed
by the SEC.
YIELD-TO-MATURITY -- The concept used to determine the rate of return an
investor will receive if a long-term, interest-bearing investment, such as a
bond, is held to its maturity date. It takes into account purchase price,
redemption value, time to maturity, coupon yield (the interest rate on a debt
security the issuer promises to pay to the holder until maturity, expressed as
an annual percentage of face value) and the time between interest payments.
<PAGE>
NOTES --
<PAGE>
NOTES --
<PAGE>
<TABLE>
[GRAPHIC OMITTED]
IF YOU WOULD LIKE MORE INFORMATION ABOUT THE
FUNDS, THE FOLLOWING DOCUMENTS ARE AVAILABLE FREE
UPON REQUEST:
<S> <C>
Annual and Semiannual Reports -- Provide
additional information about each Fund's
investments. Each report includes a discussion of
the market conditions and investment strategies
that significantly affected the Fund's performance
during its last fiscal year.
Statement of Additional Information (SAI) --
Provides more detailed information about the NEW ENGLAND FUNDS
Funds, has been filed with the Securities and MONEY MARKET FUNDS
Exchange Commission and is incorporated into this
Prospectus by reference.
New England Cash Management Trust --
TO ORDER A FREE COPY OF A FUND'S ANNUAL OR Money Market Series
SEMIANNUAL REPORT OR ITS SAI, CONTACT YOUR
FINANCIAL REPRESENTATIVE, OR THE FUNDS AT: New England Tax Exempt Money Market Trust
New England Funds, L.P.
399 Boylston Street
Boston, Massachusetts 02116
Telephone: 800-225-5478
Internet: www.mutualfunds.com
Your financial representative or New England Funds
will also be happy to answer your questions or to
provide any additional information that you may
require.
You can review the Funds' reports and SAIs at the
Public Reference Room of the Securities and
Exchange Commission. Text-only copies are
available free from the Commission's Web site at:
www.sec.gov.
Copies of these publications are also available
for a fee by writing or calling the Public
Reference Room of the SEC,
Washington, D.C. 20549-6009
Telephone: 800-SEC-0330
New England Funds, L.P., and other firms selling
shares of New England Funds are members of the
National Association of Securities Dealers, Inc.
(NASD). As a service to investors, the NASD has
asked that we inform you of the availability of a
brochure on its Public Disclosure Program. The
program provides access to information about
securities firms and their representatives.
Investors may obtain a copy by contacting the NASD
at 800-289-9999 or by visiting their Web site at
www.NASDR.com.
Investment Company Act File No. 811-4323
Investment Company Act File No. 811-242
XM51-0999
</TABLE>
<PAGE>
[LOGO]
NEW ENGLAND FUNDS(R)
Where The Best Minds Meet(R)
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NEW ENGLAND MONEY MARKET FUNDS
NEW ENGLAND CASH MANAGEMENT TRUST -- MONEY MARKET SERIES
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 1, 1999
This Statement of Additional Information (the "Statement") is not a prospectus.
This Statement relates to the prospectus of New England Cash Management Trust -
Money Market Series and New England Tax Exempt Money Market Trust (the "Trusts"
and each a "Trust") for Class A, B and C shares dated September 1, 1999 and the
New England Cash Management Trust - Money Market Series Class Y shares
prospectus dated September 1, 1999, (collectively, the "Prospectus"), and should
be read in conjunction therewith. A copy of the Prospectuses may be obtained
from New England Funds, L.P. (the "Distributor"), 399 Boylston Street, Boston,
Massachusetts 02116.
The Trusts' financial statements and accompanying notes are incorporated by
reference into this Statement. Each Trust's annual and semiannual report
contains additional performance information and is available upon request and
without charge by calling 800-225-5478.
T A B L E O F C O N T E N T S
Page
Investment Objectives and Policies 2
Investment Restrictions 5
Management of the Funds 8
Investment Advisory, Subadvisory, Distribution and Other Services 11
Portfolio Transactions 15
Performance 16
Description of the Funds and Ownership of Shares 18
How to Buy Shares 22
Shareholder Services 22
Open Accounts 22
Automatic Investment Plans 23
Retirement Plans Offering Tax Benefits 23
Systematic Withdrawal Plans 23
Dividend Diversification Program 24
Exchange Privilege 24
Automatic Exchange Plan 25
NvestPRO 27
Self-Servicing Your Account 27
Redemptions 29
Net Income, Dividends and Valuation 30
Tax-Free Investing 32
Taxes 33
Financial Statements 34
Appendix A - Description of Certain New England Cash Management
Trust - Money Market Series Investments A-1
Appendix B - Description of Certain New England Tax Exempt Money
Market Trust Investments B-1
Appendix C - Ratings of Corporate and Municipal Bonds, Commercial
Paper and Short-Term Tax Exempt Obligations C-1
Appendix D - Media That May be Referred to in Fund Advertisements
or Sales Literature D-1
Appendix E - Advertising and Promotional Literature E-1
<PAGE>
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INVESTMENT OBJECTIVES AND POLICIES
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GENERAL
The investment objectives and policies of New England Cash Management
Trust - Money Market Series and New England Tax Exempt Money Market Trust
(together the "Money Market Funds," or the "Funds," and each a "Fund") are
summarized in the Prospectus under "Goals, Strategies & Risks."
The investment policies and types of permitted investments of each Fund
set forth below and in the Prospectus may be changed without shareholder
approval except that the investment objective of each Fund, and any investment
policy expressly identified as fundamental, may not be changed without the
approval of a majority of the outstanding voting securities of that Fund.
The terms "shareholder approval" and "majority of the outstanding
voting securities" as used in the Prospectus and this Statement each refer to
approval by the lesser of (i) 67% or more of the shares of the applicable Fund
represented at a meeting at which more than 50% of the outstanding shares of
such Fund are represented and (ii) more than 50% of the outstanding shares of
such Fund.
CASH MANAGEMENT TRUST - MONEY MARKET SERIES
The Fund will invest only in securities which the Fund's subadviser,
Back Bay Advisors(R), L.P. ("Back Bay Advisors"), acting under guidelines
established by the New England Cash Management Trust's Board of Trustees, has
determined are of high quality and present minimal credit risk. For a
description of certain of the money market instruments in which the Fund may
invest, and the related descriptions of the ratings of Standard and Poor's
Ratings Group ("S&P") and Moody's Investors Service, Inc. ("Moody's"), see
Appendices A and C to this Statement. Money market instruments maturing in less
than one year may yield less than obligations of comparable quality having
longer maturities.
As described in the Prospectus, the Fund's investments may include
certificates of deposit, bankers' acceptances and other U.S. dollar-denominated
obligations of banks whose net assets exceed $100 million. These obligations may
be issued by U.S. banks, foreign banks (including their U.S. or London branches)
or foreign branches and subsidiaries of U.S. banks. Obligations of foreign banks
may be subject to foreign economic, political and legal risks. Such risks
include foreign economic and political developments, foreign governmental
restrictions that may adversely affect payment of principal and interest on the
obligations, foreign withholding and other taxes on interest income,
difficulties in obtaining and enforcing a judgment against a foreign obligor,
exchange control regulations (including currency blockage), and the
expropriation or nationalization of assets or deposits. Foreign branches of U.S.
banks and foreign banks are not necessarily subject to the same or similar
regulatory requirements that apply to domestic banks. For instance, such
branches and banks may not be subject to the types of requirements imposed on
domestic banks with respect to mandatory reserves, loan limitations,
examinations, accounting, auditing, recordkeeping and the public availability of
information. Obligations of such branches or banks will be purchased only when
Back Bay Advisors believes the risks are minimal.
The Fund may also invest in U.S. Government Securities that include all
securities issued or guaranteed by the U.S government or its agencies,
authorities or instrumentalities ("U.S. Government Securities"). Some U.S.
Government Securities are backed by the full faith and credit of the United
States, some are supported by the discretionary authority of the U.S. government
to purchase the issuer's obligations (e.g., obligations of the Federal National
Mortgage Association), some by the right of the issuer to borrow from the U.S.
government (e.g., obligations of Federal Home Loan Banks), while still others
are supported only by the credit of the issuer itself (e.g., obligations of the
Student Loan Marketing Association).
All of the Fund's investments at the time of purchase (other than U.S.
government securities and repurchase agreements relating thereto) will be rated
in the highest rating category by a major credit agency or, if unrated, will be
of comparable quality as determined by the Fund's subadviser under guidelines
approved by the New England Cash Management Trust's Board of Trustees.
Considerations of liquidity, safety and preservation of capital may
preclude the Fund from investing in money market instruments paying the highest
available yield at a particular time. The Fund, consistent with its investment
objective, attempts to maximize yields by engaging in portfolio trading and by
buying and selling portfolio investments in anticipation of, or in response to,
changing economic and money market conditions and trends. The Fund also seeks to
take advantage of what are believed to be temporary disparities in the yields of
the different segments or among particular instruments within the same segment
of the market. These policies, as well as the relatively short maturity of
obligations to be purchased by the Fund, may result in frequent changes in the
portfolio composition of the Fund. There are usually no brokerage commissions as
such paid by the Fund in connection with the purchase of securities of the type
in which it invests. See "Portfolio Transactions" and "Investment Restrictions."
TAX EXEMPT MONEY MARKET TRUST
As described in the Prospectus, the Fund seeks to achieve its objective
through investment in a diversified portfolio consisting primarily of high
quality short-term fixed, variable and floating rate debt securities the
interest on which is, in the opinion of bond counsel for the issuers of the
securities at the time of their issuance, exempt from federal income taxation
("Municipal Securities"). Municipal Securities are generally obligations issued
by or on behalf of states, territories and possessions of the United States and
the District of Columbia and their political subdivisions, agencies and
instrumentalities, or by or on behalf of multi-state agencies or authorities.
The Fund will only invest in Municipal Securities which are (i) short-term notes
rated MIG-2 or better by Moody's or SP-2 or better by S&P; (ii) municipal bonds
rated Aa or better by Moody's or AA or better by S&P with a remaining maturity
of 397 days or less whose issuer has comparable short-term obligations that are
rated in the top rating category by Moody's or S&P; and (iii) other types of
Municipal Securities, including commercial paper, rated P-2 by Moody's or A-2 by
S&P or unrated Municipal Securities determined to be of comparable quality by
the Fund's subadviser under guidelines approved by the New England Tax Exempt
Money Market Trust's Board of Trustees, subject to any limitations imposed by
Rule 2a-7 under the Investment Company Act of 1940, as amended (the "1940 Act").
For a more complete description of various types of Municipal Securities and the
meanings of the ratings assigned to them by Moody's and S&P, see Appendices B
and C to this Statement. The Fund expects that at least 95% of all dividends
paid by the Fund in any given year will be exempt from federal income tax. See
"Taxes."
As described in the Prospectus, the Fund may elect on a temporary basis
to hold cash or to invest in obligations other than Municipal Securities when
such action is deemed advisable by Back Bay Advisors. For example, the Fund
might hold cash or make such temporary investments: (i) due to market
conditions; (ii) in the event of the scarcity of suitable Municipal Securities;
(iii) pending investment of proceeds from subscriptions for Fund shares or from
the sale of portfolio securities; or (iv) in anticipation of redemptions. The
Fund will limit its investments in obligations other than Municipal Securities
to "money market securities" such as (i) U.S. Government Securities, (ii) high
quality short-term domestic certificates of deposit, commercial paper and
domestic bankers' acceptances and other high quality money market instruments,
or (iii) repurchase agreements with brokers, dealers and banks relating to
Municipal or U.S. Government Securities. The interest earned on money market
securities is not exempt from federal income tax and may be taxable to
shareholders as ordinary income. The ability of the Fund to invest in such
taxable money market securities is limited by a requirement of the Internal
Revenue Code (the "Code") that at least 50% of the Fund's total assets be
invested in Municipal Securities at the end of each quarter of the Fund's fiscal
year (see "Taxes") and by a fundamental policy of the Fund which requires that
during periods of normal market conditions the Fund will not purchase any
security if, as a result, less than 80% of the Fund's net assets would then be
invested in Municipal Securities.
As described in the Prospectus, the Fund may invest in variable or
floating rate Municipal Securities. These obligations pay a rate of interest
adjusted on a periodic basis and determined by reference to a prescribed
formula. Such obligations will be subject to prepayment without penalty, at the
option of either the Fund or the issuer, and may be backed by letters of credit
or similar arrangements where necessary to ensure that the obligations are of
appropriate investment quality. Back Bay Advisors intends to evaluate the credit
of the issuers of these obligations and the providers of credit support no less
frequently than quarterly.
The price stability and liquidity of the Fund may not be equal to that
of a money market fund which invests exclusively in short-term taxable money
market securities, because the taxable money market is a broader and more liquid
market with a greater number of investors, issuers and market makers than the
short-term Municipal Securities market and because the average portfolio
maturity of a money market fund will generally be shorter than the average
portfolio maturity of a tax exempt money fund such as the Fund. Adverse
economic, business or political developments might affect all or a substantial
portion of the Fund's Municipal Securities in the same manner. The issuer of a
Municipal Security may make payments from money raised through a variety of
sources, such as (i) the issuer's general taxing power; (ii) a specific type of
tax such as a property tax; or (iii) a particular facility or project such as a
highway. The ability of an issuer to make these payments could be affected by
litigation, legislation or other political events or the bankruptcy of the
issuer.
When-Issued Securities
The Tax Exempt Money Market Trust may purchase Municipal Securities on
a when-issued basis, which means that delivery and payment for the securities
normally occur between 15 to 45 days after the date of the commitment to
purchase. The payment obligation and the interest rate that will be received on
the securities are each fixed at the time the buyer enters into the commitment.
Pending delivery of securities purchased on a when-issued basis, the amount of
the purchase price will be held in liquid assets such as cash or high quality
debt obligations. Such obligations and cash will be maintained in a separate
account with the Fund's custodian in an amount equal on a daily basis to the
amount of the Fund's when-issued commitments. By committing itself to purchase
Municipal Securities on a when-issued basis, the Fund subjects itself to market
and credit risks on such commitments as well as such risks otherwise applicable
to its portfolio securities. Therefore, to the extent the Fund remains
substantially fully invested at the same time that it has purchased securities
on a when-issued basis, there will be a greater possibility that the market
value of the Fund's assets will vary from $1.00 per share. (See "Net Income,
Dividends and Valuation.") The Fund will make commitments to purchase such
securities only with the intention of actually acquiring the securities.
However, the Fund may sell these securities before the settlement date if it is
deemed advisable as a matter of investment strategy. Such sales may result in
capital gains that are not exempt from federal income taxes. When the time comes
to pay for when-issued securities, the Fund will meet its obligations from then
available cash flow or the sale of securities, or, although it would not
normally expect to do so, from the sale of the when-issued securities (which may
have a value greater or less than the Fund's payment obligation).
Purchase of Securities with Rights to Put Securities to Seller
The Tax Exempt Money Market Trust has authority to purchase securities,
including Municipal Securities, at a price which would result in a yield to
maturity lower than that generally offered by the seller at the time of purchase
if the Fund simultaneously acquires the right to sell the securities back to the
seller at an agreed-upon price at any time during a stated period or on a
certain date. Such a right is generally called a "put." The purpose of engaging
in transactions involving puts is to maintain flexibility and liquidity and to
permit the Fund to meet redemptions while remaining as fully invested as
possible in Municipal Securities. The Fund will acquire puts only from
recognized securities dealers.
For the purposes of asset valuation, the Fund will never ascribe any
value to puts. The Fund will rarely pay specific consideration for them
(although typically the yield on a security that is subject to a put will be
lower than for an otherwise comparable security that is not subject to a put).
In no event will the specific consideration paid for puts held in the Fund's
portfolio at any time exceed 1/2 of 1% of the Fund's net assets. Puts purchased
by the Fund will generally not be marketable and the Fund's ability to exercise
puts will depend on the creditworthiness of the other party to the transaction.
BOTH FUNDS
As noted in the Prospectus, each Fund may enter into repurchase
agreements, which are agreements pursuant to which the Fund purchases a security
and obtains a simultaneous commitment from the seller (a member bank of the
Federal Reserve or, to the extent permitted by the 1940 Act, a recognized
securities dealer) to repurchase the security at an agreed upon price and date
(usually seven days or less from the date of original purchase). The resale
price is in excess of the purchase price and reflects an agreed upon market rate
unrelated to the coupon rate on the purchased security. Such transactions afford
each Fund the opportunity to earn a return on temporarily available cash at
relatively low market risk. While the underlying security may be a U.S.
Government Security (in the case of either Fund), a Municipal Security (in the
case of the Tax Exempt Money Market Trust) or another type of high quality money
market instrument, the obligation of the seller is not guaranteed by the U.S.
Government, the issuer of the Municipal Security, or the issuer of any other
high quality money market instrument underlying the agreement, and there is a
risk that the seller may fail to repurchase the underlying security. In such
event, the Fund would attempt to exercise rights with respect to the underlying
security, including possible disposition in the market. However, in case of such
a default, a Fund may be subject to various delays and risks of loss, including
(a) possible declines in the value of the underlying security during the period
while the Fund seeks to enforce its rights thereto, (b) possible reduced levels
of income and lack of access to income during this period, and (c) inability to
enforce rights and the expenses involved in attempted enforcement. Each Fund
will enter into repurchase agreements only where the market value of the
underlying security equals or exceeds the repurchase price, and each Fund will
require the seller to provide additional collateral if this market value falls
below the repurchase price at any time during the term of the repurchase
agreement. It is a fundamental policy of each Fund that no more than 10% of the
net assets of the Fund are to be invested in illiquid securities, including
repurchase agreements with maturities of more than seven days.
As described in the Prospectus, all of each Fund's investments will be
in U.S. dollars and will be determined to present minimal credit risks by the
subadviser under guidelines established by each Trusts' Board of Trustees. Also,
all of each Fund's investments will, at the time of investment, have remaining
maturities of 397 days or less. The average maturity of each Fund's portfolio
securities based on their dollar value will not exceed 90 days at the time of
each investment. If the disposition of a portfolio security results in a
dollar-weighted average portfolio maturity in excess of 90 days for any Fund,
such Fund will invest its available cash in such a manner as to reduce its
dollar-weighted average portfolio maturity to 90 days or less as soon as
reasonably practicable. For the purposes of the foregoing maturity restrictions,
variable rate instruments which are scheduled to mature in more than 397 days
are treated as having a maturity equal to the longer of (i) the period remaining
until the next readjustment of the interest rate and (ii) if the Fund is
entitled to demand prepayment of the instrument, the notice period remaining
before the Fund is entitled to such prepayment; other variable rate instruments
are treated as having a maturity equal to the shorter of such periods. Floating
rate instruments which are scheduled to mature in more than 397 days are treated
as having a maturity equal to the notice period remaining before the Fund is
entitled to demand prepayment of the instrument; other floating rate
instruments, and all such instruments which are U.S. Government Securities, are
treated as having a maturity of one day.
The value of the securities in each Fund can be expected to vary
inversely with changes in prevailing interest rates. Thus, if interest rates
increase after a security is purchased, that security, if sold, might be sold at
a loss. Conversely, if interest rates decline after purchase, the security, if
sold, might be sold at a profit. In either instance, if the security were held
to maturity, no gain or loss would normally be realized as a result of these
fluctuations. Substantial redemptions of the shares of any Fund might require
the sale of portfolio investments of that Fund at a time when a sale might not
be desirable.
After purchase by a Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by such Fund but
neither event will require a sale of such security by such Fund. However, such
event will be considered in determining whether the Fund should continue to hold
the security. To the extent that the ratings given by Moody's or S&P (or another
SEC-approved nationally recognized statistical rating organization ["NRSRO"])
may change as a result of changes in such organizations or their rating systems,
each Fund will, in accordance with standards approved by the relevant Board of
Trustees, attempt to use comparable ratings as standards for investments in
accordance with the investment policies contained in the Prospectus.
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INVESTMENT RESTRICTIONS
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The following is a list of each Fund's investment restrictions. The
restrictions set forth in the numbered paragraphs below are fundamental policies
and, accordingly, will not be changed without the consent of the holders of a
majority of the outstanding voting securities of the applicable Fund.
CASH MANAGEMENT TRUST - MONEY MARKET SERIES
The Fund will not:
(1) Purchase any security (other than U.S. Government Securities and
repurchase agreements relating thereto) if, as a result, more than 5% of
the Fund's total assets (taken at current value) would be invested in
securities of a single issuer. This restriction applies to securities
subject to repurchase agreements but not to the repurchase agreements
themselves;
(2) Purchase any security if, as a result of such purchase, more than 25% of
the Fund's total assets (taken at current value) would be invested in any
one industry. This restriction does not apply to U.S. Government
Securities and bank obligations. For purposes of this restriction,
telephone, gas and electric public utilities are each regarded as separate
industries and finance companies whose financing activities are related
primarily to the activities of their parent companies are classified in
the industry of their parents;
(3) Purchase securities on margin (but it may obtain such short-term credits
as may be necessary for the clearance of purchases and sales of
securities); or make short sales except where, by virtue of ownership of
other securities, it has the right to obtain, without payment of further
consideration, securities equivalent in kind and amount to those sold, and
the Fund will not deposit or pledge more than 10% of its total assets
(taken at current value) as collateral for such sales;
(4) Acquire more than 10% of the total value of any class of the outstanding
securities of an issuer or acquire more than 10% of the outstanding voting
securities of an issuer. This restriction does not apply to U.S.
Government Securities;
(5) Borrow money, except as a temporary measure for extraordinary or emergency
purposes (but not for the purpose of investment) up to an amount not in
excess of the lower of (i) 10% of its total assets (taken at cost) and
(ii) 5% of such total assets (taken at current value);
(6) Pledge, mortgage or hypothecate more than 10% of its total assets (taken
at cost);
(7) Invest more than 5% of its total assets (taken at current value) in
securities of businesses (including predecessors) less than three years
old;
(8) Purchase or retain securities of any issuer if, to the knowledge of the
Fund, officers and Trustees of the Fund or officers and directors of any
investment adviser of the Fund who individually own beneficially more than
1/2 of 1% of the securities of that issuer, together own beneficially more
than 5%;
(9) Make loans, except by purchase of debt obligations in which the Fund may
invest consistent with its objective and investment policies. This
restriction does not apply to repurchase agreements;
(10) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
commodities or commodity contracts or real estate. This restriction does
not prevent the Fund from purchasing securities of companies investing in
real estate or of companies which are not principally engaged in the
business of buying or selling such leases, rights or contracts;
(11) Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter
under the federal securities laws;
(12) Make investments for the purpose of exercising control or management;
(13) Participate on a joint or joint and several basis in any trading account
in securities. (The "bunching" of orders for the purchase or sale of
portfolio securities with other accounts under the management of Back Bay
Advisors to reduce acquisition costs, to average prices among them, or to
facilitate such transactions, is not considered participating in a trading
account in securities);
(14) Write or purchase puts, calls or combinations thereof; or
(15) Invest in the securities of other investment companies, except in
connection with a merger, consolidation or similar transaction.
Except as otherwise stated, the foregoing percentages and the
percentage limitations set forth in the Prospectus will apply at the time of the
purchase of a security and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of a purchase of
such security.
TAX EXEMPT MONEY MARKET TRUST
The Fund will not:
(1) Purchase any security if, as a result, more than 5% of the Fund's total
assets (based on current value) would then be invested in the securities
of a single issuer. This limitation does not apply to U.S. Government
Securities. The limitation applies to securities subject to credit
enhancement, but guarantors, insurers, issuers of puts and letters of
credit and other parties providing credit enhancement are not considered
issuers for purposes of the restriction, although investment in such
securities may be limited by applicable regulatory restrictions. The
restriction also applies to securities subject to repurchase agreements
but not to the repurchase agreements themselves. (The SEC staff currently
takes the position that only fully collateralized repurchase agreements
may be excluded from such restriction);
(2) Purchase voting securities or make investments for the purpose of
exercising control or management;
(3) Invest more than 25% of its total assets in industrial development bonds
which are based, directly or indirectly, on the credit of private entities
in any one industry or in securities of private issuers in any one
industry. (In the utilities category, gas, electric, water and telephone
companies will be considered as being in separate industries.);
(4) Participate on a joint or joint and several basis in any trading account
in securities;
(5) Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Fund may obtain short-term credits
as necessary for the clearance of securities transactions;
(6) Borrow money except for temporary or emergency purposes and then only in
an amount not exceeding 10% of its total assets taken at cost, except that
the Fund may enter into reverse repurchase agreements. The Fund will not,
however, borrow or enter into reverse repurchase agreements if the value
of the Fund's assets would be less than 300% of its borrowing and reverse
repurchase agreement obligations. In addition, when borrowings (other than
reverse repurchase agreements) exceed 5% of the Fund's total assets (taken
at current value), the Fund will not purchase additional portfolio
securities. Permissible borrowings and reverse repurchase agreements will
be entered into solely for the purpose of facilitating the orderly sale of
portfolio securities to accommodate redemption requests;
(7) Make loans, except that the Fund may purchase or hold debt instruments in
accordance with its investment objective and policies and may enter into
loan participations and repurchase agreements;
(8) Pledge, mortgage or hypothecate its assets except in connection with
reverse repurchase agreements and except to secure temporary borrowings
permitted by restriction (6) above in aggregate amounts not to exceed 10%
of its net assets taken at cost at the time of the incurrence of such
borrowings;
(9) Act as an underwriter of securities of other issuers except that, in the
disposition of portfolio securities, it may be deemed to be an underwriter
under the federal securities laws;
(10) Invest in securities of other investment companies, except by purchases in
the open market involving only customary brokers' commissions, or in
connection with a merger, consolidation, reorganization or similar
transaction. Under the 1940 Act the Fund may not (a) invest more than 10%
of its total assets (taken at current value) in such securities, (b) own
securities of any one investment company having a value in excess of 5% of
the Fund's total assets (taken at current value), or (c) own more than 3%
of the outstanding voting stock of any one investment company;
(11) Purchase or retain securities of an issuer if, to the knowledge of the
Fund, officers, Trustees or directors of the Fund or any investment
adviser of the Fund who individually own beneficially more than 1/2 of 1%
of the shares or securities of that issuer together own beneficially more
than 5% of such shares or securities;
(12) Purchase securities of any company which has (with predecessor businesses
and entities) a record of less than three years' continuing operation or
purchase securities whose source of repayment is based, directly or
indirectly, on the credit of such a company, except (i) obligations issued
or guaranteed by the United States Government, its agencies or
instrumentalities, or (ii) Municipal Securities which are rated by at
least two nationally recognized municipal bond rating services, if as a
result more than 5% of the total assets of the Fund (taken at current
value) would be invested in such securities;
(13) Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
commodities or commodity contracts or real estate (except that the Fund
may buy Municipal Securities or other permitted investments secured by
real estate or interests therein); or
(14) Write or purchase puts, calls, warrants, straddles, spreads or
combinations thereof, except that the Fund may purchase puts as described
under "Investment Objectives and Policies -- Tax Exempt Money Market Trust
-- Purchase of Securities with Rights to Put Securities to Seller" and may
purchase Municipal Securities on a "when-issued" basis as described above
under "Investment Objectives and Policies -- Tax Exempt Money Market Trust
-- When-Issued Securities";
Except as otherwise stated, the foregoing percentages and the
percentage limitations set forth in the Prospectus will apply at the time of the
purchase of a security and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of a purchase of
such security.
For the purpose of the foregoing investment restrictions, the
identification of the "issuer" of Municipal Securities which are not general
obligation bonds (see Appendix B) is made by Back Bay Advisors on the basis of
the characteristics of the obligation, the most significant of which is the
source of funds for the payment of principal and interest on such securities. If
the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government of such
subdivision, and the obligation is based solely on the assets and revenues of
such subdivision, such subdivision would be regarded as the sole issuer.
Similarly, in the case of industrial development bonds (see Appendix B), if the
bond is backed only by the assets and revenues of the non-governmental user, the
non-governmental user would be regarded as the sole issuer.
BOTH FUNDS
No Fund will purchase any security restricted as to disposition under
federal securities laws if, as a result, more than 10% of such Fund's net assets
would be invested in such securities or in other securities that are illiquid.
The Funds have implemented procedures to determine the liquidity of Section 4(2)
commercial paper purchased by the Funds for purposes of determining whether the
Fund's limit on the purchases of illiquid securities has been met.
The staff of the SEC is currently of the view that repurchase
agreements maturing in more than seven days are "illiquid" securities. Each Fund
currently intends to conduct its operations in a manner consistent with this
view. In addition, certain loan participations may be "illiquid" securities for
this purpose.
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MANAGEMENT OF THE FUNDS
- -------------------------------------------------------------------------------
The Funds are governed by a Board of Trustees, which is responsible for
generally overseeing the conduct of Fund business and for protecting the
interests of shareholders. The Trustees meet periodically throughout the year to
oversee the Funds' activities, review contractual arrangements with companies
that provide services to the Funds and review the Funds' performance.
Trustees
The Trustees of the Trusts, their position with the Trusts
(underlined), their ages (in parentheses), addresses and principal occupations
during at least the past five years are listed below. Each Trustee with an
asterisk (*) next to his or her name may be deemed to be an "interested person"
of the Trusts as defined in the 1940 Act.
GRAHAM T. ALLISON, JR.-- Trustee (59); 79 John F. Kennedy Street, Cambridge,
Massachusetts 02138; Member of the Contract Review and Governance
Committee for the Trusts; Douglas Dillon Professor and Director for the
Center of Science and International Affairs, John F. Kennedy School of
Government; Special Advisor to the United States Secretary of Defense;
formerly, Assistant Secretary of Defense; formerly, Dean, John F.
Kennedy School of Government.
DANIEL M. CAIN -- Trustee (54); 452 Fifth Avenue, New York, New York 10018;
Member of the Audit and Transfer Agent and Shareholder Services
Committee for the Trusts; President and CEO, Cain Brothers & Company
Incorporated (investment banking); Trustee, Universal Health Realty
Income Trust (NYSE); Norman Rockwell Museum; Sharon Health Corporation
and National Committee for Quality Healthcare (all not-for-profit
organizations).
KENNETH J. COWAN -- Trustee (67); One Beach Drive, S.E. #2103, St. Petersburg,
Florida 33701; Member of the Contract Review and Governance Committee
for the Trusts; Retired; Director, A Young Woman's Residence; formerly,
Senior Vice President-Finance and Chief Financial Officer, Blue Cross
of Massachusetts, Inc. and Blue Shield of Massachusetts, Inc.;
formerly, Director, Neworld Bank for Savings and Neworld Bancorp.
RICHARD DARMAN -- Trustee (56); 1001 Pennsylvania Avenue, N.W., Washington, D.C.
20004; Member of the Contract Review and Governance Committee for the
Trusts; Partner, The Carlyle Group (investments); Public Service
Professor, Harvard Graduate School of Government; Trustee, Council for
Excellence in Government (not-for-profit); Director, Frontier Ventures
(personal investment); Director, Telcom Ventures (telecommunications);
Director, Genesis Cable (cable communications); Director, Prime
Communications (cable communications); Director, Neptune Communications
(undersea cable systems); formerly, Director of the U.S. Office of
Management and Budget and a member of President Bush's Cabinet;
formerly, Managing Director, Shearson Lehman Brothers (Investments).
SANDRA O. MOOSE -- Trustee (57); Exchange Place, Boston, Massachusetts 02109;
Member of the Audit and Transfer Agent and Shareholder Services
Committee for the Trusts; Senior Vice President and Director, The
Boston Consulting Group, Inc. (management consulting); Director, GTE
Corporation (communication services) and Director, Rohm and Haas
Company (specialty chemicals).
JOHN A. SHANE -- Trustee (66); 200 Unicorn Drive, Woburn, Massachusetts 01801;
Member of the Audit and Transfer Agent and Shareholder Services
Committee for the Trusts; President, Palmer Service Corporation
(venture capital organization); General Partner, Palmer Partners L.P.;
Director, Abt Associates, Inc. (consulting firm); Director, Arch
Communications Group, Inc. (paging service); Director, Dowden
Publishing Company, Inc. (publishers of medical magazines); Director,
Eastern Bank Corporation; Director, Gensym Corporation (developer of
expert system software); Director, Overland Data, Inc. (manufacturer of
computer tape drives); Director, United Asset Management Corporation
(holding company for institutional money management).
* PETER S. VOSS -- Chairman of the Board, Chief Executive Officer and Trustee
(52); President and Chief Executive Officer, Nvest, L.P. and Nvest
Companies, L.P. ("Nvest Companies"); Chairman of the Board and
Director, President and Chief Executive Officer, Nvest Corporation;
Director, Nvest Services Company; Chairman of the Board and Director,
NEF Corporation; Chairman of the Board and Director, BBAI; formerly,
Director, New England Financial.
PENDLETON P. WHITE -- Trustee (68); 6 Breckenridge Lane, Savannah, Georgia
31411; Member of the Contract Review and Governance Committee for the
Trusts; Retired; formerly, President and Chairman of the Executive
Committee, Studwell Associates (executive search consultants);
formerly, Trustee, The Faulkner Corporation (community hospital
corporation).
The Contract Review and Governance Committee of the Trusts is comprised solely
of disinterested Trustees and considers matters relating to advisory,
subadvisory and distribution arrangements, potential conflicts of interest
between the adviser or subadviser and the Funds, and governance matters
relating to the Funds.
The Audit and Transfer Agent and Shareholders Services Committee of the Trusts
is comprised solely of disinterested Trustees and considers matters relating to
the scope and results of the Funds' audits and serves as a forum in which the
independent accountants can raise any issues or problems identified in the audit
with the Board of Trustees. This Committee also reviews and monitors compliance
with stated investment objectives and policies, SEC and IRS regulations as well
as operational issues relating to the transfer agent.
Officers
In addition to Mr. Voss, the officers of the Trusts, their positions
with the Trusts (underlined), their ages (in parentheses) and principal
occupations during the past five years are listed below.
BRUCE R. SPECA -- President (43); Director and Executive Vice President, NEF
Corporation; Managing Director, President and Chief Executive Officer,
the Distributor; Managing Director, President and Executive Officer,
New England Funds Management, L.P. ("NEFM").
THOMAS P. CUNNINGHAM -- Treasurer (53); Senior Vice President, Nvest Services
Company; Senior Vice President, NEFM; formerly, Vice President,
Allmerica Financial Life Insurance and Annuity Company; formerly,
Treasurer, Allmerica Investment Trust; formerly, Vice President, First
Data Investor Services Group.
JOHN E. PELLETIER -- Secretary and Clerk (35); Senior Vice President, General
Counsel, Secretary and Clerk, NEF Corporation; Senior Vice President,
General Counsel, Secretary and Clerk, the Distributor; Senior Vice
President, General Counsel, Secretary and Clerk, NEFM; Executive Vice
President and General Counsel, Nvest Services Company; formerly, Senior
Vice President and General Counsel, Funds Distributor, Inc. (mutual
fund service company); formerly, Counsel, The Boston Company Advisors,
Inc.; formerly, Associate, Ropes & Gray (law firm).
Each person listed above holds the same position(s) with both Trusts.
Previous positions during the past five years with New England Financial or
Metropolitan Life Insurance Company ("MetLife"), the Distributor, or NEFM are
omitted, if not materially different from a Trustee's or officer's current
position with such entity. As indicated below under "Trustee Fees", each of the
Trustees is also a director or Trustee of several other investment companies for
which the Distributor acts as principal underwriter.
Except as indicated above, the address of each Trustee and officer of
the Trusts is 399 Boylston Street, Boston, Massachusetts 02116.
Trustee Fees
Neither Trust pays compensation to its officers, or to its Trustees who
are "interested persons" of the Trusts as defined in the 1940 Act.
Each Trustee who is not an interested person of the Trusts receives in
the aggregate for serving on the boards of the Trusts, New England Funds Trust
I, New England Funds Trust II and New England Funds Trust III (all five trusts
collectively, the "New England Funds Trusts"), comprising as of September 1,
1999 a total of 24 mutual fund portfolios, a retainer fee at the annual rate of
$40,000 and meeting attendance fees of $3,500 for each meeting of the Board of
Trustees he or she attends. Each committee member receives an additional
retainer fee at the annual rate of $6,000. Furthermore, each committee chairman
receives an additional retainer fee (beyond the $6,000 fee) at the annual rate
of $4,000. These fees are allocated among the mutual fund portfolios in the New
England Funds Trusts based on a formula that takes into account, among other
factors, the relative net assets of each Fund.
During the fiscal year ended June 30, 1999, the Trustees of the Trusts
received the amounts set forth in the following table for serving as a Trustee
of the Trusts; and during the year ended December 31, 1998, such persons
received the amounts set forth below for serving as Trustee of the Trusts and
for also serving as Trustees of the other New England Funds Trusts.
<TABLE>
<CAPTION>
Aggregate Aggregate Pension or
Compensation Compensation from Retirement Total Compensation
from New England New England Tax Benefits Accrued from the New
Cash Management Exempt Money as Part of Fund Estimated England Funds
Trust in the Market Trust in Expenses in the Annual Trusts in the
Year Ended the Year Ended Year Ended Benefits Upon Year Ended
Name of Trustee June 30, 1999 June 30, 1999 June 30, 1999 Retirement December 31, 1998
--------------- ------------- ------------- ------------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Graham T. Allison, Jr. $5,430 $1,094 $0 $0 $60,000
Daniel M. Cain $5,849 $1,136 $0 $0 $64,000
Kenneth J. Cowan $5,849 $1,136 $0 $0 $64,000
Richard Darman $5,430 $1,094 $0 $0 $60,000
Sandra O. Moose $5,430 $1,094 $0 $0 $60,000
John A. Shane $5,430 $1,094 $0 $0 $60,000
Pendleton P. White $5,278 $ 942 $0 $0 $56,500
</TABLE>
The Trusts provide no pension or retirement benefits to Trustees, but
have adopted a deferred payment arrangement under which each Trustee may elect
not to receive fees from each Fund on a current basis but to receive in a
subsequent period an amount equal to the value that such fees would have if they
had been invested in each Fund selected by a Trustee on the normal payment date
for such fees. As a result of this method of calculating the deferred payments,
each Fund, upon making the deferred payments, will be in the same financial
position as if the fees had been paid on the normal payment dates.
As of July 19, 1999, the officers and Trustees of the Trusts as a group
owned less than 1% of the outstanding shares of each Fund.
- -------------------------------------------------------------------------------
INVESTMENT ADVISORY, SUBADVISORY, DISTRIBUTION AND OTHER SERVICES
- -------------------------------------------------------------------------------
Investment Advisory and Subadvisory Agreements
Pursuant to separate advisory agreements, each dated August 30, 1996,
as amended May 1, 1998 (the "Advisory Agreements"), NEFM has agreed, subject to
the supervision of the Board of Trustees of the relevant Trust, to manage the
investment and reinvestment of the assets of each Fund and to provide a range of
administrative services, including executive and other personnel, to each Fund.
In addition to overseeing the management of the Funds, NEFM provides executive
and other personnel for the management of the Trusts. For the services described
in the advisory agreements, each Fund has agreed to pay NEFM a management fee
set forth in the following table, reduced by the amount of any subadvisory fee
payable by the Fund to Back Bay Advisors (as described below):
Management fee payable by Fund to NEFM
(less any fee paid to the subadviser)
(as a percentage of average daily net assets
Fund of the Fund)
---- --------------------------------------------
Cash Management Trust - 0.425% of the first $500 million
Money Market Series 0.400% of the next $500 million
0.350% of the next $500 million
0.300% of the next $500 million
0.250% of amounts in excess of $2 billion
Tax Exempt Money Market Trust 0.400% of the first $100 million
0.300% of amounts in excess of $100 million
The Advisory Agreements each provide that NEFM may delegate its
responsibilities thereunder to other parties. Pursuant to separate subadvisory
agreements, each dated August 30, 1996, as amended May 1, 1998 the ("Subadvisory
Agreements"), NEFM has delegated responsibilities for managing the investment
and reinvestment of each Fund to Back Bay Advisors as subadviser. For providing
such subadvisory services to the Funds, each Fund pays Back Bay Advisors the
following fee:
Subadvisory fee payable by the Fund
(as a percentage of average daily net assets
Fund of the Fund)
---- --------------------------------------------
Cash Management Trust - 0.205% of the first $500 million
Money Market Series 0.180% of the next $500 million
0.160% of the next $500 million
0.140% of the next $500 million
0.120 % of amounts in excess of $2 billion
Tax Exempt Money Market Trust 0.200% of the first $100 million
0.150% of amounts in excess of $100 million
From January 2, 1996 to May 1, 1998, NEFM served as adviser and Back
Bay Advisors served as subadviser to each Fund pursuant to separate advisory and
subadvisory agreements providing for the same management and subadvisory fees as
are currently in effect for the Funds; except that NEFM, and not the Fund, paid
Back Bay Advisors for the services it rendered to each Fund.
For the fiscal years ended June 30, 1997, 1998 and 1999, the Cash
Management Trust - Money Market Series paid management fees of $1,485,266,
$1,535,052 and $1,713,918 to NEFM. During this period, Back Bay Advisors
received subadvisory fees of $1,340,219, $1,380,613 and $1,527,291.
Beginning January 2, 1996 and until further notice to the Tax Exempt
Money Market Trust, NEFM and Back Bay Advisors have each agreed to
proportionately reduce their fee and/or pay the charges, expenses and fees of
the Fund (not including fees payable to the Trustees who are not "interested
persons" of the Trust as defined in the 1940 Act) to the extent necessary to
limit the Fund's expenses to an annual rate of 0.65% of average net assets. For
the fiscal years ended June 30, 1997, 1998 and 1999, gross management fees
payable to NEFM of $273,587, $274,666 and $310,993 were reduced by $192,978,
$165,118 and $118,782, respectively, resulting in net management fees of
$80,609, $109,548 and $192,211, respectively, and gross subadvisory fees payable
to Back Bay Advisors of $136,794, $137,333 and $155,496 were reduced by $96,489,
$82,559 and $59,391, respectively, resulting in net subadvisory fees, of
$40,305, $54,774 and $96,105, respectively, as a result of this expense
limitation.
In addition to the management fees paid to NEFM and the subadvisory
fees paid to Back Bay Advisors, each Fund pays the Distributor for providing
certain accounting and administrative services. The amount of the payments is
based on the allocated costs that the Distributor incurs in providing these
services.
In General.
NEFM, formed in 1995, is a limited partnership whose sole general
partner, NEF Corporation, is a wholly-owned subsidiary of Nvest Holdings, L.P.
("Nvest Holdings"), which in turn is a wholly-owned subsidiary of Nvest
Companies. NEF Corporation is also the sole general partner of the Distributor,
and the sole shareholder of Nvest Services Company, the transfer and dividend
disbursing agent of the Funds. Nvest Services Company is located at 399 Boylston
Street, Boston, Massachusetts 02116. Nvest Companies owns the entire limited
partnership interest in each of NEFM and the Distributor. Nvest Services Company
has subcontracted certain of its obligations as the transfer and dividend
disbursing agent of the Funds to State Street Bank and Trust Company (see
"Custodial Arrangements".) Nvest Services Company, Inc. will also do business as
Nvest Services Company, Nvest Services Co. and New England Funds Service
Company.
Nvest Companies' managing general partner, Nvest Corporation, is a
wholly-owned subsidiary of MetLife New England Holdings, Inc., which in turn is
a wholly-owned subsidiary of MetLife. MetLife owns directly 46% (and in the
aggregate, directly and indirectly, 47%) of the outstanding limited partnership
interests in Nvest Companies. Nvest Companies' advising general partner, Nvest,
L.P., is a publicly-traded company listed on the New York Stock Exchange. Nvest
Corporation is the sole general partner of Nvest, L.P. Nvest Companies' 14
principal subsidiary or affiliated asset management firms, collectively, had
more than $136 billion of assets under management as of June 30, 1999.
Back Bay Advisors, formed in 1986, is a limited partnership whose sole
general partner, Back Bay Advisors, Inc., is a wholly-owned subsidiary of Nvest
Holdings. Nvest Companies owns the entire limited partnership interest in Back
Bay Advisors. Back Bay Advisors specializes in fixed-income management and
provides investment management services to institutional clients, including
other registered investment companies and accounts of New England Financial and
its affiliates.
Each Fund pays all expenses not borne by NEFM or Back Bay Advisors
including, but not limited to, the charges and expenses of the Fund's custodian
and transfer agent, independent auditors and legal counsel for the Funds and the
Trusts' independent Trustees, all brokerage commissions and transfer taxes in
connection with portfolio transactions, all taxes and filing fees, the fees and
expenses for registration or qualification of its shares under federal and state
securities laws, all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing reports to shareholders and the compensation of
Trustees who are not directors, officers or employees of each of the Fund's
adviser, subadviser(s) or their affiliates, other than affiliated registered
investment companies. Each Fund also pays NEFM for certain legal and accounting
services provided to the Fund by NEFM.
Each Fund's Advisory Agreement and Subadvisory 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 relevant Trust or by vote of a majority of
the outstanding voting securities of the relevant Fund and (ii) by vote of a
majority of the Trustees who are not "interested persons" of the relevant Trust,
as that term is defined in the 1940 Act, cast in person at a meeting called for
the purpose of voting on such approval. Each Fund has received an exemptive
order from the Securities and Exchange Commission which permits NEFM to amend or
continue existing subadvisory agreements without shareholder approval when
approved by the Fund's Board of Trustees. The exemption also permits NEFM to
enter into new subadvisory agreements with subadvisers that are not affiliated
with NEFM, if approved by the Fund's Board of Trustees. Shareholders will be
notified of any subadviser changes. Each Advisory Agreement and Subadvisory
Agreement may be terminated without penalty by vote of the Board of Trustees of
the relevant Trust or by vote of a majority of the outstanding voting securities
of the relevant Fund, upon 60 days' written notice, or by the Fund's adviser
upon 90 days' written notice, and each terminates automatically in the event of
its assignment. Each Subadvisory Agreement also may be terminated by the Fund's
subadviser upon 90 days' notice and automatically terminates upon termination of
the related Advisory Agreement. In addition, each Advisory Agreement will
automatically terminate if the Trust or the Fund shall at any time be required
by the Distributor to eliminate all reference to the words "New England" or the
letters "NEFM" in the name of the relevant Trust or the relevant Fund, unless
the continuance of the agreement after such change of name is approved by a
majority of the outstanding voting securities of the relevant Fund and by a
majority of the Trustees who are not interested persons of the relevant Trust or
the Fund's adviser or subadviser.
Each Fund's Advisory Agreement and Subadvisory Agreement provides that
NEFM or Back Bay Advisors 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.
Certain officers and employees of Back Bay Advisors have responsibility
for portfolio management of other advisory accounts and clients of Back Bay
Advisors (including other registered investment companies and accounts of
affiliates of Back Bay Advisors) that may invest in securities in which the
Funds also invest. If Back Bay Advisors determines that an investment purchase
or sale opportunity is appropriate and desirable for more than one advisory
account, purchase and sale orders may be executed separately or may be combined
and, to the extent practicable, allocated by Back Bay Advisors to the
participating accounts. Where advisory accounts have competing interests in a
limited investment opportunity, Back Bay Advisors will allocate an investment
purchase opportunity based on the relative time the competing accounts have had
funds available for investment, and the relative amounts of available funds, and
will allocate an investment sale opportunity based on relative cash requirements
and the time the competing accounts have had investments available for sale. It
is Back Bay Advisors' policy to allocate, to the extent practicable, investment
opportunities to each client over a period of time on a fair and equitable basis
relative to its other clients. It is believed that the ability of the Funds to
participate in larger volume transactions in this manner will in some cases
produce better executions for the Funds. However, in some cases, this procedure
could have a detrimental effect on the price and amount of a security available
to a Fund or the price at which a security may be sold. The Trustees are of the
view that the benefits of retaining Back Bay Advisors as subadviser to each of
the Funds outweigh the disadvantages, if any, that may result from participating
in such transactions.
Distribution Agreement
Under separate agreements with each Fund, the Distributor, 399 Boylston
Street, Boston, Massachusetts 02116, acts as the distributor of each class of
the Funds' shares, which are sold at net asset value without any sales charge.
The Distributor receives no compensation from the Funds or purchasers of Fund
shares for acting as distributor. The agreements do not obligate the Distributor
to sell a specific number of shares. Under the agreements, the Distributor pays
promotion and distribution expenses relating to the sale of Fund shares,
including the cost of preparing, printing and distributing prospectuses used in
offering shares of the Funds for sale. Each Fund pays the cost of registering
and qualifying its shares under state and federal securities laws.
The Distributor pays investment dealers a service fee in order to
compensate them for services they provide and expenses they incur in connection
with the establishment or maintenance of shareholder accounts in the Funds. The
service fee is paid quarterly at an annual rate equal to the following
percentages of average Fund net assets, including reinvested dividends, in
accounts serviced by the investment dealer during the year. The Distributor
pays the service fee; the fee is not a direct or indirect expense of the Funds
or their shareholders and does not affect the Funds' yields.
Average Daily Net Asset Balance Fee
- -------------------------------- ---
$0-5 million none
$over 5 million to 10 million .05%
$over 10 million .10%
The Distributor controls the words "New England" in the names of the
Trusts and the Funds and if it should cease to be the distributor, New England
Cash Management Trust, New England Tax Exempt Money Market Trust or the affected
Fund may be required to change their names and delete these words or letters.
The Distributor also acts as general distributor for New England Funds Trust I,
New England Trust II and New England Funds Trust III.
The Distributor may publish information about the Funds in the media
described in Appendix D and may include information in advertising and sales
literature as described in Appendix E.
Independent Accountants
The Funds' independent accountants are PricewaterhouseCoopers LLP, 160
Federal Street, Boston, Massachusetts 02110. The independent accountants conduct
an annual audit of the Funds' financial statements, assist in the preparation of
the Funds' federal and state income tax returns and consult with the Funds as to
matters of accounting and federal and state income taxation. The information
concerning financial highlights in the Prospectuses, and the financial
statements contained in the Funds' annual reports for the year ended June 30,
1999 and incorporated by reference in this Statement, have been so included in
reliance on the reports of the Funds' independent accountants, given on the
authority of said firm as experts in auditing and accounting.
Custodian
State Street Bank and Trust Company ("State Street Bank"), 225 Franklin
Street, Boston, Massachusetts 02110, is the custodian for each Fund. As such,
State Street Bank holds in safekeeping certificated securities and cash
belonging to each Fund and, in such capacity, is the registered owner of
securities in book-entry form belonging to each Fund. Upon instruction, State
Street Bank receives and delivers cash and securities in connection with
transactions of each Fund and collects all dividends and other distributions
made with respect to each Fund's portfolio securities. State Street Bank also
maintains certain accounts and records of the Funds and calculates the total net
asset value, total net income and net asset value per share of the Funds on a
daily basis. State Street Bank does not determine the investment policies of the
Funds or decide which securities a Fund will buy or sell.
Other Services
Pursuant to a contract between the Funds and Nvest Services Company,
Nvest Services Company acts as shareholder servicing and transfer agent for the
Funds and is responsible for services in connection with the establishment,
maintenance and recording of shareholder accounts, including all related tax and
other reporting requirements and the implementation of investment and redemption
arrangements offered in connection with the sale of the Funds' shares. The Funds
pay a per account fee to Nvest Services Company for these services in the amount
of $22.00, annually, which may be increased with the approval of each Trust's
Board of Trustees. The aggregate amount of fees paid by the Funds to Nvest
Services Company for these services during the three most recent fiscal years of
the Funds were as follows:
Fund Fiscal Year Ended June 30,
---- --------------------------
1997 1998 1999
---- ---- ----
Cash Management Trust - Money
Market Series $1,743,823 $1,685,387 $1,672,122
Tax Exempt Money Market Trust $ 75,898 $ 73,566 $ 69,140
Nvest Services Company has subcontracted with State Street Bank for it
to provide, through its subsidiary, Boston Financial Data Services, Inc.
("BFDS"), transaction processing, mail and other services. Class Y shares of
Cash Management Trust Money Market Series bear a sub-transfer agent fee of 0.10%
of average daily net assets charged by National Financial Services Corporation.
In addition, during the fiscal year ended June 30, 1999, Nvest Services
Company performed certain accounting and administrative services for the Funds.
Each Fund reimbursed Nvest Services Company for all or part of Nvest Service
Company's expenses of providing these services which include the following: (i)
expenses for personnel performing bookkeeping, accounting, internal auditing and
financial reporting functions and clerical functions relating to the Fund, (ii)
expenses for services required in connection with the preparation of
registration statements and prospectuses, registration of shares in various
states, shareholder reports and notices, proxy solicitation material furnished
to shareholders of the Fund or regulatory authorities and reports and
questionnaires for SEC compliance, and (iii) registration, filing and other fees
in connection with requirements of regulatory authorities.
During the fiscal year ended June 30, 1999, Nvest Services Company
received legal and accounting services fees paid by the Cash Management Trust -
Money Market Series and Tax Exempt Money Market Trust in the amounts of $191,303
and $32,738, respectively.
YEAR 2000
The investment management services provided to each Fund by the adviser
and each subadviser and the services provided to shareholders by Nvest Services
Company depend on the smooth functioning of their computer systems. Many
computer software systems in use today cannot recognize the year 2000, but
revert to 1900 or some other date, due to the manner in which dates were encoded
and calculated. This failure could have a negative impact on a Fund's
operations, including the handling of securities trades, pricing and account
services. NEFM, Back Bay Advisors and Nvest Services Company have advised each
Fund that they have been reviewing all of their computer systems and actively
working on necessary changes to their systems to prepare for the year 2000 and
expect that their systems will be compliant before that date. In addition, NEFM
has been advised by the Funds' custodian, transfer agent and accounting service
agent that they are also in the process of modifying their systems with the same
goal. There can, however, be no assurance that NEFM, Back Bay Advisors, Nvest
Services Company or any other service provider will be successful, or that
interaction with other non-complying computer systems will not impair Fund
services at that time. In addition, the ability of issuers to make timely
payments of interest and principal or to continue their operations or services
may be impaired by inadequate preparation of their computer systems for the year
2000. This may adversely affect the market values of securities of specific
issuers or of securities generally if the inadequacy of preparation is perceived
as widespread or as affecting trading markets.
- -------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
- -------------------------------------------------------------------------------
In General
In placing orders for the purchase and sale of portfolio securities for
each Fund, Back Bay Advisors will always seek the best price and execution. It
is expected that the Funds' portfolio transactions will generally be with
issuers or dealers in money market instruments acting as principal. Accordingly,
the Funds do not anticipate that they will pay significant brokerage
commissions. During the fiscal years ended June 30, 1997, 1998 and 1999, the
Funds did not incur any brokerage fees in connection with portfolio
transactions.
Some of the portfolio transactions for each Fund are placed with
dealers who provide Back Bay Advisors with supplementary investment and
statistical information or furnish market quotations to the Funds or other
investment companies advised by Back Bay Advisors. The business would not be so
placed if the Funds would not thereby obtain the best price and execution.
Although it is not possible to assign an exact dollar value to these research
services, they may, to the extent used, tend to reduce the expenses of Back Bay
Advisors. The research 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 Funds.
The Board of Trustees of each Trust has requested that Back Bay
Advisors seek to reduce underwriting commissions or similar fees on Fund
portfolio transactions through certain methods currently available. It is not
expected that these methods will result in material reductions. The Boards have
not requested that Back Bay Advisors or its affiliates attempt to join
underwriting syndicates to reduce underwriting commissions or fees.
Tax Exempt Money Market Trust
It is expected that the Tax Exempt Money Market Trust's portfolio
securities will normally be purchased directly from an underwriter or in the
over-the-counter market from the principal dealers in such securities, unless it
appears that a better price or execution may be obtained elsewhere. Purchases
from underwriters will include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers will include the spread between the
bid and asked price.
- --------------------------------------------------------------------------------
PERFORMANCE
- --------------------------------------------------------------------------------
From time to time, the Funds may use performance data in advertisements
and promotional material. These results may include comparisons to the average
daily yields of money market funds reporting to IBC/Donoghue's Money Fund Report
("Donoghue's"), including comparisons of such average yields for funds
considered by Donoghue's to be in the same category as each of the Funds. See
"Net Income, Dividends and Valuation" below for an explanation of how the Funds
calculate yield and "effective" (or "compound") yield.
The Distributor may make reference in its advertising and sales
literature to awards, citations and honor bestowed on it by industry
organizations and other observers and raters, including, but not limited to
Dalbar's Quality Tested Service Seal and Key Honors Award. Such reference may
explain the criteria for the award, indicate the nature and significance of the
honor and provide statistical and other information about the award and the
Distributor's selection, including, but not limited to, the scores and
categories in which the Distributor excelled, the names of funds and fund
companies that have previously won the award and comparative information and
data about those against whom the Distributor competed for the award, honor or
citation.
The Funds' advertising and sales literature may refer to historical,
current and prospective political, social, economic and financial trends and
developments that affect domestic and international investment as it relates to
any of the New England Funds. The Funds' advertising and sales literature may
include historical and current performance and total returns of investment
alternatives to the New England Funds. Articles, releases, advertising and
literature may discuss the range of services offered by the Trusts, the
Distributor, and the transfer agent of the Funds, with respect to investing in
shares of the Funds and customer service. Such materials may discuss the
multiple classes of shares available through the Trusts and their features and
benefits, including the details of the pricing structure.
The Distributor may publish, allude to or incorporate in its
advertising and sales literature testimonials from shareholders, clients,
brokers who sell or own shares, broker-dealers, industry organizations and
officials and other members of the public, including, but not limited to, fund
performance, features and attributes, or service and assistance provided by
departments within the organization, employees or associates of the Distributor.
The Funds may enter into arrangements with banks exempted from
broker-dealer registration under the Securities Exchange Act of 1934.
Advertising and sales literature developed to publicize such arrangements will
explain the relationship of such bank to the New England Funds and the
Distributor as well as the services provided by the bank relative to the Funds.
The material may identify the bank by name and discuss the history of the bank
including, but not limited to, the type of bank, its asset size, the nature of
its business and services and its status and standing in the industry.
In addition, sales literature may be published concerning topics of
general investor interest for the benefit of registered representatives and the
Funds' prospective shareholders. These materials may include, but are not
limited to, discussions of college planning, retirement planning and reasons for
investing and historical examples of the investment performance of various
classes of securities, securities markets and indices.
From inception of each Fund (Class A shares) or date of first offering
(Class B, Class C and Class Y shares) through each of the dates set forth below,
an investment of $10,000 in each Fund grew, assuming the reinvestment of all
dividends, to the respective amounts set forth below. The periods covered
included periods of widely fluctuating interest rates and should not necessarily
be considered representative of performance of an investment in a Fund today.
New England Cash Management Trust -- Money Market Series
($10,000 investment on 7/10/78)
(Class A Shares)
Value of
Investment
on First Value of Cumulative
Period Ended Day of Period Reinvested Dividends Total Value
------------ ------------- -------------------- -----------
12/31/78 $10,000 $ 385 $10,385
12/31/79 10,385 1,504 11,504
12/31/80 11,504 2,971 12,971
12/31/81 12,971 5,194 15,194
12/31/82 15,194 7,156 17,156
12/31/83 17,156 8,680 18,680
12/31/84 18,680 10,628 20,628
12/31/85 20,628 12,259 22,259
12/31/86 22,259 13,676 23,676
12/31/87 23,675 15,110 25,110
12/31/88 25,110 16,915 26,915
12/31/89 26,915 19,320 29,320
12/31/90 29,320 21,638 31,638
12/31/91 31,638 23,499 33,499
12/31/92 33,499 24,655 34,655
12/31/93 34,655 25,536 35,536
06/30/94 35,536 26,036 36,036
06/30/95 36,036 27,761 37,761
06/30/96 37,761 29,628 39,628
06/30/97 39,628 31,518 41,518
06/30/98 41,518 33,588 43,588
06/30/99 45,588 35,600 45,600
New England Cash Management Trust -- Money Market Series
($10,000 investment on 9/13/93)
(Class B Shares)
Value of
Investment
on First Value of Cumulative
Period Ended Day of Period Reinvested Dividends Total Value
------------ ------------- -------------------- -----------
12/31/93 $10,000 $ 74 $10,074
06/30/94 10,074 216 10,216
06/30/95 10,216 705 10,705
06/30/96 10,705 1,234 11,234
06/30/97 11,234 1,770 11,770
06/30/98 11,770 2,358 12,358
06/30/99 12,358 2,920 12,920
New England Cash Management Trust -- Money Market Series
($10,000 investment on May 1, 1998)
(Class C Shares)
Value of
Investment
on First Value of Cumulative
Period Ended Day of Period Reinvested Dividends Total Value
------------ ------------- -------------------- -----------
06/30/98 $ 10,000 $ 165 $10,165
06/30/99 $ 10,165 $ 627 $10,627
New England Cash Management Trust -- Money Market Series
($10,000 investment on January 23, 1998)
(Class Y Shares)
Value of
Investment
on First Value of Cumulative
Period Ended Day of Period Reinvested Dividends Total Value
------------ ------------- -------------------- -----------
06/30/98 $ 10,000 $ 169 $10,169
06/30/99 $ 10,169 $ 632 $10,632
New England Tax Exempt Money Market Trust
($10,000 investment on 4/21/83)
(Class A Shares)
Value of
Investment
on First Value of Cumulative
Period Ended Day of Period Reinvested Dividends Total Value
------------ ------------- -------------------- -----------
12/31/83 $10,000 $ 371 $10,371
12/31/84 10,371 984 10,984
12/31/85 10,984 1,543 11,543
12/31/86 11,543 2,043 12,043
12/31/87 12,043 2,531 12,531
12/31/88 12,531 3,134 13,134
12/31/89 13,134 3,899 13,899
12/31/90 13,899 4,660 14,660
12/31/91 14,660 5,268 15,268
12/31/92 15,268 5,667 15,667
12/31/93 15,667 5,979 15,979
06/30/94 15,979 6,153 16,153
06/30/95 16,153 6,667 16,667
06/30/96 16,667 7,220 17,220
06/30/97 17,220 7,771 17,771
06/30/98 17,771 8,353 18,353
06/30/99 18,353 8,875 18,875
New England Tax Exempt Money Market Trust
($10,000 investment on 9/13/93)
(Class B Shares)
Value of
Investment
on First Value of Cumulative
Period Ended Day of Period Reinvested Dividends Total Value
------------ ------------- -------------------- -----------
12/31/93 $10,000 $ 60 $10,060
06/30/94 10,060 170 10,170
06/30/95 10,170 493 10,493
06/30/96 10,493 841 10,841
06/30/97 10,841 1,188 11,188
06/30/98 11,188 1,555 11,555
06/30/99 11,555 1,878 11,878
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS AND OWNERSHIP OF SHARES
- --------------------------------------------------------------------------------
New England Cash Management Trust was organized as a Massachusetts
business trust under the laws of Massachusetts by an Agreement and Declaration
of Trust (a "Declaration of Trust") dated June 5, 1980. The Trust commenced
operations on October 3, 1980 by acquiring all the assets and liabilities of NEL
Cash Management Account, Inc., which commenced operations on July 10, 1978. The
Trust was established with the same investment objective, policies, restrictions
and investment adviser as NEL Cash Management Account, Inc. then had. The Cash
Management Trust - Money Market Series is the only series of New England Cash
Management Trust currently in existence. The Fund has four classes of shares
(Classes A, B, C and Y) available for purchase.
New England Tax Exempt Money Market Trust was organized as a
Massachusetts business trust under the laws of Massachusetts by a Declaration of
Trust dated January 18, 1983, and commenced operations on April 21, 1983. Only
one series of shares of New England Tax Exempt Money Market Trust is currently
in existence; it has two classes of shares (Classes A and B) available for
purchase.
Class A, B and C shares of the Cash Management Trust - Money Market
Series and Class A and B shares of the Tax Exempt Money Market Trust are
identical except that the classes have different exchange privileges, as set
forth in detail in the Prospectus. Class Y shares of the Cash Management Trust -
Money Market Series are offered only to certain qualified investors and have
different exchange privileges, as set forth in detail in the Prospectus. Class Y
shares bear their own transfer agency and/or prospectus printing costs and do
not bear any portion of those relating to other classes of shares. The Class A,
Class B, Class C and Class Y structure could be terminated should certain
Internal Revenue Service rulings be rescinded.
The Declarations of Trust currently permit the relevant trustees to
issue an unlimited number of full and fractional shares of each Fund. Each Fund
is represented by a particular series of shares. The Declarations of Trust
further permit each Trust's Trustees to divide the shares of each series into
any number of separate classes, each having such rights and preferences relative
to other classes of the same series as the Trustees may determine. When you
invest in a Fund, you acquire freely transferable shares of beneficial interest
that entitle you to receive annual or quarterly dividends as determined by the
respective Trust's Board of Trustees and to cast a vote for each share you own
at stockholder meetings. The shares of each Fund have no pre-emptive rights.
Upon termination of any Fund, whether pursuant to liquidation of the Fund or
otherwise, shareholders of each series of shares are entitled to share pro rata
in the net assets belonging to that series then available for distribution to
such shareholders. The Declarations of Trust also permit the Trustees to charge
shareholders directly for custodial, transfer agency and servicing expenses.
If a Trust were to issue shares of more than one series, the assets
received by each series of the Trust from the issue or sale of shares of each
series thereof and all income, earnings, profits, losses and proceeds therefrom,
subject only to the rights of creditors, are allocated to, and constitute the
underlying assets of, that series. The underlying assets of each series are
segregated and are charged with the expenses in respect of that series and with
a share of the general expenses of the Trust. Any general expenses of the Trust
not readily identifiable as belonging specifically to a particular series are
allocated by or under the direction of the Trustees in such manner as the
Trustees determine to be fair and equitable. While the expenses of the Trust are
allocated to the separate books of account of each series of the Trust, certain
expenses may be legally chargeable against the assets of both series.
The Declarations of Trust also permit each Trust's Board of Trustees,
without shareholder approval, to subdivide any series or class of shares into
various sub-series or sub-classes participating in the same portfolio with such
dividend preferences and other rights as the Trustees may designate. While each
Trust's Board of Trustees has no current intention to exercise this power, it is
intended to allow them to provide for an equitable allocation of the impact of
any future regulatory requirements that might affect various classes of
shareholders differently. Each Trust's Board of Trustees may also, without
shareholder approval, establish one or more additional series or classes or
merge two or more series or classes. At such time as the Trustees of the Trusts
create another series, the Trusts would become a "series" company as that term
is used in Section 18(f) of the 1940 Act.
The Declarations of Trust provide for the perpetual existence of the
Trusts. Either Trust or any Fund, however, may be terminated at any time by vote
of at least two-thirds of the outstanding shares of the Fund affected.
Similarly, any class within a Fund may be terminated by vote of at least
two-thirds of the outstanding shares of such class. While each Declaration of
Trust further provides that the Board of Trustees may also terminate the
relevant Trust upon written notice to its shareholders, the 1940 Act requires
that the Trust receive the authorization of a majority of its outstanding shares
in order to change the nature of its business so as to cease to be an investment
company.
Voting Rights
Shareholders are entitled to one vote for each full share held (with
fractional votes for fractional shares held) and may vote (to the extent
described below) in the election of Trustees and the termination of the Funds
and on other matters submitted to the vote of shareholders.
The Declaration of Trust for each Trust provides that, on any matter
submitted to a vote of all Trust shareholders, all of a Trust's shares entitled
to vote shall be voted together irrespective of series or class unless the
rights of a particular series or class would be adversely affected by the vote,
in which case a separate vote of that series or class shall also be required to
decide the question. Also, a separate vote shall be held whenever required by
the 1940 Act or any rule thereunder. Rule 18f-2 under the 1940 Act provides in
effect that a series or class shall be deemed to be affected by a matter unless
it is clear that the interests of each series or class in the matter are
substantially identical or that the matter does not affect any interest of such
series or class. On matters affecting an individual series or class, only
shareholders of that series or class are entitled to vote. Consistent with the
current position of the SEC, shareholders of all series and classes vote
together, irrespective of series or class, on the election of Trustees and the
selection of the Trust's independent accountants, but shareholders of each
series vote separately on other matters requiring shareholder approval, such as
certain changes in investment policies of that series or the approval of the
investment advisory and subadvisory agreement relating to that series, and
shareholders of each class within a series vote separately as to the Rule 12b-1
plan (if any) relating to that class.
There will normally be no meetings of shareholders for the purpose of
electing Trustees except that in accordance with the 1940 Act (i) each Trust
will hold a meeting of its shareholders for the election of Trustees at such
time as less than a majority of the Trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy in the Board of Trustees,
less than two-thirds of the Trustees holding office have been elected by the
shareholders, that vacancy may only be filled by a vote of the shareholders. In
addition, Trustees of the Tax Exempt Money Market Trust may be removed from
office by a written consent signed by the holders of two-thirds of the
outstanding shares and filed with the Fund's custodian or by a vote of the
holders of two-thirds of the outstanding shares at a meeting duly called for the
purpose, which meeting shall be held upon the written request of the holders of
not less than 10% of the outstanding shares.
Upon written request by the holders of shares having a net asset value
of $25,000 or constituting 1% of the outstanding shares stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
trustee, the Tax Exempt Money Market Trust has undertaken to provide a list of
shareholders or to disseminate appropriate materials (at the expense of the
requesting shareholders).
Except as set forth above, the Trustees shall continue to hold office
and may appoint successor Trustees. Voting rights are not cumulative.
No amendment may be made to the Declarations of Trust without the
affirmative vote of a majority of the outstanding shares of the applicable Trust
except (i) to change the name of the Trust or a series thereof or to cure
technical problems in the Declaration of Trust, (ii) to establish and designate
new series or classes of shares, and (iii) to establish, designate or modify new
and existing series or classes of shares or modify other provisions relating to
Trust shares in response to applicable laws or regulations, or, in the case of
the Tax Exempt Money Market Trust, in order to convert the Fund into a "series"
company. If one or more new series of either Trust is established and designated
by the Trustees, the shareholders having beneficial interests in the Funds
described in this Statement shall not be entitled to vote on matters exclusively
affecting such new series, such matters including, without limitation, the
adoption of or any change in the investment objectives, policies or restrictions
of the new series and the approval of the investment advisory contracts of the
new series. Similarly, the shareholders of the new series shall not be entitled
to vote on any such matters as they affect the Funds.
Shareholder and Trustee Liability
Under Massachusetts law, a Trust's shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declarations of Trust disclaim shareholder liability for acts or
obligations of a Fund and require that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by a Trust or
its Trustees. The Declarations of Trust provide for indemnification out of the
assets of a Fund for all loss and expense of any shareholder held personally
liable for the obligations of that Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is considered
remote since it is limited to circumstances in which the disclaimer is
inoperative and the Fund itself would be unable to meet its obligations.
The Declarations of Trust further provide that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declarations of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office. The By-Laws of each Trust provide for indemnification by the
Trust of the Trustees and the officers of such Trust except with respect to any
matter as to which any such person did not act in good faith in the reasonable
belief that his or her action was in or not opposed to the best interests of the
Trust. Such person may not be indemnified against any liability to the Trust or
its shareholders to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office. Each Trust offers only its
own Funds' shares for sale, but it is possible that a Trust might become liable
for any misstatements in the Prospectus that relate to another Trust. The
Trustees of each Trust have considered this potential liability and approved the
use of the combined Prospectus for Funds of both Trusts.
Ownership of Shares
As of July 19, 1999, to the Trusts' knowledge, the following persons
owned of record or beneficially 5% or more of the outstanding shares of the
indicated classes set forth below. In addition, each person that has direct or
indirect beneficial ownership of more than 25% of the outstanding shares of the
indicated classes of the Fund set forth below may be deemed to control that Fund
as defined in the 1940 Act.
<TABLE>
<CAPTION>
Fund
Percentage Shareholder and Address Ownership
- ---------- ----------------------- ---------
<S> <C> <C>
CASH MANAGEMENT TRUST - MONEY MARKET SERIES
Class C shares Dorothy Spencer 13.88%
34829 Fairview Road
Oconomowoc, WI 53066-3310
Salomon Smith Barney Inc. 9.16%
333 West 34th Street, 3rd Floor
New York, NY 10001-2483
Class Y shares National Financial Services Corp. 100%
For the Exclusive Benefit of
Our Customers
P.O. Box 3752
Church Street Station
New York, NY 10008-3752
TAX EXCEMPT MONEY MARKET TRUST
Class A shares National Financial Services Corp. 24.96%
For the Exclusive Benefit of
Our Customers
P.O. Box 3752
Church Street Station
New York, NY 10008-3752
Mark Henkin 7.38%
265 East 66th Street #19-C
New York, NY 10021-6406
Class B shares Samuel J. Weldler 6.46%
Donya Weldler JT TEN
5725 N. Bernard
Chicago, IL 60659-3411
Donaldson Lufkin Jenrette 8.6%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
Metlife Securities Inc. 33.79%
485 E.U.S. Highway 1 South
Fourth Floor
Iselin, NJ 08830
Fred Luntsford 20.13%
Ann Luntsford TOD
Paul K. Luntsford
Kathyrn Robinson
1415 Magnolia Blvd. #128
Sherman Oaks, CA 91433-1150
</TABLE>
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
The procedures for purchasing shares of the Funds are summarized in the
Prospectus. All purchases made by check should be drawn on U.S. banks and
payable in U.S. dollars and made payable to New England Funds, or, in the case
of a retirement account, the custodian or Trustee. Shares of each Fund are
offered for sale continuously at their respective net asset values, which the
Funds seek to maintain at a constant $1 per share. See "Net Income, Dividends
and Valuation" in this Statement. There is no sales charge to purchase the
Funds' shares. The minimum initial investment is $2,500, with a $100 minimum for
subsequent investments. There are reduced initial investment minimums for
certain investments described below under "Shareholder Services."
Shares may also be purchased either in writing, by phone, by electronic
funds transfer using Automated Clearing House ("ACH"), or by exchange as
described in the Prospectus through firms that are members of the National
Association of Securities Dealers, Inc. and that have selling agreements with
the Distributor. You may also use New England Funds Personal Access Line(TM)
(800-225-5478, press 1) or New England Funds Web site (www.mutualfunds.com) to
purchase Fund shares. For more information, see the section entitled
"Shareholder Services" in this Statement.
A shareholder may purchase additional shares electronically through the
ACH system so long as the shareholder's bank or credit union is a member of the
ACH system and the shareholder has a completed, approved ACH application on
file. Banks may charge a fee for transmitting funds by wire. With respect to
shares purchased by federal funds, shareholders should bear in mind that wire
transfers may take two or more hours to complete.
If you wish transactions in your account to be effected by another
person under a power of attorney from you, special rules as summarized in the
Prospectus may apply.
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Open Accounts
Except for investors who own shares through certain broker "street
name" or retirement plan arrangements, each shareholder's investment is
automatically credited to a separate open account maintained for the shareholder
by State Street Bank, and the shareholder will receive a monthly statement
disclosing the current balance of shares owned in the shareholder's account and
the details of all transactions in that account during the month; however, if
there were no transactions other than dividend declarations during a month, the
shareholder will receive a quarterly statement instead of a monthly statement.
After the close of each calendar year, State Street Bank will send the
shareholder a statement for each of his or her accounts providing federal tax
information on dividends and distributions paid during the year including
information as to that percentage, if any, of Tax Exempt Money Market Trust
dividends that are not exempt from federal income taxation. Shareholders should
retain this as a permanent record. Nvest Services Company reserves the right to
charge a fee for providing duplicate information.
The open account system provides for full and fractional shares
expressed to three decimal places and, by making the issuance and delivery of
stock certificates unnecessary, eliminates problems of handling and safekeeping,
and the cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates. Certificates will not be issued for Class B or Class C shares.
The costs of maintaining the open account system are paid by the Funds
and no direct charges are made to shareholders. Although the Funds have no
present intention of making such direct charges to shareholders, they each
reserve the right to do so. Shareholders will receive prior notice before any
such charges are made.
Automatic Investment Plans (Class A, B and C shares)
Subject to each Fund's investor eligibility requirements, investors may
automatically invest in additional shares of a Fund on a monthly basis by
authorizing the Distributor to draw checks on an investor's bank account. The
checks are drawn under the Investment Builder Program, a program designed to
facilitate such periodic payments, and are forwarded to Nvest Services Company
for investment in the Fund. A plan may be opened with an initial investment of
$100 or more and thereafter regular monthly checks of $100 or more will be drawn
on the investor's account. The reduced minimum initial investment pursuant to an
automatic investment plan is referred to in the Prospectus. An Investment
Builder application must be completed to open an automatic investment plan. An
application may be found in the Prospectus or may be obtained by calling the
Distributor at 800-225-5478 or your investment dealer.
This program is voluntary and may be terminated at any time by Nvest
Services Company upon notice to existing plan participants.
The Investment Builder Program plan may be discontinued at any time by
the investor by written notice to Nvest Services Company, which must be received
at least five business days prior to any payment date. The plan may be
discontinued by State Street Bank at any time without prior notice if any check
is not paid upon presentation; or by written notice to you at least thirty days
prior to any payment date. State Street Bank is under no obligation to notify
shareholders as to the nonpayment of any check.
Retirement Plans Offering Tax Benefits - Cash Management Trust - Money Market
Series (Class A, B and C shares)
The federal tax laws provide for a variety of retirement plans offering
tax benefits. These plans may be funded with shares of the Cash Management Trust
- - Money Market Series with certain other investments. The plans include H.R. 10
(Keogh) plans for self-employed individuals and partnerships, individual
retirement accounts (IRAs), corporate pension and profit sharing plans,
including 401(k) plans, and retirement plans for public school systems and
certain tax exempt organizations (403(b) plans).
Initial investments in the Fund must be at least $250 for each
participant in corporate pension and profit sharing plans, IRAs and Keogh plans
and $100 for subsequent investments. There is a special initial and subsequent
investment minimum of $25 for payroll deduction investment programs for 401(k),
SARSEP, SEP, SIMPLE Plans, 403(b) and certain other retirement plans. Income
dividends and capital gain distributions will be automatically reinvested
(unless the investor is age 59 1/2 or disabled). Plan documents can be obtained
from the Distributor.
An investor should consult a competent tax or other adviser as to the
suitability of either Fund's shares as a vehicle for funding a plan, in whole or
in part, under the Employee Retirement Income Security Act of 1974 and as to the
eligibility requirements for a specific plan and its state as well as federal
tax aspects.
Systematic Withdrawal Plans (Class A, B and C shares)
An investor owning shares having a value of $5,000 or more in any Fund
may establish a Systematic Withdrawal Plan providing for periodic payments of a
fixed or variable amount. There is no minimum account size where payments are
made directly to New England Financial or the Distributor. There is no charge
for this service, and an investor may terminate his or her plan at any time. A
form for use in establishing such a plan is available from the servicing agent
or your investment dealer. Withdrawals may be paid to a person other than the
shareholder if a signature guarantee is provided. Please consult your investment
dealer or the Distributor.
Under a Systematic Withdrawal Plan, shareholders may elect to receive
or direct payments monthly, quarterly, semiannually or annually for a fixed
amount of not less than $50 or a variable amount based on (1) a specified
percentage of an account's market value or (2) a specified number of years for
liquidating an account (e.g., a 20-year program of 240 monthly payments would be
liquidated at a monthly rate of 1/240, 1/239, 1/238, etc.). Under a variable
payment option, the initial payment from an account for each Fund must be $50 or
more. In addition, shareholders who have purchased insurance or annuity products
of New England Financial may elect to have amounts withdrawn from a Fund monthly
to pay the necessary premiums. Withdrawals may be paid to a person other than
the shareholder if a signature guarantee is provided. On Systematic Withdrawal
Plans for accounts subject to a contingent deferred sales charge ("CDSC"), the
redemption of shares will not be subject to a CDSC if the amount or percentage
you specify does not exceed, on an annualized basis, 10% of the value of your
account with the Fund (based on the day you established your Plan). In the case
of Class A and B shares not subject to a CDSC, there is no limit on the
percentage of an account that may be redeemed. Please consult your investment
dealer or New England Funds for additional information.
No share certificates will be issued for an account that is subject to
a Systematic Withdrawal Plan. Income dividends and capital gain distributions
will be reinvested.
Since Systematic Withdrawal Plan payments represent proceeds from the
liquidation of shares, withdrawals may reduce and possibly exhaust the initial
investment, particularly in the event of a period of low earnings. Accordingly,
the shareholder should consider whether a Systematic Withdrawal Plan and the
specified amounts to be withdrawn are appropriate in the circumstances. The
Funds and New England Funds make no recommendations or representations in this
regard. It may be appropriate for the shareholder to consult a tax adviser
before establishing such a Plan. See "Redemptions" and "Tax Status," below, for
certain information as to federal income taxes. New England Funds may modify or
terminate this program at any time.
Because of statutory restrictions this plan is not available to pension
or profit-sharing plans, IRAs or 403(b) plans that have State Street Bank as
Trustee.
Dividend Diversification Program
You may also establish a Dividend Diversification Program, which allows
you to have all dividends and any other distributions automatically invested in
shares of the same class of a New England Fund or Money Market Fund, subject to
the investor eligibility requirements of that other Fund and to state securities
law requirements. Shares will be purchased at the selected Fund's net asset
value (plus an applicable sales charge or CDSC) on the dividend record date. A
dividend diversification account must be in the same registration (shareholder
name) as the distributing Fund account and, if a new account in the purchased
Fund is being established, the purchased Fund's minimum investment requirements
must be met. Before establishing a Dividend Diversification Program into any
other New England Fund or Money Market Fund, you must obtain and carefully read
a copy of that Fund's Prospectus.
Exchange Privilege
Class A shares of a Fund may be exchanged for shares of Class A, B or C
of the other Money Market Fund (if available) and Class B shares of a Fund may
be exchanged for Class B shares of the other Money Market Fund without a sales
charge or CDSC, subject to the investor eligibility requirements of the Fund
into which you are exchanging. Shareholders may also exchange their shares in
the Money Market Funds for shares of the same class of any other New England
Fund listed below, subject to those funds' eligibility requirements and sales
charges. Class A shares of a Money Market Fund may also be exchanged for Class C
shares of a New England Fund, subject to the applicable sales charge. If you own
Class Y shares, you may exchange those shares for Class Y shares of the Cash
Management Trust - Money Market Series. These options are summarized in the
Prospectus.
Shareholders of any of the New England Funds may exchange all or any
portion of their shares (including the proceeds of shares of the other funds
redeemed within 120 days before the exchange) for shares of the same class of
the Money Market Funds. However, Class A, Class B or Class C shares of a Money
Market Fund acquired by exchange either from the New England Funds or the other
Money Market Fund will be subject to a CDSC if, and to the extent as, the shares
exchanged were subject to a CDSC. Such exchanges may be made by telephoning or
writing New England Funds or certain investment dealers. An exchange of the
Class B shares of the New England Funds into Class B shares of a Money Market
Fund stops the aging period for purposes of determining the CDSC and conversion
to Class A, and the aging resumes only when an exchange is made back into a New
England Fund.
Class C shares of a Fund may be exchanged for Class C shares of any of
the New England Funds which offer Class C shares on the basis of relative net
asset value, subject to the CDSC schedule of the New England Fund acquired. For
purpose of computing the CDSC payable upon redemption of shares acquired by such
exchange, the holding period of any New England Fund Class C shares that were
exchanged for Class C shares of the Fund is included, but the holding period of
the Class C shares of the Fund is not included.
Shares of any Fund acquired through an exchange from the New England
Funds listed below may be re-exchanged for shares of the same class of those New
England Funds. Any such exchange will be based on the respective current net
asset values of the shares involved and no sales charge will be imposed (unless
you exchanged into a Money Market Fund from Class A shares of the New England
Intermediate Tax Free Fund of California that you held for less than 6 months,
which would subject you to pay the difference between the sales charge
previously paid on your California Fund shares and the sales charge currently
imposed on other New England Fund shares). Shareholders making such exchanges
must provide New England Funds with sufficient information to permit
verification of their prior ownership of shares.
An exchange may be effected, provided that neither the registered name
nor address of the accounts are different and provided that a certificate
representing the shares being exchanged has not been issued to the shareholder,
by (1) a telephone request to the Funds or Nvest Services Company at
800-225-5478 or (2) a written request to the Funds or Nvest Services Company,
P.O. Box 8551, Boston, MA 02266-8551. In any event, a current prospectus of the
fund whose shares will be received must be delivered to the shareholder before
the transaction can be completed. The minimum amount for an exchange is $1,000.
Except as otherwise permitted by SEC rule, shareholders will receive at
least 60 days advance notice of any material change to the exchange privilege.
Automatic Exchange Plan (Class A, B and C shares)
Shareholders may establish an Automatic Exchange Plan under which
shares are automatically redeemed each month and immediately reinvested in
shares of the same class of one or more of the New England Funds listed below,
subject to the investor eligibility requirement of that other fund and the
exchange rules regarding Class A, Class B and Class C above. Also, proceeds of
automatic redemptions of Class A shares of the Funds may be reinvested in Class
C shares of those New England Funds' Stock or Bond Funds that offer Class C
shares. Registrations on all accounts must be identical. The two dates each
month on which exchanges may be made are the 15th or 28th (or the first business
day thereafter if the 15th or the 28th are not business days) and are made until
the account is exhausted or until Nvest Services Company is notified in writing
to terminate the plan. Exchanges may be made in amounts of $100 or more from any
Fund. A sales charge will be imposed on such exchanges unless the shares being
exchanged were previously acquired through an exchange from one of the New
England Funds listed below. Complete the account application or the Service
Options Form available from Nvest Services Company or your financial
representative to establish an Automatic Exchange Plan.
Every exchange constitutes a sale of fund shares for federal income tax
purposes, on which an investor may realize a long- or short-term capital gain or
loss.
The New England Funds and their investment objectives are as follows:
STOCK FUNDS:
NEW ENGLAND GROWTH FUND seeks long-term growth of capital through
investments in equity securities of companies whose earnings are expected to
grow at a faster rate than the United States economy.
NEW ENGLAND CAPITAL GROWTH FUND seeks long-term growth of capital.
NEW ENGLAND VALUE FUND seeks a reasonable long-term investment return
from a combination of market appreciation and dividend income from equity
securities.
NEW ENGLAND BALANCED FUND seeks a reasonable long-term investment
return from a combination of long-term capital appreciation and moderate current
income.
NEW ENGLAND GROWTH AND INCOME FUND (FORMERLY NEW ENGLAND GROWTH
OPPORTUNITIES FUND) seeks opportunities for long-term growth of capital and
income.
NEW ENGLAND INTERNATIONAL EQUITY FUND seeks total return from long-term
growth of capital and dividend income primarily through investment in a
diversified portfolio of marketable international equity securities.
NEW ENGLAND STAR ADVISERS FUND seeks long-term growth of capital.
NEW ENGLAND STAR WORLDWIDE FUND seeks long-term growth of capital.
NEW ENGLAND STAR SMALL CAP FUND seeks capital appreciation.
NEW ENGLAND EQUITY INCOME FUND seeks current income and capital growth.
NEW ENGLAND BULLSEYE FUND seeks long-term growth of capital.
BOND FUNDS:
NEW ENGLAND GOVERNMENT SECURITIES FUND seeks a high level of current
income consistent with safety of principal by investing in U.S. Government
Securities and engaging in transactions involving related options, futures and
options on futures.
NEW ENGLAND LIMITED TERM U.S. GOVERNMENT FUND seeks a high current
return consistent with preservation of capital.
NEW ENGLAND SHORT TERM CORPORATE INCOME FUND seeks a high level of
current income consistent with preservation of capital.
NEW ENGLAND STRATEGIC INCOME FUND seeks high current income with a
secondary objective of capital growth.
NEW ENGLAND BOND INCOME FUND seeks a high level of current income
consistent with what the Fund considers reasonable risk.
NEW ENGLAND HIGH INCOME FUND seeks high current income plus the
opportunity for capital appreciation to produce a high total return.
NEW ENGLAND MUNICIPAL INCOME FUND seeks as high a level of current
income exempt from federal income taxes as is consistent with reasonable risk
and protection of shareholders' capital.
NEW ENGLAND MASSACHUSETTS TAX FREE INCOME FUND seeks as high a level of
current income exempt from federal income tax and Massachusetts personal income
taxes as the Fund's subadviser believes is consistent with preservation of
capital.
NEW ENGLAND INTERMEDIATE TERM TAX FREE FUND OF CALIFORNIA seeks as high
a level of current income exempt from federal income tax and its state personal
income tax as is consistent with preservation of capital.
ACCESS SHARES (CURRENTLY NOT OFFERED TO THE PUBLIC):
NEW ENGLAND CORE EQUITY FUND seeks long-term capital appreciation by
investing all or substantially all of its assets in The Oakmark Fund.
NEW ENGLAND STOCK AND BOND FUND seeks high current income as well as
preservation and growth of capital by investing all or substantially all of its
assets in The Oakmark Equity and Income Fund.
NEW ENGLAND SELECT FUND seeks long-term capital appreciation by
investing all or substantially all of its assets in The Oakmark Select Fund.
NEW ENGLAND SMALL CAP VALUE FUND seeks long-term capital appreciation
by investing all or substantially all of its assets in The Oakmark Small Cap
Fund.
NEW ENGLAND SMALL CAP GROWTH FUND seeks long-term capital growth by
investing all or substantially all of its assets in the Loomis Sayles Small Cap
Growth Fund.
NEW ENGLAND TOTAL RETURN BOND FUND seeks high total investment return
through a combination of current income and capital appreciation by investing
all or substantially all of its assets in the Loomis Sayles Bond Fund.
As of June 30, 1999, the net assets of the New England Funds and the Money
Market Funds totaled over $7 billion.
Nvest Portfolio Reporting Option ("NvestPRO")
Fund shareholders who are clients of broker-dealers that have entered
into an agreement with New England Funds and the Distributor, and have total net
assets of $50,000 or more may be eligible to receive NvestPRO Quarterly Reports
in addition to their standard New England Funds quarterly statements. Eligible
clients are defined as those clients with a portfolio of regular and IRA
accounts that are assigned to the same social security number having a minimum
account value of: (i) $50,000 in the case of a new account or (ii) $100,000 in
the case of an existing account. NvestPRO Quarterly Reports include graphic
performance illustrations and are designed to provide investors with
individualized performance information on their New England Funds holdings.
Individualized performance illustrated in the NvestPRO reports is determined
from the first date of participation in the NvestPRO product, not the account
open date.
Clients who elect to participate in the NvestPRO program are also
offered access to an asset allocation questionnaire that is designed to assist
them and their registered representative in choosing an initial portfolio of New
England Funds based on their financial profile, objectives, and risk tolerance.
This is not an actively managed asset allocation program as described in Rule
3a-4 of the 1940 Act. The Distributor will charge a fee for this product
(currently $35 annually per portfolio), and has the right to determine account
minimums for participation in the product.
Self-Servicing Your Account with New England Funds Personal Access Line(TM) and
Web site
New England Funds shareholders may access account information,
including share balances and recent account activity online, by visiting our Web
site at www.mutualfunds.com. Transactions may also be processed online for
certain accounts (restrictions may apply). Such transactions include purchases,
redemptions and exchanges, and shareholders are automatically eligible for these
features. New England Funds has taken measures to ensure the security of
shareholder accounts, including the encryption of data and the use of personal
identification (PIN) numbers. In addition, you may restrict these privileges
from your account by calling New England Funds at 800-225-5478, or writing to us
at P.O. Box 8551, Boston, MA 02116. More information regarding these features
may be found on our Web site at www.mutualfunds.com.
Investor activity through these mediums is subject to the terms and conditions
outlined in the following NEW ENGLAND FUNDS ONLINE AND TELEPHONIC CUSTOMER
AGREEMENT. This agreement is also posted on our Web site. The initiation of any
activity through the New England Funds Personal Access Line(TM), or Web site at
WWW.MUTUALFUNDS.COM by an investor shall indicate agreement with the following
terms and conditions:
NEW ENGLAND FUNDS ONLINE AND TELEPHONIC CUSTOMER AGREEMENT
NOTE: ACCESSING OR REQUESTING ACCOUNT INFORMATION OR TRANSACTIONS THROUGH THIS
SITE CONSTITUTES AND SHALL BE DEEMED TO BE AN ACCEPTANCE OF THE FOLLOWING TERMS
AND CONDITIONS.
The accuracy, completeness and timeliness of all mutual fund information
provided is the sole responsibility of the mutual fund company which provides
the information. No party which provides a connection between this web site and
a mutual fund or its transfer agency system can verify or ensure the receipt of
any information transmitted to or from a mutual fund or its transfer agent, or
the acceptance by, or completion of any transaction with, a mutual fund.
The online acknowledgments or other messages which appear on your screen for
transactions entered do not mean that the transactions have been received,
accepted or rejected by the mutual fund. These acknowledgments are only an
indication that the transactional information entered by you has either been
transmitted to the mutual fund, or that it cannot be transmitted. It is the
responsibility of the mutual fund to confirm to you that it has received the
information and accepted or rejected a transaction. It is the responsibility of
the mutual fund to deliver to you a current prospectus, confirmation statement
and any other documents or information required by applicable law.
NO TRANSACTION SHALL BE DEEMED ACCEPTED UNTIL YOU RECEIVE A WRITTEN CONFIRMATION
FROM THE FUND COMPANY.
You are responsible for reviewing all mutual fund account statements received by
you in the mail in order to verify the accuracy of all mutual fund account
information provided in the statement and transactions entered through this
site. You are also responsible for promptly notifying the mutual fund of any
errors or inaccuracies relating to information contained in, or omitted from
your mutual fund account statements, including errors or inaccuracies arising
from the transactions conducted through this site.
TRANSACTIONS ARE SUBJECT TO ALL REQUIREMENTS, RESTRICTIONS AND FEES AS SET FORTH
IN THE PROSPECTUS OF THE SELECTED FUND.
THE CONDITIONS SET FORTH IN THIS AGREEMENT EXTEND NOT ONLY TO TRANSACTIONS
TRANSMITTED VIA THE INTERNET BUT TO TELEPHONIC TRANSACTIONS INITIATED THROUGH
THE NEW ENGLAND FUNDS PERSONAL ACCESS LINE(TM) (PAL).
You are responsible for the confidentiality and use of your personal
identification numbers, account numbers, social security numbers and any other
personal information required to access the site or transmit telephonically. Any
individual that possesses the information required to pass through all security
measures will be presumed to be you. All transactions submitted by an individual
presumed to be you will be solely your responsibility.
You agree that New England Funds does not have the responsibility to inquire as
to the legitimacy or propriety of any instructions received from you or any
person believed to be you, and is not responsible or liable for any losses that
may occur from acting on such instructions.
New England Funds is not responsible for incorrect data received via the
Internet or telephonically from you or any person believed to be you.
Transactions submitted over the Internet and telephonically are solely your
responsibility and New England Funds makes no warranty as to the correctness,
completeness, or the accuracy of any transmission. Similarly New England Funds
bears no responsibility for the performance of any computer hardware, software,
or the performance of any ancillary equipment and services such as telephone
lines, modems, or Internet service providers.
The processing of transactions over this site or telephonically will involve the
transmission of personal data including social security numbers, account numbers
and personal identification numbers. While New England Funds has taken
reasonable security precautions including data encryption designed to protect
the integrity of data transmitted to and from the areas of our Web site that
relate to the processing of transactions, we disclaim any liability for the
interception of such data.
You agree to immediately notify New England Funds if any of the following
occurs:
1. You do not receive confirmation of a transaction submitted via the Internet
or telephonically within five (5) business days.
2. You receive confirmation of a transaction of which you have no knowledge
and was not initiated or authorized by you.
3. You transmit a transaction for which you do not receive a confirmation
number.
4. You have reason to believe that others may have gained access to your
personal identification number (PIN) or other personal data.
5. You notice an unexplained discrepancy in account balances or other changes
to your account, including address changes, and banking instructions on any
confirmations or statements.
Any costs incurred in connection with the use of the New England Funds Personal
Access Line(TM) or the New England Funds Internet site including telephone line
costs, and Internet service provider costs are solely your responsibility.
Similarly New England Funds makes no warranties concerning the availability of
Internet services, or network availability.
New England Funds reserves the right to suspend, terminate or modify the
Internet capabilities offered to shareholders without notice.
You have the ability to restrict internet AND Telephonic access to your accounts
by notifying New England Funds of your desire to do so.
Written notifications to New England Funds should be sent to:
New England Funds
PO Box 8551
Boston, MA 02266-8551
Notification may also be made by calling 800-225-5478 during normal business
hours.
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REDEMPTIONS
- --------------------------------------------------------------------------------
The procedures for redemption of Fund shares are summarized in the
Prospectus. As described in the Prospectus, a CDSC may be imposed in certain
instances upon the redemption of Fund shares that were acquired through an
exchange of shares of the New England Funds. For purposes of the CDSC, an
exchange of shares from one Fund to another Fund is not considered a redemption
or purchase. For federal tax purposes, however, such an exchange is considered a
sale and a purchase and, therefore, would be considered a taxable event on which
you may recognize a gain or loss. Any applicable CDSC will be calculated in the
manner described in the relevant prospectus of the New England Funds and the
related Statement of Additional Information.
Signatures on redemption requests must be guaranteed by an "Eligible
Guarantor Institution" as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934. However, as noted in the Prospectus, a signature guarantee will not
be required if the proceeds of the redemption do not exceed $100,000 and the
proceeds check is made payable to the registered owner(s) and mailed to the
record address.
If you select the telephone redemption service in the manner described
in the next paragraph, shares of a Fund may be redeemed by calling toll free
800-225-5478. A wire fee, currently $5.00, will be deducted from the proceeds.
Telephone redemption requests must be received by the close of regular trading
on the New York Stock Exchange (the "Exchange"). Requests made after that time
or on a day when the Exchange is not open for business cannot be accepted and a
new request on a later day will be necessary. The proceeds of a telephone
withdrawal will normally be sent on the first business day following receipt of
a proper redemption request.
In order to redeem shares by telephone, a shareholder must either
select this service when completing the new account application or must do so
subsequently on the Service Options Form, available from Nvest Services Company
or your investment dealer. When selecting the service, a shareholder must
designate a bank account to which the redemption proceeds should be sent. Any
change in the bank account so designated may be made by furnishing to Nvest
Services Company or your investment dealer a completed Service Options Form with
a signature guarantee. Whenever the Service Options Form is used, the
shareholder's signature must be guaranteed as described above. Telephone
redemptions may only be made if the designated bank is a member of the Federal
Reserve System or has a correspondent bank that is a member of the System. If
the account is with a savings bank, it must have only one correspondent bank
that is a member of the System. The Funds, the Distributor and State Street Bank
are not responsible for the authenticity of withdrawal instructions received by
telephone.
In order to redeem shares electronically through the ACH system, a
shareholder's bank or credit union must be a member of the ACH system and the
shareholder must have a completed, approved ACH application on file. In
addition, the telephone request must be received no later than 4:00 p.m.
(Eastern Time). Upon receipt of the required information, the appropriate number
of shares will be redeemed and the monies forwarded to the bank designated on
the shareholder's application through the ACH system. The redemption will be
processed the day the telephone call is made and the monies generally will
arrive at the shareholder's bank within three business days. The availability of
these monies will depend on the individual bank's rules.
The redemption price will be the net asset value per share (less any
applicable CDSC) next determined after the redemption request and any necessary
special documentation are received by State Street Bank or your investment
dealer in proper form. Payment normally will be made by State Street Bank on
behalf of the Fund within seven days thereafter. However, in the event of a
request to redeem shares for which the Fund has not yet received good payment,
the Funds reserve the right to withhold payments of redemption proceeds if the
purchase of shares was made by a check which was deposited less than fifteen
days prior to the redemption request (unless the Fund is aware that the check
has cleared).
The Funds will normally redeem shares for cash; however, the Funds
reserve the right to pay the redemption price wholly or partly in kind if the
relevant Trust's Board of Trustees determines it to be advisable and in the
interest of the remaining shareholders of a Fund. The redemptions in kind will
be selected by the Fund's subadviser in light of the Fund's objective and will
not generally represent a pro rata distribution of each security held in the
Fund's portfolio. If portfolio securities are distributed in lieu of cash, the
shareholder will normally incur brokerage commissions upon subsequent
disposition of any such securities. However, the Funds have elected to be
governed by Rule 18f-1 under the 1940 Act, pursuant to which the Funds are
obligated to redeem shares solely in cash for any shareholder during any 90-day
period up to the lesser of $250,000 or 1% of the total net asset value of the
relevant Fund at the beginning of such period. The Funds do not currently intend
to impose any redemption charge (other than the CDSC imposed by the Funds'
distributor), although it reserves the right to charge a fee not exceeding 1% of
the redemption price. A redemption constitutes a sale of shares for federal
income tax purposes on which the investor may realize a long- or short-term
capital gain or loss. See the sections "Net Income, Dividends and Valuation" and
"Taxes" below.
- --------------------------------------------------------------------------------
NET INCOME, DIVIDENDS AND VALUATION
- --------------------------------------------------------------------------------
Determination of Net Income
The net income of each Fund is determined as of the close of regular
trading on the Exchange on each day that the Exchange is open for trading. The
Exchange is expected to be closed on the following holidays: New Year's Day,
Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. Net income includes (i) all
interest accrued and discount earned on the portfolio investments of the Fund,
minus (ii) amortized premium on such investments, plus or minus (iii) all
realized gains and losses on such investments, and minus (iv) all expenses of
the Fund.
Daily Dividends
As described in the Prospectus, the net income of each Fund is declared
as a dividend, at the closing of regular trading on the Exchange each day that
the Exchange is open. Dividends will be paid in cash to the shareholder if the
shareholder has notified State Street Bank in writing of the election on or
before payable date. The net income for Saturdays, Sundays and other days on
which the Exchange is closed is declared as a dividend on the immediately
preceding business day. Although the Funds do not expect to realize any
long-term capital gains, if such gains are realized they will be distributed
once a year. If you elect to receive your dividends in cash and the dividend
checks sent to you are returned "undeliverable" to the Fund or remain uncashed
for six months, your cash election will be automatically changed and your future
dividends will be reinvested. No interest will accrue on amounts represented by
uncashed dividend or redemption checks.
Valuation of the Funds' Portfolio Investments
The total net asset value of each Fund (the excess of the Fund's assets
over its liabilities) is determined by State Street Bank as of the close of
regular trading on the Exchange on each day the Exchange is open for trading.
(See "Determination of Net Income.") The portfolio securities of each Fund are
valued at their fair value as determined in good faith by the relevant Trust's
Board of Trustees or persons acting at their direction. Under normal market
conditions, portfolio securities will be valued at amortized cost as described
below. Expenses of each Fund are paid or accrued each day.
Under the amortized cost method of valuation, securities are valued at
cost on the date of purchase. Thereafter, the value of securities purchased at a
discount or premium is increased or decreased incrementally each day so that at
maturity the purchase discount or premium is fully amortized and the value of
the security is equal to its principal amount. Due to fluctuations in interest
rates, the amortized cost value of the securities of a Fund may at times be more
or less than their market value.
By using amortized cost valuation, the Funds seek to maintain a
constant net asset value of $1.00 per share despite minor shifts in the market
value of their portfolio securities. The yield on a shareholder's investment may
be more or less than that which would be recognized if the net asset value per
share were not constant and were permitted to fluctuate with the market value of
the portfolio securities of each Fund. However, as a result of the following
procedures, it is believed that any difference will normally be minimal. The
Trustees monitor quarterly the deviation between the net asset value per share
of each Fund as determined by using available market quotations and its
amortized cost price per share. Back Bay Advisors makes such comparisons at
least weekly and will advise the Trustees promptly in the event of any
significant deviation. If the deviation exceeds 1/2 of 1% for any Fund, the
relevant Board of Trustees will consider what action, if any, should be
initiated to provide fair valuation of the portfolio securities of that Fund and
prevent material dilution or other unfair results to shareholders. Such action
may include redemption of shares in kind; selling portfolio securities prior to
maturity; withholding dividends; or using a net asset value per share as
determined by using available market quotations. There is no assurance that each
Fund will be able to maintain its net asset value at $1.00.
Determination of Yield
Yield. Each Fund's yield, as it may appear in advertisements or written
sales material, represents the net change, exclusive of capital changes, in the
value of a hypothetical account having a balance of one share at the beginning
of the period for which yield is determined (the "base period"). Current yield
for the base period (for example, seven calendar days) is calculated by dividing
(i) the net change in the value of the account for the base period by (ii) the
number of days in the base period. The resulting number is then multiplied by
365 to determine the net income on an annualized basis. This amount is divided
by the value of the account as of the beginning of the base period, normally $1,
in order to state the current yield as a percentage. Yield may also be
calculated on a compound basis ("effective" or "compound" yield) which assumes
continual reinvestment throughout an entire year of net income earned at the
same rate as net income is earned by the account for the base period.
Each Fund's yield for the seven days ended June 30, 1999 and effective
yield based on such seven-day period were, respectively, 4.22% and 4.31% (Cash
Management Trust - Money Market Series) and 2.86% and 2.90% (Tax Exempt Money
Market Trust).
Yield is calculated without regard to realized and unrealized gains and
losses. The yield of each Fund will vary depending on prevailing interest rates,
operating expenses and the quality, maturity and type of instruments held in the
portfolio of that Fund. Consequently, no yield quotation should be considered as
representative of what the yield of the applicable Fund may be for any future
period. The Funds' yields are not guaranteed. At any time in the future, yields
and total return may be higher or lower than past yields and there can be no
assurance that any historical results will continue.
Investors in the Funds are specifically advised that share prices,
expressed as the net asset values per share, will vary just as yield will vary.
An investor's focus on the yield of a Fund to the exclusion of the consideration
of the share price of that Fund may result in the investor's misunderstanding
the total return he or she may derive from the Fund.
Shareholders comparing a Fund's yield with that of alternative
investments (such as savings accounts, various types of bank deposits, and other
money market funds) should consider such things as liquidity, minimum balance
requirements, checkwriting privileges, the differences in the periods and
methods used in the calculation of the yields being compared, and the impact of
taxes on alternative types of investments.
Yield information may be useful in reviewing each Fund's performance
and providing a basis for comparison with other investment alternatives.
However, unlike bank deposits, traditional corporate or municipal bonds or other
investments which pay a fixed yield for a stated period of time, money market
and tax exempt money market fund yields fluctuate.
Taxable-Equivalent Yield. The Tax Exempt Money Market Trust may also
advertise a taxable-equivalent yield or taxable-equivalent effective yield,
calculated as described above, except that, for any given tax bracket, net
investment income will be calculated using as gross investment income an amount
equal to the sum of (i) any taxable income of the Fund plus (ii) the tax exempt
income of the Fund divided by the difference between 1 and the effective federal
income tax rate for taxpayers in that tax bracket.
Taxable-Equivalent Yield and Taxable-Equivalent
Effective Yield for the 7 day period ended June 30, 1999
7 day yield: 2.86%
7 day effective: 2.90%
Federal Taxable-Equivalent Taxable-Equivalent
Tax Rate Yield Effective Yield
-------- ----- ---------------
15% 3.36% 3.41%
28% 3.97% 4.03%
31% 4.14% 4.20%
36% 4.47% 4.53%
39.6% 4.74% 4.80%
Calculation of Total Return.
Total return is a measure of the change in value of an investment in a
Fund over the period covered, which assumes that any dividends or capital gains
distributions are automatically reinvested in shares of the same class of that
Fund rather than paid to the investor in cash. Each Fund may show each class's
average annual total return for the one-year, five-year and ten-year periods (or
for the life of the class, if shorter) through the end of the most recent
calendar quarter. The formula for total return used by the Funds is prescribed
by the SEC and includes three steps: (1) adding to the total number of shares of
the particular class that would be purchased by a hypothetical $10,000
investment in the Fund (with or without giving effect to the deduction of sales
charge or CDSC, if applicable) all additional shares that would have been
purchased if all dividends and distributions paid or distributed during the
period had been automatically reinvested; (2) calculating the value of the
hypothetical initial investment as of the end of the period by multiplying the
total number of shares owned at the end of the period by the net asset value per
share of the relevant class on the last trading day of the period; (3) dividing
this account value for the hypothetical investor by the amount of the initial
investment, and annualizing the result for periods of less than one year. Total
return may be stated with or without giving effect to any expense limitations in
effect for a Fund. If a Fund presents returns reflecting an expense limitation
or waiver, its total return would have been lower if no limitation or waiver
were in effect.
- --------------------------------------------------------------------------------
TAX-FREE INVESTING
- --------------------------------------------------------------------------------
[TO BE UPDATED]
The table below compares taxable and tax-free yields, based on tax
rates for 1999:
<TABLE>
<CAPTION>
Federal
Marginal
Taxable Income* Tax If Tax Exempt Yield Is
--------------------------------------------------- Rate ---------------------------------------------------------
Joint Single (1999) 2% 3% 4% 5% 6%
Return Return Then the Equivalent Taxable Yield Would Be
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0 - $43,050 $0 - $25,750 15% 2.35% 3.53% 4.71% 5.88% 7.06%
$43,051 - $104,050 $25,751 - $62,450 28% 2.78% 4.17% 5.56% 6.94% 8.33%
$104,051 - $158,550 $62,451 - $130,250 31% 2.90% 4.35% 5.80% 7.25% 8.70%
$158,551 - $283,150 $130,251 - $283,150 36% 3.13% 4.69% 6.25% 7.81% 9.38%
$283,151 and over $283,151 and over 39.6% 3.31% 4.97% 6.62% 8.28% 9.93%
* This amount represents taxable income as defined in the Code.
</TABLE>
The table above does not take into account the effect of state and
local taxes, if any, or federal income taxes on social security benefits which
may arise as a result of receiving tax exempt income.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
In General
The tax status of the Funds and the distributions that each Fund may
make are summarized in the section of the Prospectus entitled "Tax
Consequences." Each Fund intends to qualify as a regulated investment company
under the Code. This means that the Fund will not be subject to federal income
tax on net income and net realized capital gains distributed to shareholders
provided it distributes (i) annually substantially all its net investment income
and net realized short-term capital gains (ii) derives at least 90% of its gross
income from dividends, interest, payments with respect to certain securities
loans, gains from the sale of securities or foreign currencies, or other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies; and (iii) diversifies its holdings so that at the end
of each fiscal quarter, (a) at least 50% of the value of its total assets
consist of cash, U.S. Government Securities, securities of other regulated
investment companies, and other securities limited generally, with respect to
any one issuer, to no more than 5% of the value of the Fund's total assets and
10% of the outstanding voting securities of such issuer, and (b) not more than
25% of the value of its assets is invested in the securities (other than those
of the U.S. government or other regulated investment companies) of any one
issuer or of two or more issuers which the Fund controls and which are engaged
in the same, similar or related trades or businesses.
To avoid certain excise taxes, each Fund must distribute by December 31
each year virtually all of its ordinary income realized in that year, and any
previously undistributed capital gains it realized in the twelve months ended on
October 31 of that year. Certain dividends declared by a Fund in October,
November or December but not actually received by you until January will be
treated for federal tax purposes as though you had received them on December 31
of the year in which declared.
Cash Management Trust - Money Market Series
It is not expected that the Fund will realize any long-term capital
gains. However, to the extent that distributions of any net realized long-term
capital gains (i.e., the excess of net gains from capital assets held for more
than one year over net losses from capital assets held for not more than one
year) are made to shareholders of the Fund, such gains are taxable to such
shareholders as long-term capital gains, whether received in cash or additional
shares and regardless of how long shareholders have held their shares. Such
distributions are not eligible for the dividends received deduction for
corporations. Distributions derived from short-term capital gains and
investment income are generally taxable to you at ordinary income rates.
The Fund is required to withhold 31% of all income dividends and
capital gains distributions it pays to you if you do not provide a correct,
certified taxpayer identification number, if a Fund is notified that you have
underreported income in the past or if you fail to certify to a Fund that you
are not subject to such withholding. If you are a tax-exempt shareholder,
however, these backup withholding rules will not apply so long as you furnish
the Fund with an appropriate certification.
Tax Exempt Money Market Trust
The Fund intends to have at least 50% of its total assets invested in
Municipal Securities at the close of each quarter of its taxable year so that
dividends paid by the Fund which are derived from interest on Municipal
Securities will be "exempt-interest dividends" within the meaning of the Code.
Exempt-interest dividends may be treated by shareholders as interest excludable
from gross income under Section 103(a) of the Code. Dividends derived from
income which is not exempt from federal income tax, including interest earned on
investments in taxable money market securities or in repurchase agreements and
any net short-term capital gains realized by the Fund, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
Determination of the taxability status of dividends is made using the average
annual method. The percentage of income designated as tax-exempt for any
particular distribution may be substantially different from the percentage of
the Fund's income that was tax-exempt during the period covered by the
distribution. The interest on certain types of Municipal Securities, known as
"private activity" bonds, is an item of tax preference, subject to the federal
alternative minimum tax with a maximum rate of 28%. The Fund has instituted
procedures to avoid investment in "private activity" Municipal Securities in
order to reduce the possibility that Fund dividends will constitute an item of
tax preference. However, there can be no assurance that these procedures will be
totally effective. The Fund intends to continue these procedures so long as it
deems them necessary and prudent. Shareholders should be aware that, while these
procedures are in effect, the Fund will not be able to invest in the full range
of issues available in the Municipal Securities market. The Fund's investments
in Municipal Securities that are subject to the federal alternative minimum tax,
together with other investments the interest on which is subject to the
alternative minimum tax, will not normally exceed 20% of Fund investments. See
the Prospectus for information certain other limitations on the tax-exempt
status of interest on Municipal Securities.
The interest on Municipal Securities issued after August 15, 1986 is
retroactively taxable from the date of issuance if the issuer does not comply
with certain requirements concerning the use of bond proceeds and the
application of earnings on bond proceeds.
Net long-term capital gain distributions, if any, will be taxable to
shareholders as long-term capital gains, regardless of the length of time the
shareholder has held shares of the Fund.
None of the Funds' dividends or distributions are expected to be
eligible for the dividends-received deduction available to corporations.
Under the Code, investors may not deduct interest on indebtedness
incurred or continued to purchase or carry shares of an investment company
paying exempt-interest dividends, such as the Fund. (See Section 265(4) of the
Code.) Further, entities or persons who are "substantial users" (or persons
related to "substantial users") of facilities financed by industrial development
bonds (see Appendix B) should consult their tax advisers before purchasing
shares of the Fund.
Shareholders are advised to consult their own tax advisers for more
detailed information concerning the federal income taxation of the Fund and the
income tax consequences to its shareholders.
Both Funds
The foregoing relates only to federal income taxation of individuals
and corporations. Prospective shareholders should consult their tax advisers as
to the possible application of state and local income tax laws to Fund dividends
and capital gain distributions and the tax consequences of retirement plans
offering tax benefits. Information regarding the tax status of distributions
made by the Funds will be sent to shareholders shortly after the end of each
calendar year.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Financial Statements of each of the Funds and the related reports
of the independent accountants included in the annual reports of the Funds for
the year ended June 30, 1999 are incorporated herein by reference. Each Fund's
annual and semi-annual report is available upon request and without charge. Each
Fund will send a single copy of its annual and semi-annual reports to an address
at which more than one shareholder of record with the same last name has
indicated that mail is to be delivered. Shareholders may request additional
copies of any annual or semi-annual report by telephone at (800) 225-5478 or by
writing to the Funds at: New England Fund, L.P., 399 Boylston Street, Boston,
Massachusetts 02116.
<PAGE>
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APPENDIX A
- --------------------------------------------------------------------------------
DESCRIPTION OF CERTAIN NEW ENGLAND CASH MANAGEMENT TRUST - MONEY MARKET
SERIES INVESTMENTS:
Obligations Backed by Full Faith and Credit of the U.S. Government--
are bills, certificates of indebtedness, notes and bonds issued by (i) the U.S.
Treasury or (ii) agencies, authorities and instrumentalities of the U.S.
Government or other entities and backed by the full faith and credit of the U.S.
Government. Such obligations include, but are not limited to, obligations issued
by the Government National Mortgage Association, the Farmers'Home Administration
and the Small Business Administration.
Other U.S. Government Obligations -- are bills, certificates of
indebtedness, notes and bonds issued by agencies, authorities and
instrumentalities of the U.S. Government which are supported by the right of the
issuer to borrow from the U.S. Treasury or by the credit of the agency,
authority or instrumentality itself. Such obligations include, but are not
limited to, obligations issued by the Tennessee Valley Authority, the Bank for
Cooperatives, Federal Home Loan Banks, Federal Intermediate Credit Banks,
Federal Land Banks and the Federal National Mortgage Association.
Repurchase Agreements -- are agreements by which the Fund purchases a
security (usually a U.S. Government Obligation) and obtains a simultaneous
commitment from the seller (a member bank of the Federal Reserve System or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date. The resale price is in
excess of the purchase price and reflects an agreed upon market rate unrelated
to the coupon rate on the purchased security. Such transactions afford an
opportunity for the Fund to earn a return on temporarily available cash at
minimal market risk, although the Fund may be subject to various delays and
risks of loss if the seller is unable to meet its obligation to repurchase.
Certificates of Deposit -- are certificates issued against funds
deposited in a bank, are for a definite period of time, earn a specified rate of
return and are normally negotiable.
Bankers'Acceptances -- are short-term credit instruments used to
finance the import, export, transfer or storage of goods. They are termed
"accepted"when a bank guarantees their payment at maturity.
Yankeedollar Obligations -- obligations of U.S. branches of foreign
banks.
Eurodollar Obligations -- dollar-denominated obligations of foreign
banks (including U.S. and London branches of foreign banks) and foreign branches
of U.S. banks.
Commercial Paper -- refers to promissory notes issued by corporations
in order to finance their short-term credit needs. (See Appendix C.)
Corporate Obligations -- include bonds and notes issued by corporations
in order to finance longer-term credit needs. (See Appendix C.)
<PAGE>
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APPENDIX B
- --------------------------------------------------------------------------------
DESCRIPTION OF CERTAIN NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST INVESTMENTS
The three principal classifications of Municipal Securities are
"Notes," "Bonds" and "Commercial Paper."
Municipal Notes. Municipal Notes are generally issued to finance
short-term capital needs and generally have maturities of one year or less.
Municipal Notes include:
1. Project Notes. Project Notes are issued by public bodies (called "local
issuing agencies") created under the laws of a state, territory or U.S.
possession. They have maturities that range up to one year from the date of
issuance. These Notes provide financing for a wide range of financial
assistance programs for housing, redevelopment and related needs (such as
low-income housing programs and urban renewal programs). While they are the
primary obligations of the local public housing agencies or the local urban
renewal agencies, they are also backed by the full faith and credit of the U.S.
Government. Accordingly, investment restriction (1) of New England Tax Exempt
Money Market Trust is not applicable to Project Notes. See "Investment
Restrictions."
2. Tax Anticipation Notes. Tax Anticipation Notes are issued to finance
working capital needs of states, counties, municipalities and other public
bodies that have the legal power to tax. Generally, they are issued in
anticipation of various seasonal tax revenues, such as real and personal
property, income, sales, use and business taxes, and are payable from some or
all of these specific future taxes.
3. Revenue Anticipation Notes. Revenue Anticipation Notes are issued to
provide interim financing in expectation of receipt of various types of non-tax
revenue, such as revenues available to the issuer under various federal revenue
sharing programs. In some cases, Revenue Anticipation Notes may be payable
additionally from tax revenues.
4. Bond Anticipation Notes. Bond Anticipation Notes are issued to provide
interim financing until long-term financing can be arranged. In most cases, the
long-term bonds, when sold and issued, then provide the money for repayment of
the Notes.
5. Construction Loan Notes. Construction Loan Notes are sold to provide
construction financing. After successful completion and acceptance, many
projects receive permanent financing through the Federal Housing Administration
under "Fannie Mae" (the Federal National Mortgage Association) or "Ginnie Mae"
(the Government National Mortgage Association) programs.
Municipal Bonds. Municipal Bonds, which meet longer-term capital needs
and generally have maturities of more than one year when issued, have two
principal classifications: General Obligation Bonds and Limited Obligation or
Revenue Bonds. One type of Municipal Revenue Bonds is referred to as Industrial
Development Bonds. These three are discussed below.
1. General Obligation Bonds. Issuers of General Obligation Bonds include
states, counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind General Obligation Bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. General Obligation Bonds are not payable from any
particular fund or source. The characteristics and method of enforcement of
General Obligation Bonds vary according to the law applicable to the particular
issuer and payment may be dependent upon an appropriation by the issuer's
legislative body. The taxes that can be levied for the payment of debt service
may be limited or unlimited as to rate or amount. Such bonds may be
additionally secured by special assessments.
2. Limited Obligation or Revenue Bonds. The principal source for repayment
of a Revenue Bond is generally the net revenues derived from a particular
facility or group of facilities or, in some cases, the proceeds of a special
excise or other specific revenue source. Revenue Bonds have been or may be
issued to finance a wide variety of capital projects including: electric, gas,
water and sewer systems; highways, bridges and tunnels; port facilities;
colleges and universities; and hospitals. Although the principal security
behind these bonds may vary, many provide additional security in the form of a
debt service reserve fund whose money may be used to make principal and interest
payments on the issuer's obligations. Housing finance authorities have a wide
range of security, including partially or fully insured mortgages, rent
subsidies and/or collateralized mortgages, and/or the net revenues from housing
or other public projects. Some authorities provide further security in the form
of a state's ability (without obligation) to make up deficiencies in the debt
service reserve fund.
3. Industrial Development Bonds. Prior to the Tax Reform Act of 1986,
certain debt obligations known as Industrial Development Bonds could be issued
by or on behalf of public authorities to raise money to finance various
privately-operated facilities for business and manufacturing, housing, sports
and pollution control; such obligations are included within the term Municipal
Bonds if the interest paid thereon is, in the opinion of bond counsel, exempt
from federal income tax. These bonds also have been or may be used to finance
public facilities, which may be privately used and operated, such as airports,
mass transit systems, ports and parking. The payment of the principal and
interest on such bonds is dependent solely on the ability of the facility's user
to meet its financial obligations and the pledge, if any, of real or personal
property so financed as security for such payment. The Tax Reform Act of 1986
eliminated some types of industrial revenue bonds but retained others under the
general category of "private activity bonds."
Tax-Exempt Commercial Paper. Tax-Exempt Commercial Paper is a
short-term obligation with a stated maturity of 365 days or less. It is issued
by agencies of state and local governments to finance seasonal working capital
needs or as short-term financing in anticipation of longer term financing.
Tax-Exempt Commercial Paper is often renewed or refunded at its maturity by the
issuance of other short or long-term obligations.
Other Types of Municipal Securities. The foregoing describes types of
Municipal Securities which are presently available. New England Tax Exempt Money
Market Trust may, to the extent consistent with its investment objective,
policies and restrictions, invest in other types of Municipal Securities as they
become available in the future.
<PAGE>
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APPENDIX C
- --------------------------------------------------------------------------------
RATINGS OF CORPORATE AND MUNICIPAL BONDS, COMMERCIAL PAPER AND
SHORT-TERM TAX-EXEMPT OBLIGATIONS
Set forth below are descriptions of the highest ratings of Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Ratings Group ("S&P") for
corporate and municipal bonds, commercial paper and short-term tax-exempt
obligations. Ratings for commercial paper have been included since certain of
the obligations which the Funds are authorized to purchase have characteristics
of commercial paper and have been rated as such by Moody's and S&P.
MOODY'S RATINGS
Corporate and Municipal Bonds
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Short-Term Municipal Notes
The two highest ratings of Moody's for short-term municipal notes are MIG-1 and
MIG-2: MIG-1 denotes "best quality, enjoying strong protection from established
cash flows;" MIG-2 denotes "high quality," with margins of protection ample
although not so large as in the preceding group.
Commercial Paper
The rating P-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
Issuers rated Prime-1 are judged to be of the best quality. Their short-term
debt obligations carry the smallest degree of investment risk. Margins of
support for current indebtedness are large or stable with cash flow and asset
protection well assured. Current liquidity provides ample coverage of near-term
liabilities and unused alternative financing arrangements are generally
available. While protective elements may change over the intermediate or long
term, such changes are most unlikely to impair the fundamentally strong position
of short-term obligations.
S&P RATINGS
Corporate and Municipal Bonds
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA -- Bonds rated AA also qualify as high quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
Short-Term Municipal Notes
S&P does not rate short-term municipal notes as such.
Commercial Paper
Commercial paper rated A-1 by S&P has the following characteristics: Liquidity
ratios are adequate to meet cash requirements. Long-term senior debt is rated
"A" or better. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance
made for unusual circumstances. Typically, the issuer's industry is well
established and the issuer has a strong position within the industry. The
reliability and quality of management are unquestioned. Commercial paper within
the A-1 category which has overwhelming safety characteristics is denoted
"A-1+."
<PAGE>
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APPENDIX D
- --------------------------------------------------------------------------------
MEDIA THAT MAY BE REFERRED TO IN FUND ADVERTISEMENTS OR
SALES LITERATURE
ABC and affiliates
Adam Smith's Money World
America Online
Anchorage Daily News
Atlanta Constitution
Atlanta Journal
Arizona Republic
Austin American Statesman
Baltimore Sun
Bank Investment Marketing
Barron's
Bergen County Record (NJ)
Bloomberg Business News
B'nai B'rith Jewish Monthly
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
Cincinnati Post
CNBC
CNN
Columbus Dispatch
CompuServe
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghues Money Fund Report
Dorfman, Dan (syndicated column)
Dow Jones News Service
Economist
FACS of the Week
Financial News Network
Financial Planning
Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World
Fitch Insights
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Fund Decoder
Global Finance
(the) Guarantor
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Individual Investor
Institutional Investor
International Herald Tribune
Internet
Investment Advisor
Investment Company Institute
Investment Dealers Digest
Investment Profiles
Investment Vision
Investor's Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas City)
KOA-AM (Denver)
Los Angeles Times
Leckey, Andrew (syndicated column)
Lear's
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
Mutual Funds Magazine
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UPI
US News and World Report
USA Today
USA TV Network
Value Line
Wall St. Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
WEEI
WHDH
Worcester Telegram
World Wide Web
Worth Magazine
WRKO
<PAGE>
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APPENDIX E
- --------------------------------------------------------------------------------
ADVERTISING AND PROMOTIONAL LITERATURE
References may be included in New England Funds' advertising and
promotional literature to Nvest Companies and to its affiliates that perform
advisory and subadvisory functions for New England Funds including, but not
limited to: Back Bay Advisors, L.P., Harris Associates, L.P., Loomis, Sayles &
Company, L.P., Capital Growth Management Limited Partnership, Westpeak
Investment Advisors, L.P. and Jurika & Voyles, L.P. Reference also may be made
to the Funds of their respective fund groups, namely, the Loomis Sayles Funds
and the Oakmark Funds advised by Harris Associates, L.P.
References may be included in New England Funds' advertising and
promotional literature to other Nvest Companies affiliates including, but not
limited to Nvest Corporation, AEW Capital Management, L.P., Marlborough Capital
Advisors, L.P., Reich & Tang Capital Management, Reich and Tang Mutual Funds
Group and Jurika & Voyles, L.P. and their fund groups.
References to subadvisers unaffiliated with Nvest Companies that
perform subadvisory functions on behalf of New England Funds and advisory
functions for their respective fund groups may be contained in New England
Funds' advertising and promotional literature including, but not limited to,
Janus Capital Corporation, Founders Asset Management, LLC, Montgomery Asset
Management, LLC and RS Investment Management, L.P.
New England Funds' advertising and promotional material will include,
but is not limited to, discussions of the following information about both
affiliated and unaffiliated entities:
|X| Specific and general assessments and forecasts regarding U.S. and world
economies, and the economies of specific nations and their impact on the New
England Funds;
|X| Specific and general investment emphasis, specialties, fields of expertise,
competencies, operations and functions;
|X| Specific and general investment philosophies, strategies, processes,
techniques and types of analysis;
|X| Specific and general sources of information, economic models, forecasts and
data services utilized, consulted or considered in the course of providing
advisory or other services;
|X| The corporate histories, founding dates and names of founders of the
entities;
|X| Awards, honors and recognition given to the entities;
|X| The names of those with ownership interest and the percentage of ownership
interest;
|X| The industries and sectors from which clients are drawn and specific client
names and background information on current individual, corporate and
institutional clients, including pension and profit sharing plans;
|X| Current capitalizations, levels of profitability and other financial and
statistical information;
|X| Identification of portfolio managers, researchers, economists, principals
and other staff members and employees;
|X| The specific credentials of the above individuals, including, but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors;
|X| Specific and general reference to past and present notable and renowned
individuals including reference to their field of expertise and/or specific
accomplishments;
|X| Current and historical statistics regarding:
-total dollar amount of assets managed
-New England Funds' assets managed in total and by fund
-the growth of assets
-asset types managed
-numbers of principal parties and employees, and the length of their
tenure, including officers, portfolio managers, researchers, economists,
technicians and support staff
-the above individuals' total and average number of years of industry
experience and the total and average length of their service to the
adviser or subadviser;
|X| The general and specific strategies applied by the subadvisers in the
management of New England Funds portfolios including, but not limited to:
-the pursuit of growth, value, income oriented, risk management or other
strategies
-the manner and degree to which the strategy is pursued
-whether the strategy is conservative, moderate or extreme and an
explanation of other features and attributes
-the types and characteristics of investments sought and specific
portfolio holdings
-the actual or potential impact and result from strategy implementation
-through its own areas of expertise and operations, the value added by
sub-advisers to the management process
-the disciplines it employs, e.g., in the case of Loomis, Sayles &
Company, L.P., the strict buy/sell guidelines and focus on sound value it
employs, and goals and benchmarks that it establishes in management,
e.g., Capital Growth Management Limited Partnership pursues growth 50%
above the S&P 500
-the systems utilized in management, the features and characteristics of
those systems and the intended results from such computer analysis, e.g.,
Westpeak Investment Advisors, L.P.'s efforts to identify overvalued and
undervalued issues; and
|X| Specific and general references to portfolio managers and funds that they
serve as portfolio manager of, other than New England Funds, and those
families of funds, other than New England Funds. Any such references will
indicate that New England Funds and the other funds of the managers differ
as to performance, objectives, investment restrictions and limitations,
portfolio composition, asset size and other characteristics, including fees
and expenses. References may also be made to industry rankings and ratings
of the Funds and other funds managed by the Funds' advisers and subadvisers,
including, but not limited to, those provided by Morningstar, Lipper, Inc.,
Forbes and Worth.
In addition, communications and materials developed by New England
Funds will make reference to the following information about Nvest Companies and
its affiliates:
Nvest Companies is part of an affiliated group including Nvest, L.P. a
publicly traded company listed on the NYSE. Nvest Companies has 14 principal
subsidiary or affiliated asset management firms, which collectively had more
than $136 billion of assets under management as of June 30, 1999. In addition,
promotional materials may include:
|X| Specific and general references to New England Funds multi-manager approach
through Nvest Companies' affiliates and outside firms including, but not
limited to, the following:
-that each adviser/manager operates independently on a day-to-day basis
and maintains an image and identity separate from Nvest Companies and the
other investment managers
-other fund companies are limited to a "one size fits all" approach but
New England Funds draws upon the talents of multiple managers whose
expertise best matches the fund objective
-in this and other contexts reference may be made to New England Funds'
slogan "Where The Best Minds Meet"(R) and that New England Funds' ability
to match the talent to the task is one more reason it is becoming known
as "Where The Best Minds Meet."
Financial Adviser Services ("FAS"), a division of Nvest Companies, may
be referenced in Fund advertising and promotional literature concerning the
marketing services it provides to Nvest Companies affiliated fund groups
including: New England Funds, Loomis Sayles Funds, Oakmark Funds and Reich &
Tang Funds.
FAS will provide marketing support to Nvest Companies affiliated fund
groups targeting financial advisers, financial intermediaries and institutional
clients who may transact purchases and other fund-related business directly with
these fund groups. Communications will contain information including, but not
limited to: descriptions of clients and the marketplaces to which it directs its
efforts; the mission and goals of FAS and the types of services it provides
which may include: seminars; its 1-800 number, Web site, Internet or other
electronic facilities; qualitative information about the funds' investment
methodologies; information about specific strategies and management techniques;
performance data and features of the funds; institutional oriented research and
portfolio manager insight and commentary. Additional information contained in
advertising and promotional literature may include: rankings and ratings of the
funds including, but not limited to, those of Morningstar and Lipper, Inc.;
statistics about the advisers', fund groups' or a specific fund's assets under
management; the histories of the advisers and biographical references to
portfolio managers and other staff including, but not limited to, background,
credentials, honors, awards and recognition received by the advisers and their
personnel; and commentary about the advisers, their funds and their personnel
from third-party sources including newspapers, magazines, periodicals, radio,
television or other electronic media.
References may be included in New England Funds' advertising and
promotional literature about its 401(k) and retirement plans. The information
may include, but is not limited to:
|X| Specific and general references to industry statistics regarding 401(k) and
retirement plans including historical information, industry trends and
forecasts regarding the growth of assets, numbers of plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms including, but not limited to, DC Xchange,
William Mercer and other organizations involved in 401(k) and retirement
programs with whom New England Funds may or may not have a relationship.
|X| Specific and general references to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the New England Funds
as a 401(k) or retirement plan funding vehicle produced by, including, but
not limited to, Access Research, Dalbar, Investment Company Institute and
other industry authorities, research organizations and publications.
|X| Specific and general discussion of economic, legislative, and other
environmental factors affecting 401(k) and retirement plans, including, but
not limited to, statistics, detailed explanations or broad summaries of:
-past, present and prospective tax regulation, Internal Revenue Service
requirements and rules, including, but not limited to, reporting
standards, minimum distribution notices, Form 5500, Form 1099R and other
relevant forms and documents, Department of Labor rules and standards and
other regulations. This includes past, current and future initiatives,
interpretive releases and positions of regulatory authorities about the
past, current or future eligibility, availability, operations,
administration, structure, features, provisions or benefits of 401(k) and
retirement plans;
-information about the history, status and future trends of Social
Security and similar government benefit programs including, but not
limited to, eligibility and participation, availability, operations and
administration, structure and design, features, provisions, benefits and
costs; and
-current and prospective ERISA regulation and requirements.
|X| Specific and general discussion of the benefits of 401(k) investment and
retirement plans, and, in particular, the New England Funds 401(k) and
retirement plans, to the participant and plan sponsor, including
explanations, statistics and other data, about:
-increased employee retention
-reinforcement or creation of morale
-deductibility of contributions for participants
-deductibility of expenses for employers
-tax deferred growth, including illustrations and charts
-loan features and exchanges among accounts
-educational services materials and efforts, including, but not limited
to, videos, slides, presentation materials, brochures, an investment
calculator, payroll stuffers, quarterly publications, releases and
information on a periodic basis and the availability of wholesalers and
other personnel.
|X| Specific and general reference to the benefits of investing in mutual funds
for 401(k) and retirement plans, and, in particular, New England Funds and
investing in its 401(k) and retirement plans, including, but not limited
to:
-the significant economies of scale experienced by mutual fund companies
in the 401(k) and retirement benefits arena
-broad choice of investment options and competitive fees
-plan sponsor and participant statements and notices
-the plan prototype, summary descriptions and board resolutions
-plan design and customized proposals
-Trusteeship, record keeping and administration
-the services of State Street Bank, including, but not limited to, Trustee
services and tax reporting
-the services of DST and BFDS, including, but not limited to, mutual fund
processing support, participant 800 numbers and participant 401(k)
statements
-the services of Trust Consultants Inc., including, but not limited to,
sales support, plan record keeping, document service support, plan
sponsor support, compliance testing and Form 5500 preparation.
|X| Specific and general reference to the role of the investment dealer and the
benefits and features of working with a financial professional including:
-access to expertise on investments
-assistance in interpreting past, present and future market trends and
economic events
-providing information to clients including participants during enrollment
and on an ongoing basis after participation
-promoting and understanding the benefits of investing, including mutual
fund diversification and professional management.
<PAGE>
- --------------------------------------------------------------------------------
ANNUAL REPORT AND PROSPECTUS
- --------------------------------------------------------------------------------
[Logo](R)
New England Funds(R)
Where The Best Minds Meet(R)
- --------------------------------------------------------------------------------
New England
Money Market Funds
[Graphic Omitted]
WHERE
THE BEST
MINDS
MEET(R)
- -------------------------------
Annual Report -- June 30, 1999
Prospectus -- September 1, 1999
- -------------------------------
<PAGE>
- --------------------------------------------------------------------------------
NEW ENGLAND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
AUGUST 1999
- --------------------------------------------------------------------------------
[Photo of Bruce R. Speca]
"Most investment
professionals
I know agree that proper
asset allocation
is a bedrock principle
of sound investing."
Dear Shareholder,
Performance results for the New England Family of Funds were driven mainly by
two important changes that took place in our financial markets during the first
half of 1999. First, the long, upward climb of large-capitalization stocks
slowed dramatically as attention turned to stocks with more reasonable
valuations. Then, bond investors grew fearful that our persistently strong
economy would lead the Federal Reserve Board to impose higher interest rates.
Your managers' commentary on the following pages details how these trends
affected your fund's strategy and performance.
As I watch investments come in and out of favor, I'm reminded of the importance
of asset allocation - the practice of dividing your portfolio among different
kinds of stocks and bonds. The idea is to own more or less of each investment
type according to your feelings about risk and your investment time horizon.
Most investment professionals I know agree that proper asset allocation is a
bedrock principle of sound investing. In addition to broadening diversification,
it seeks to avoid exposure to narrow market segments and can help reduce
volatility.
While a diversified portfolio may have given solid returns during the past year,
many investors were disappointed when they compared those returns to the
performance of large-company growth stocks or to the soaring returns of Internet
stocks. Suddenly, investors were asking: Is asset allocation dead?
Certainly not! Like so much in life, market cycles are inevitable. Different
categories of investments will be popular at different times, and a sensible
asset allocation program can help you as market trends change.
I know it can be tempting to jump on a bandwagon and go after "easy money." But
I encourage you, instead, to maintain a rational, long-term perspective and to
consult your financial representative regularly to review and fine-tune your
investments, including a well-diversified asset allocation program.
Thank you for your continued interest. We look forward to helping you achieve
your long-term financial objectives.
Sincerely,
/s/ Bruce R. Speca
Bruce R. Speca
President and CEO
- --------------------------------------------------------------------------------
INVESTMENT IN THE FUNDS IS NOT FDIC INSURED NOR GUARANTEED BY A BANK
AND MAY LOSE VALUE
- --------------------------------------------------------------------------------
Annual Report
<PAGE>
- --------------------------------------------------------------------------------
NEW ENGLAND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
ANNUALIZED SEVEN-DAY YIELDS -- 6/30/99
CLASS A, B & C CLASS Y
NEW ENGLAND CASH MANAGEMENT TRUST-- MONEY MARKET SERIES 4.3% 4.2%
CLASS A & B
New England Tax Exempt Money Market Trust 2.9%
- --------------------------------------------------------------------------------
Yields will fluctuate with changes in market conditions.
The seven-day money market yield reflects the Funds' current earnings more
closely than total return.
Average Annual Total Returns -- 6/30/99
New England Cash Management Trust -- Money Market Series
- --------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS 10 YEARS
Net Asset Value(1) 4.6% 4.8% 4.9%
- --------------------------------------------------------------------------------
CLASS B (Inception 9/13/93) 1 YEAR 5 YEARS SINCE INCEPTION
Net Asset Value(1) 4.6% 4.8% 4.5%
- --------------------------------------------------------------------------------
CLASS C (Inception 3/1/98) 1 YEAR SINCE INCEPTION
Net Asset Value(1) 4.6% 4.7%
- --------------------------------------------------------------------------------
CLASS Y (Inception 2/27/98) 1 YEAR SINCE INCEPTION
Net Asset Value(1) 4.6% 4.7%
- --------------------------------------------------------------------------------
New England Tax Exempt Money Market Trust
- --------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS 10 YEARS
Net Asset Value(1) 2.8% 3.2% 3.4%
- --------------------------------------------------------------------------------
CLASS B (Inception 9/13/93) 1 YEAR 5 YEARS SINCE INCEPTION
Net Asset Value(1) 2.8% 3.2% 3.0%
- --------------------------------------------------------------------------------
(1) These returns include reinvestment of distributions, represent past
performance and do not predict future results. Class Y shares are only
available to certain institutional investors.
<PAGE>
- --------------------------------------------------------------------------------
NEW ENGLAND MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
YOUR PORTFOLIO MANAGERS' 12-MONTH SUMMARY
- --------------------------------------------------------------------------------
During the last six months of 1998, the investment environment was a volatile
though positive one for short-term securities. Investors' sentiment shifted
quickly from an expectation that the Federal Reserve Board would raise interest
rates to curb inflation to a fear that a credit crunch would cripple world
financial markets. Financial problems in Russia and other emerging markets
started this swing. Confronted by moderating strength in the U.S. economy, the
Fed calmed the financial markets by lowering short-term interest rates three
times in the fall of 1998. By doing so, the Fed helped to keep the U.S. economy
on track and help spark growth in other economies around the world.
In the first half of 1999, economic growth started to rekindle in many areas of
the world, helped by interest-rate cuts implemented by most major central banks.
In addition, the U.S. economy sustained its strong growth tendencies of the past
year. U.S. consumer confidence was high due to strong job and income growth.
Retail demand for homes, home furnishings, automobiles and electronics was high.
At the same time, strong productivity gains helped keep consumer price inflation
restrained.
More recently, however, signs of possible inflation problems began to appear. As
a result, the Federal Reserve Board changed from a neutral stance toward
interest rates to one leaning toward a short-term interest rate hike, in order
to slow growth and head off inflation. The Fed followed through with an increase
in a key short-term interest rate at the end of June.
QUESTIONS & ANSWERS WITH YOUR PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
[Photo of Scott Nicholson]
Scott Nicholson
Back Bay Advisors, L.P.
NEW ENGLAND CASH MANAGEMENT TRUST
Q. How did New England Cash Management Trust perform during its fiscal year,
which ended June 30, 1999?
New England Cash Management Trust maintained a constant $1.00(1) share price
throughout the period and was able to provide a total return of 4.6% (Class A
shares calculated at NAV) for the 12 months ending June 30, 1999. The Fund's
return included the reinvestment of $0.0445 per share in income distributions.
As of June 30, 1999, the New England Cash Management Trust's seven-day yield was
4.3%.
Q. What strategies were used in managing the fund?
For most of the period, the Fund invested in securities with longer maturities
to benefit from the attractive yield advantage they offered versus shorter-term
alternatives. The Fund's average maturity remained in the 75- to 80-day range
for most of the period. In the second quarter of 1999, with the Fed changing to
a "tightening bias" -- an inclination to increase rates in order to dampen
economic growth and prevent inflation -- that strategy started to change. The
Fund will look to shorten its average maturity, allowing it to more quickly
reinvest in issues coming due at higher rates.
Q. What is your outlook for the next six months?
We are watching the Federal Reserve Board closely, keeping our strategy flexible
until we get a clearer sense of which way short-term rates are heading. Until
the Fed decides its course -- after having implemented one rate hike at the end
of June -- we plan to pursue an investment strategy that will keep the Fund
nimble, so that it can respond to events as they develop.
(1) An investment in the Fund is not guaranteed by the FDIC or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in
the Fund.
The opinions expressed are those of the portfolio manager and are subject
to change. The occurence of forecasted events and predictions is not certain
and cannot be assured.
PORTFOLIO COMPOSITION AS OF 6/30/99
Commercial Paper 80.2%
Certificates of Deposit 17.9%
Eurodollar Certificates of Deposit 1.0%
Bank Note and Other 0.9%
<PAGE>
- --------------------------------------------------------------------------------
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
[Photo of John Maloney]
John Maloney
Back Bay Advisors, L.P.
Q. How did New England Tax Exempt Money Market Trust perform during its fiscal
year, which ended June 30, 1999?
maintained its $1.00(1) share price throughout the period and was able to
provide a total return of 2.8% (calculated at NAV) for the 12 months ending June
30, 1999. The Fund's return included the reinvestment of $0.0276 per share in
income distributions. As of June 30, 1999, the Fund's seven-day yield was 2.9%,
which translates into a taxable equivalent yield of 4.7% for investors in the
highest federal tax bracket of 39.6%.(2)
Q. What strategies did you use in managing the Fund?
The Fund focused on the seasonal factors that have been characteristic of the
short-term tax-exempt market. Heavy supply came to market in June; June 30 is
the fiscal year-end of many municipalities. The added supply nudged short-term
rates higher. Therefore, at the beginning of the fiscal year in July 1998, we
lengthened the Fund's maturity to lock in higher yields for the greatest period
of time.
As the end of 1998 approached, interest rates on short-term, variable-rate
securities experienced an upswing in yield. In order to take advantage of this
opportunity, we shortened the Fund's average maturity from 68 days at the
beginning of October and to 45 days at the end of December, by focusing 73% of
its assets in variable-rate securities by December 31, 1998. The Fund maintained
a neutral position in April and May 1999, a period when the Fund typically
experiences withdrawals as investors pay their taxes.
Q. How will you position the Fund going forward?
June, as usual, has proven to be the heaviest month for note issuance; it should
therefore be the cheapest time to buy one-year notes. As such, the Fund has been
adding to its note position during this time. We anticipate the usual run of
events in the short-term tax-exempt market going forward, and will keep an eye
on both these supply/demand issues as well as what course Federal Reserve Board
interest-rate policy will take after the Board's late June rate increase.
(1) An investment in the Fund is not insured or guaranteed by the FDIC or any
other government agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
(2) A portion of income may be subject to state, federal and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax.
The opinions expressed are those of the portfolio manager and are subject to
change. The occurrence of forecasted events and predictions is not certain and
cannot be assured.
<PAGE>
- --------------------------------------------------------------------------------
CASH MANAGEMENT TRUST MONEY MARKET SERIES
- --------------------------------------------------------------------------------
Investments as of June 30, 1999
INVESTMENTS -- 100.3% OF TOTAL NET ASSETS
PRINCIPAL
AMOUNT DESCRIPTION VALUE (A)
- --------------------------------------------------------------------------------
BANK NOTE -- 1.2%
$10,000,000 Travelers Insurance Co., 4.930%, 9/01/1999 (b) .... $ 10,000,000
------------
Total Bank Note (Cost $10,000,000) ................ 10,000,000
------------
CERTIFICATES OF DEPOSIT -- 17.9%
5,000,000 Toronto Dominion, 5.640%, 7/08/1999 ............... 5,000,494
5,000,000 Royal Bank of Canada, 5.650%, 7/12/1999 ........... 5,000,862
3,000,000 Bank of Nova Scotia, 5.680%, 8/03/1999 ............ 3,001,606
5,000,000 Deutsche Bank AG New York, 4.900%, 8/18/1999 ...... 4,999,934
5,000,000 State Street Bank & Trust Co., 4.950%, 9/07/1999 .. 5,000,000
8,000,000 Toronto Dominion, 4.990%, 1/07/2000 ............... 7,998,795
17,000,000 Commerzbank AG New York, 5.010%, 1/10/2000 ........ 16,996,202
6,000,000 Canadian Imperial, 5.000%, 1/27/2000 .............. 5,997,337
8,000,000 Canadian Imperial, 5.010%, 2/07/2000 .............. 7,998,132
18,000,000 Deutsche Bank AG New York, 5.050%, 2/09/2000 ...... 17,986,456
10,000,000 Toronto Dominion, 5.050%, 2/14/2000 ............... 9,984,042
3,000,000 Commerzbank AG New York, 5.085%, 2/16/2000 ........ 2,999,362
10,000,000 Rabobank Nederland NV, 5.125%, 2/18/2000 .......... 9,999,514
2,000,000 Toronto Dominion, 5.270%, 3/02/2000 ............... 1,998,544
8,000,000 Canadian Imperial, 5.270%, 3/03/2000 .............. 8,002,852
10,000,000 Bank of Montreal Chicago, 5.170%, 3/15/2000 ....... 9,997,958
10,000,000 Societe Generale, 5.200%, 3/15/2000 ............... 10,000,002
1,000,000 Commerzbank AG New York, 5.230%, 5/11/2000 ........ 999,821
5,000,000 Bank of Montreal Chicago, 5.200%, 5/12/2000 ....... 4,997,917
6,000,000 Commerzbank AG New York, 5.295%, 5/19/2000 ........ 5,997,192
------------
Total Certificates of Deposit (Cost $144,957,022) . 144,957,022
------------
CERTIFICATES OF DEPOSIT (EURODOLLARS) -- 1.0%
8,000,000 Bank of Nova Scotia, 5.060%, 9/08/1999 ............ 8,001,461
------------
Total Certificates of Deposit (Eurodollars)
(Cost $8,001,461) ............................... 8,001,461
------------
COMMERCIAL PAPER -- 80.2%
AGRICULTURE -- 4.9%
5,000,000 Monsanto Co., 4.870%, 7/12/1999 ................... 4,992,560
2,400,000 Monsanto Co., 5.020%, 7/23/1999 ................... 2,392,637
3,076,000 Monsanto Co., 5.000%, 8/19/1999 ................... 3,055,066
7,500,000 Monsanto Co., 4.800%, 9/14/1999 ................... 7,425,000
6,000,000 Monsanto Co., 5.100%, 10/05/1999 .................. 5,918,400
8,500,000 Monsanto Co., 5.000%, 10/06/1999 .................. 8,385,486
7,415,000 Monsanto Co., 4.830%, 10/08/1999 .................. 7,316,510
------------
39,485,659
------------
AIRLINES -- 0.6%
5,000,000 International Lease Finance Corp.,
4.800%, 8/11/1999 ............................... 4,972,667
------------
ASSET BACKED -- 4.5%
2,000,000 Clipper Receivables Corp., 5.900%, 7/01/1999 ...... 2,000,000
10,000,000 Clipper Receivables Corp., 4.820%, 7/08/1999 ...... 9,990,628
10,000,000 Clipper Receivables Corp., 4.980%, 7/14/1999 ...... 9,982,017
5,000,000 Clipper Receivables Corp., 5.000%, 7/16/1999 ...... 4,989,583
10,000,000 Clipper Receivables Corp., 5.060%, 8/23/1999 ...... 9,925,505
------------
36,887,733
------------
AUTOMOTIVE -- 12.8%
5,000,000 Ford Motor Credit Co., 4.800%, 7/09/1999 .......... 4,994,667
10,000,000 General Motors Acceptance Corp., 4.800%, 7/09/1999. 9,989,333
7,500,000 General Motors Acceptance Corp., 4.800%, 7/13/1999. 7,488,000
5,000,000 General Motors Acceptance Corp., 4.810%, 7/14/1999. 4,991,315
5,000,000 Chevron USA, Inc., 5.010%, 7/16/1999 .............. 4,989,563
15,000,000 American Honda Finance, 4.850%, 7/19/1999 ......... 14,963,625
3,243,000 American Honda Finance, 4.900%, 7/19/1999 ......... 3,235,055
5,000,000 American Honda Finance, 5.000%, 8/03/1999 ......... 4,977,083
10,000,000 Ford Motor Credit Co., 4.950%, 8/19/1999 .......... 9,932,625
17,000,000 Ford Motor Credit Co., 4.920%, 8/20/1999 .......... 16,883,833
3,000,000 Ford Motor Credit Co., 4.740%, 9/27/1999 .......... 2,965,240
2,700,000 Ford Motor Credit Co., 5.060%, 10/05/1999 ......... 2,663,568
6,000,000 General Motors Acceptance Corp., 5.190%, 10/12/1999 5,910,905
10,000,000 General Motors Acceptance Corp., 5.220%, 1/28/2000 9,694,050
------------
103,678,862
------------
BANKS -- 15.3%
4,000,000 UBS Finance Delaware, Inc., 5.625%, 7/01/1999 ..... 4,000,000
10,000,000 Lloyds Bank plc, 4.800%, 7/07/1999 ................ 9,992,000
3,600,000 Svenska Handelsbanken, 5.380%, 7/12/1999 .......... 3,594,082
3,000,000 UBS Finance Delaware, Inc., 4.940%, 7/12/1999 ..... 2,995,472
7,000,000 Wells Fargo & Co., 4.810%, 7/15/1999 .............. 6,986,906
10,000,000 Wells Fargo & Co., 4.860%, 8/03/1999 .............. 9,955,450
9,000,000 Deutsche Bank Finance, 4.820%, 8/09/1999 .......... 8,953,005
2,000,000 Wells Fargo & Co., 4.820%, 8/09/1999 .............. 1,989,557
7,000,000 Wells Fargo & Co., 5.010%, 8/10/1999 .............. 6,961,033
10,000,000 Wells Fargo & Co., 5.040%, 9/01/1999 .............. 9,913,200
21,000,000 Bank of Nova Scotia, 4.950%, 9/03/1999 ............ 20,815,200
1,000,000 Wells Fargo & Co., 5.040%, 9/07/1999 .............. 990,480
8,000,000 Societe Generale Canada, 4.880%, 9/13/1999 ........ 7,919,751
5,000,000 Lloyds Bank plc, 4.800%, 10/04/1999 ............... 4,936,667
15,000,000 UBS Finance Delaware, Inc., 4.920%, 10/12/1999 .... 14,788,850
10,000,000 Svenska Handelsbanken, 4.860%, 12/20/1999 ......... 9,767,800
------------
124,559,453
------------
DIVERSIFIED CONGLOMERATES -- 3.3%
12,000,000 USAA Capital Corp., 4.780%, 7/13/1999 ............. 11,980,880
15,000,000 USAA Capital Corp., 4.850%, 8/17/1999 ............. 14,905,021
------------
26,885,901
------------
FINANCE -- 19.4%
10,000,000 American Express, 5.200%, 7/01/1999 ............... 10,000,000
10,000,000 American Express, 4.800%, 7/06/1999 ............... 9,993,333
5,000,000 Transamerica Financial Group, 4.820%, 7/07/1999 ... 4,995,983
5,000,000 CIT Group Holdings, 4.800%, 7/12/1999 ............. 4,992,667
3,000,000 American Express, 4.800%, 7/14/1999 ............... 2,994,800
5,000,000 General Electric Capital Corp., 4.780%, 7/16/1999 . 4,990,042
8,750,000 Transamerica Financial Group, 4.840%, 7/20/1999 ... 8,727,649
10,000,000 Commercial Credit Co., 4.950%, 7/21/1999 .......... 9,972,500
10,000,000 Commercial Credit Co., 4.950%, 7/22/1999 .......... 9,971,125
2,200,000 Transamerica Financial Group, 4.800%, 7/23/1999 ... 2,193,547
10,000,000 Transamerica Financial Group, 4.840%, 7/26/1999 ... 9,966,389
5,000,000 General Electric Capital Corp., 4.840%, 8/09/1999 . 4,973,783
14,000,000 Household Finance Corp., 5.030%, 8/13/1999 ........ 13,915,887
10,000,000 Associates Corp of N.A., 4.990%, 8/16/1999 ........ 9,936,239
5,000,000 Associates Corp of N.A., 4.830%, 8/23/1999 ........ 4,964,446
2,091,000 Transamerica Financial Group, 4.940%, 9/01/1999 ... 2,073,210
10,000,000 Household Finance Corp., 5.040%, 9/08/1999 ........ 9,903,400
10,000,000 Transamerica Financial Group, 5.040%, 9/17/1999 ... 9,890,800
5,000,000 General Electric Capital Corp., 4.830%, 9/30/1999 . 4,938,954
8,000,000 General Electric Capital Corp., 5.130%, 10/04/1999 7,891,700
10,000,000 General Electric Capital Corp., 5.000%, 10/07/1999 9,863,889
------------
157,150,343
------------
INSURANCE -- 3.1%
6,000,000 Prudential Funding Corp., 4.980%, 7/21/1999 ....... 5,983,400
2,500,000 Prudential Funding Corp., 5.000%, 8/04/1999 ....... 2,488,194
14,000,000 Prudential Funding Corp., 4.950%, 8/24/1999 ....... 13,896,050
3,000,000 Prudential Funding Corp., 5.040%, 8/31/1999 ....... 2,974,380
------------
25,342,024
------------
PHARMACEUTICAL -- 1.0%
8,000,000 American Home Products Corp., 4.870%, 8/05/1999 ... 7,962,122
------------
RETAIL -- 3.6%
4,500,000 Sears Roebuck Acceptance Corp., 4.850%, 7/14/1999 . 4,492,119
10,000,000 Sears Roebuck Acceptance Corp., 4.900%, 7/20/1999 . 9,974,139
10,000,000 Sears Roebuck Acceptance Corp., 5.000%, 7/23/1999 . 9,969,444
5,000,000 Sears Roebuck Acceptance Corp., 4.900%, 7/27/1999 . 4,982,306
------------
29,418,008
------------
SECURITIES -- 10.2%
10,000,000 Merrill Lynch & Co., 4.810%, 7/06/1999 9,993,320
2,000,000 Merrill Lynch & Co., 5.270%, 7/06/1999 1,998,536
10,000,000 Merrill Lynch & Co., 4.810%, 7/15/1999 ............ 9,981,294
1,500,000 Merrill Lynch & Co., 5.120%, 7/30/1999 ............ 1,493,813
10,000,000 Goldman Sachs Group, 4.810%, 9/01/1999 ............ 9,917,161
5,000,000 J.P. Morgan, 4.900%, 9/15/1999 .................... 4,948,278
6,000,000 Goldman Sachs Group, 4.840%, 9/16/1999 ............ 5,937,887
8,000,000 J.P. Morgan, 5.150%, 9/22/1999 .................... 7,905,011
4,000,000 Goldman Sachs Group, 4.910%, 10/01/1999 ........... 3,949,809
5,000,000 Goldman Sachs Group, 4.920%, 10/01/1999 ........... 4,937,133
7,000,000 J.P. Morgan, 4.820%, 10/04/1999 ................... 6,910,964
10,000,000 J.P. Morgan, 4.970%, 10/06/1999 ................... 9,866,086
5,000,000 Merrill Lynch & Co., 5.060%, 2/01/2000 ............ 4,848,903
------------
82,688,195
------------
TRUCKING & FREIGHT FORWARDING -- 1.5%
12,000,000 Paccar Financial Corp., 5.600%, 7/01/1999 ......... 12,000,000
------------
Total Commercial Paper (Cost $651,030,967) ........ 651,030,967
------------
Total Investments -- 100.3%
(Identified Cost $813,989,450)(c) ............... 813,989,450
Other assets less liabilities ..................... (2,125,907)
------------
Total Net Assets -- 100% .......................... $811,863,543
============
(a) See Note 1a of Notes to Financial Statements.
(b) Variable rate interest certificates are instruments whose interest rates
vary with changes in a designated base rate on a specific date. This
certificate resets interest daily based on the prime interest rate. The
maturity date shown is the next interest reset date.
(c) The aggregate cost for federal income tax purposes was $813,989,450.
Percentage of net assets invested in obligations of foreign banks or foreign
branches of U.S. banks at June 30, 1999:
Canada 13.14%
Switzerland 2.67
England 1.84
Germany 7.26
Sweden 1.65
France 1.23
Netherlands 1.23
See accompanying notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
TAX EXEMPT MONEY MARKET TRUST
- -------------------------------------------------------------------------------
Investments as of June 30, 1999
INVESTMENTS -- 103.0% OF TOTAL NET ASSETS
PRINCIPAL
AMOUNT DESCRIPTION VALUE (A)
- -------------------------------------------------------------------------------
ALABAMA -- 5.8%
$1,500,000 Alabama State Docks Department Facilities
Revenue, 5.250%, 10/01/1999 .................... $ 1,506,622
3,400,000 Athens Industrial Development Board Revenue,
4.550%, (b) .................................... 3,400,000
------------
4,906,622
------------
ALASKA -- 3.4%
2,400,000 North Slope Borough, 4.600%, 1/01/2000 ............ 2,417,714
500,000 Matanuska Susitna Borough, 4.000%, 3/01/2000 ...... 501,283
------------
2,918,997
------------
ARIZONA -- 2.4%
1,000,000 Meza Industrial Development Authority
Revenue, 4.000%, 1/01/2000 ...................... 1,004,430
1,000,000 Tempe Excise Tax Revenue, 3.750%, 7/01/2000 ..... 1,003,641
------------
2,008,071
------------
CALIFORNIA -- 0.5%
400,000 Los Angeles Regional Airport Lease, 3.850%, (b) ... 400,000
------------
DELAWARE -- 0.6%
500,000 Delaware State, 5.800%, 8/15/1999 ................. 501,443
------------
DISTRICT OF COLUMBIA -- 3.0%
400,000 District of Columbia, 7.250%, 6/01/2000 ........... 421,165
2,100,000 District of Columbia, 3.700%, (b) ................. 2,100,000
------------
2,521,165
------------
FLORIDA -- 3.7%
300,000 Florida State Board of Regents University
Improvement, 5.000%, 7/01/2000 .................. 304,671
400,000 Orlando & Orange County Expressway,
7.000%, 7/01/2000 ............................... 421,962
1,000,000 Collier County Industrial Development Authority,
3.750%, (b) .................................... 1,000,000
100,000 University Athletic Association, Inc., 3.600%, (b) 100,000
1,300,000 Dade County Special Obligation, 4.600%, (b) (e) ... 1,300,000
------------
3,126,633
------------
HAWAII -- 1.2%
1,000,000 Honolulu City & County, 5.100%, 1/01/2000 ......... 1,009,346
------------
ILLINOIS -- 9.8%
1,000,000 Chicago, 2.850%, 10/28/1999 ....................... 1,000,000
500,000 Illinois State, 4.250%, 6/01/2000 ................. 504,017
3,300,000 McCook Revenue, 3.850%, (b) ....................... 3,300,000
3,500,000 Illinois Educational Facilities Authority
Revenues, 3.300%, (b) ........................... 3,500,000
------------
8,304,017
------------
INDIANA -- 1.6%
1,400,000 Fort Wayne Hospital Authority Revenue, 3.500%, (b) 1,400,000
------------
IOWA -- 8.2%
3,900,000 Iowa Finance Authority Revenue, 3.300%, (b) ....... 3,900,000
3,100,000 West Des Moines Commercial Development,
3.450%, (b) ..................................... 3,100,000
------------
7,000,000
------------
KENTUCKY -- 4.1%
3,500,000 Mayfield Multi City Lease, 3.600%, (b) ............ 3,500,000
------------
LOUISIANA -- 13.7%
1,735,000 Louisiana Public Facilities Authority Hospital,
4.250%, 7/01/1999 ............................... 1,735,000
3,400,000 Caddo Parish Industrial Development Board,
3.550%, (b) ..................................... 3,400,000
3,400,000 Jefferson Parish Hospital, District 1, 3.600%, (b) 3,400,000
3,100,000 Louisiana Public Facilities Authority Hospital,
3.700%, (b) ..................................... 3,100,000
------------
11,635,000
------------
MARYLAND -- 4.5%
500,000 Montgomery County, 6.900%, 4/01/2000 .............. 522,766
3,300,000 Maryland Industrial Development Financing
Authority, 3.400%, (b) .......................... 3,300,000
------------
3,822,766
------------
MASSACHUSETTS -- 1.2%
1,000,000 Massachusetts Bay Transportation Authority,
5.000%, 3/01/2000 ............................... 1,012,891
------------
MICHIGAN -- 3.0%
1,000,000 Detroit City School District, 4.500%, 7/01/1999 ... 1,000,000
510,000 Saginaw Hospital Finance Authority Revenue,
4.000%, 7/01/2000 (d) ........................... 511,459
1,000,000 Detroit Sewage Disposal Revenue, 7.125%, 7/01/1999 1,000,000
------------
2,511,459
------------
MISSOURI -- 1.8%
1,500,000 Missouri State Environment Improvement Energy,
3.100%, 8/23/1999 ............................... 1,500,000
------------
NEBRASKA -- 0.6%
500,000 American Public Energy Agency Gas, 4.000%, 6/01/2000 502,229
------------
NEVADA -- 5.2%
2,480,000 Nevada State, 6.700%, 8/01/1999 ................... 2,536,259
1,000,000 Nevada State, 5.800%, 5/01/2000 ................... 1,020,346
860,000 Las Vegas Convertible & Vis Authority,
4.500%, 7/01/2000 ............................... 867,422
------------
4,424,027
------------
NEW MEXICO -- 1.4%
1,200,000 Farmington Pollution Control Revenue, 3.400%, (b) . 1,200,000
------------
NEW YORK -- 1.2%
900,000 New York State Dormitory Authority Revenues,
4.250%, 7/01/1999 ............................... 900,000
100,000 New York City, 4.000%, (b) ........................ 100,000
------------
1,000,000
------------
NORTH CAROLINA -- 3.0%
725,000 North Carolina Medical Care Commission,
4.000%, 10/01/1999 .............................. 725,979
1,845,000 University of North Carolina at Chapel Hill,
3.550%, (b) ..................................... 1,845,000
------------
2,570,979
------------
OHIO -- 1.8%
1,500,000 Ohio State Public Facilities Commission,
4.500%, 11/01/1999 .............................. 1,505,390
------------
OREGON -- 0.1%
100,000 Portland Pollution Control, 3.850%, (b) ........... 100,000
------------
SOUTH CAROLINA -- 2.9%
2,500,000 Florence County Hospital Revenue, 3.700%, (b) ..... 2,500,000
------------
TENNESSEE -- 5.8%
1,000,000 Chattanooga Health, Educational & Housing,
4.500%, 12/01/1999 .............................. 1,006,166
1,000,000 Memphis, 4.200%, 5/01/2000 ........................ 1,007,705
2,900,000 Metro Government Nashville Electric,
5.200%, 5/15/2000 ............................... 2,946,175
------------
4,960,046
------------
TEXAS -- 5.5%
500,000 Harris County, 7.100%, 8/15/1999 .................. 515,305
500,000 Texas State, 9.000%, 12/01/1999 ................... 511,783
675,000 West Texas Municipal Power Agency Revenue,
4.050%, 2/15/2000 ............................... 678,286
1,200,000 Grapevine Industrial Development Corp. Revenue,
3.850%, (b) ..................................... 1,200,000
1,725,000 Nueces County Health Facilities, 3.550%, (b) ...... 1,725,000
------------
4,630,374
------------
WASHINGTON -- 2.4%
1,000,000 Washington State Public Power Supply,
7.400%, 7/01/1999 ............................... 1,000,000
1,000,000 Clark County Public Utility District,
6.000%, 1/01/2000 ............................... 1,014,556
------------
2,014,556
------------
WISCONSIN -- 4.2%
3,600,000 Wisconsin State Health & Educational Facilities,
3.800%, (b) ..................................... 3,600,000
------------
WYOMING -- 0.4%
300,000 Lincoln County Pollution Control, 3.800%, (b) ..... 300,000
------------
Total Investments -- 103.0% (Identified Cost
$87,386,011) (c) ................................ 87,386,011
------------
Other assets less liabilities ..................... (2,507,231)
------------
Total Net Assets-- 100% ........................... $ 84,878,780
============
(a) See Note 1a of Notes to Financial Statements.
(b) Floating rate notes are instruments whose interest rates vary with changes
in a designated base rate (such as the prime interest rate) on a specific
date (such as a coupon date or interest payment date). These instruments are
payable on demand and are secured by letters of credit or other credit
support agreements from major banks.
(c) The aggregate cost for federal income tax purposes was $87,386,011.
(d) Purchased on a delayed delivery basis. See Note 1d to Financial Statements.
(e) This security is being used to collateralize the delayed delivery purchase
indicated in Note (d) above.
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF ASSETS & LIABILITIES
June 30, 1999
CASH MANAGEMENT
TRUST TAX EXEMPT
MONEY MARKET MONEY MARKET
SERIES TRUST
------------ -----------
ASSETS
Investments at value .......................... $813,989,450 $87,386,011
Cash .......................................... 257,295 250,961
Receivable for:
Shares of the Trust sold .................... 2,846,518 46,022
Interest .................................... 3,262,396 737,282
------------ -----------
820,355,659 88,420,276
LIABILITIES
Payable for:
Securities purchased ........................ -- 2,981,230
Shares of the Trust redeemed ................ 7,841,000 427,531
Dividends declared .......................... 50,877 --
Accrued expenses:
Management fees ............................. 280,272 48,983
Deferred trustees' fees ..................... 75,106 33,973
Accounting and administrative ............... 34,470 5,876
Other expenses .............................. 210,391 43,903
------------ -----------
8,492,116 3,341,496
------------ -----------
NET ASSETS ...................................... $811,863,543 $84,878,780
============ ===========
Net Assets consist of:
Capital paid in Class A shares .............. $635,490,793 $84,568,230
Capital paid in Class B shares .............. 18,968,782 310,550
Capital paid in Class C shares .............. 1,611,570 --
Capital paid in Class Y shares .............. 155,677,331 --
Undistributed net investment income ......... 116,821 --
Accumulated net realized gains (losses) ..... (1,754) --
------------ -----------
NET ASSETS ...................................... $811,863,543 $84,878,780
============ ===========
Shares of beneficial interest outstanding, no
par value
Class A shares .............................. 635,490,480 84,568,230
Class B shares .............................. 18,968,782 310,550
Class C shares .............................. 1,611,570 --
Class Y shares .............................. 155,677,331 --
------------ -----------
Shares of beneficial interest outstanding ....... 811,748,163 84,878,780
============ ===========
Net asset value per share Class A, Class B,
Class C and Class Y shares* ................. $1.00 $1.00
============ ===========
COST OF INVESTMENTS ........................... $813,989,450 $87,386,011
============ ===========
* Shares of the series are sold and redeemed at net asset value (net
assets/shares of beneficial interest outstanding).
See accompanying notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS
Year Ended June 30, 1999
CASH MANAGEMENT
TRUST TAX EXEMPT
MONEY MARKET MONEY MARKET
SERIES TRUST
------------ -----------
INVESTMENT INCOME
Interest ...................................... $41,167,291 $ 2,650,753
----------- -----------
Expenses
Management fees ............................. $ 3,241,209 $ 310,993
Trustees' fees .............................. 42,765 9,193
Accounting and administrative ............... 191,303 32,738
Custodian ................................... 142,846 48,255
Transfer agent .............................. 2,256,160 117,560
Service Fees - Class Y ...................... 338,400 --
Audit and tax services ...................... 25,200 25,200
Legal ....................................... 46,828 3,970
Printing .................................... 93,904 8,015
Registration ................................ 128,114 59,780
Insurance ................................... 13,395 1,440
Miscellaneous ............................... 5,917 7,020
----------- -----------
TOTAL EXPENSES ................................ 6,526,041 624,164
----------- -----------
Less - waiver of fee by investment adviser
and subadviser .............................. -- (118,782)
----------- -----------
Net Expenses .................................. 6,526,041 505,382
----------- -----------
NET INVESTMENT INCOME ......................... 34,641,250 2,145,371
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) on investments - net ... 2,470 --
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS .................................. $34,643,720 $2,145,371
=========== ==========
See accompanying notes to financial statements.
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
June 30, 1999
<CAPTION>
CASH MANAGEMENT TRUST TAX EXEMPT
MONEY MARKET MONEY MARKET
SERIES TRUST
---------------------------------- ----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1999 1998 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income ............................ $ 34,021,407 $ 34,641,250 $ 2,215,871 $ 2,145,371
Net realized gain (loss) on investments .......... (651) 2,470 -- --
-------------- -------------- -------------- --------------
Increase (decrease) in net assets from operations 34,020,756 34,643,720 2,215,871 2,145,371
-------------- -------------- -------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (a)
Class A ........................................ (32,279,427) (27,834,505) (2,215,871) (2,145,371)
Class B ........................................ -- (723,507) -- --
Class C ........................................ -- (67,961) -- --
Class Y ........................................ (1,741,329) (6,017,747) -- --
-------------- -------------- -------------- --------------
(34,020,756) (34,643,720) (2,215,871) (2,145,371)
-------------- -------------- -------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from the sale of shares ................... 1,671,676,546 2,516,699,035 104,256,210 120,150,365
Net asset value of shares issued in connection
with the reinvestment of dividends from net
investment income and distributions from net
realized gains ................................. 32,781,591 33,335,258 2,177,898 2,119,382
Cost of shares redeemed .......................... (1,691,851,054) (2,449,436,758) (100,372,725) (111,188,492)
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS DERIVED
FROM CAPITAL SHARE TRANSACTIONS .................. 12,607,083 100,597,535 6,061,383 11,081,255
Total increase (decrease) in net assets ............ 12,607,083 100,597,535 6,061,383 11,081,255
NET ASSETS
Beginning of the year ............................ 698,658,925 711,266,008 67,736,142 73,797,525
-------------- -------------- -------------- --------------
End of the year (b) .............................. $ 711,266,008 $ 811,863,543 $ 73,797,525 $ 84,878,780
============== ============== ============== ==============
(a) Amounts distributed include a net realized gain (loss) of ($651) and $2,470 for the Cash Management Trust Money Market Series
for the years ended June 30, 1998 and 1999, respectively.
(b) Including undistributed net investment income of $119,291 and $116,821 for the Cash Management Trust Money Market Series for
the years ended June 30, 1998 and 1999, respectively.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
CASH MANAGEMENT TRUST -- MONEY MARKET SERIEs
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A, B, C CLASS Y
-------------------------------------------------- -------------------------
FEBRUARY 27 (B) YEAR
YEAR ENDED JUNE 30, THROUGH ENDED
-------------------------------------------------- JUNE 30, JUNE 30,
1995 1996 1997 1998(A) 1999 1998 1999
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year .......... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- -------- -------- --------
Income From Investment Operations:
Net Investment Income ....................... 0.0469 0.0482 0.0467 0.0488 0.0445 0.0169 0.0448
Net Realized and Unrealized Gain (Loss) on
Investments ............................... 0.0000 0.0002 0.0000 0.0000 0.0000 0.0000 0.0000
-------- -------- -------- -------- -------- -------- --------
Total From Investment Operations ............ 0.0469 0.0484 0.0467 0.0488 0.0445 0.0169 0.0448
-------- -------- -------- -------- -------- -------- --------
Less Distributions Distributions From Net
Investment Income ........................... (0.0469) (0.0484)(c) (0.0465) (0.0488)(c) (0.0445) (0.0169)(c) (0.0448)
Distributions From Net Realized Capital Gains 0.0000 0.0000 (0.0002) 0.0000 0.0000 0.0000 0.0000
-------- -------- -------- -------- -------- -------- --------
Total Distributions ......................... (0.0469) (0.0484) (0.0467) (0.0488) (0.0445) (0.0169) (0.0448)
-------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of Year ................ $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ======== ======== ========
Total Return (%) ............................ 4.8 5.0 4.8 5.0 4.6 1.7 4.6
Ratio of Operating Expenses to
Average Net Assets (%) ...................... 0.88 0.90 0.88 0.84 0.84 0.74(d) 0.82
Ratio of Net Investment Income to
Average Net Assets (%) ...................... 4.67 4.85 4.66 4.88 4.46 4.98(d) 4.44
Net Assets, End of Year (000) ............... $649,808 $663,621 $698,659 $607,406 $664,609 $103,860 $147,254
(a) Class B shares commenced operations September 13, 1993 and Class C shares commenced operations March 1, 1998.
(b) Commencement of operations.
(c) Including net realized gain on investments.
(d) Computed on an annualized basis.
<PAGE>
<CAPTION>
TAX EXEMPT MONEY MARKET TRUST
--------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ................................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Income From Investment Operations
Net Investment Income ................................................ 0.0314 0.0327 0.0314 0.0323 0.0276
Net Realized and Unrealized Gain (Loss) on Investments ............... 0.0000 0.0000 0.0001 0.0000 0.0000
-------- -------- -------- -------- --------
Total From Investment Operations ..................................... 0.0314 0.0327 0.0315 0.0323 0.0276
-------- -------- -------- -------- --------
Less Distributions Distributions From Net Investment Income .......... (0.0314) (0.0327) (0.0315)(a) (0.0323) (0.0276)
-------- -------- -------- -------- --------
Total Distributions .................................................. (0.0314) (0.0327) (0.0315) (0.0323) (0.0276)
-------- -------- -------- -------- --------
Net Asset Value, End of Year ......................................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ========
Total Return (%) ..................................................... 3.2 3.3 3.2 3.3 2.8
Ratio of Operating Expenses to Average Net Assets (%)(b) ............. 0.56 0.56 0.56 0.60 0.65
Ratio of Net Investment Income to Average Net Assets (%) ............. 3.15 3.29 3.17 3.23 2.76
Net Assets, End of Year (000) ........................................ $ 67,797 $ 64,897 $ 67,736 $ 73,798 $ 84,879
(a) Including net realized gain on investments.
(b) The ratio of operating expenses to average net assets without giving effect to the voluntary expense limitation and voluntary
fee waiver described in Note 3 to the financial statements would have
been (%) ......................................................... 0.85 0.90 0.85 0.85 0.80
See accompanying notes to financial statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For the Year Ended June 30, 1999
1. SIGNIFICANT ACCOUNTING POLICIES. New England Cash Management Trust Money
Market Series and New England Tax Exempt Money Market Trust (the "Trusts") are
registered under the Investment Company Act of 1940, as amended, as diversified,
open-end investment companies. The Cash Management Trust Money Market Series
seeks maximum current income consistent with the preservation of capital and
liquidity. The Tax Exempt Money Market Trust seeks current income exempt from
federal income taxes consistent with preservation of capital and liquidity.
NEW ENGLAND CASH MANAGEMENT TRUST MONEY MARKET SERIES -- The Trust's Agreement
and Declaration of Trust permits the issuance of an unlimited number of shares
of beneficial interest, no par value. The Trust commenced its public offering of
Class B shares on September 13, 1993, Class C shares on March 1, 1998 and Class
Y shares on February 27, 1998. Class A, B and C shares were offered to enable
investors in each class of the New England Stock or Bond Funds to invest in
money market shares. Class A, B and C shares are identical and may be subject to
a contingent deferred sales charge upon redemption if the shares were acquired
by exchange of Class A, Class B or C shares of a stock or bond fund. Class Y
shares are intended for institutional investors with a minimum of $1 million to
invest.
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST -- The Trust's Agreement and
Declaration of Trust permits the issuance of an unlimited number of shares of
beneficial interest, no par value. Effective September 13, 1993, the Trust began
offering two classes of shares, Class A and Class B, in order to enable
investors in either class of the New England Stock or Bond Funds to invest in
money market shares. Class A and B shares are identical and may be subject to a
contingent deferred sales charge upon redemption if the shares were acquired by
exchange of Class A or Class B shares of a stock or bond fund.
The following is a summary of significant accounting policies followed by the
Trusts in the preparation of the financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies. The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
A. SECURITY VALUATION. The Trusts employ the amortized cost method of security
valuation as set forth in Rule 2a-7 under the Investment Company Act of 1940
which, in the opinion of the trustees of each Trust, represents the fair value
of the particular security. The amortized cost of a security is determined by
valuing it at original cost and there-after accreting any discount or amortizing
any premium on a straight-line basis.
B. REPURCHASE AGREEMENTS. The Trusts, through their custodian, receive delivery
of the underlying securities collateralizing repurchase agreements. It is the
Trusts' policy that the market value of the collateral be at least equal to 100%
of the repurchase price. The subadviser is responsible for determining that the
value of the collateral is at all times at least equal to the repurchase price.
Repurchase agreements could involve certain risks in the event of default or
insolvency of the other party, including possible delays or restrictions upon
the portfolio's ability to dispose of the underlying security.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions
are accounted for on the trade date (date the order to buy or sell is executed)
and interest income is recorded on the accrual basis. In determining the net
gain or loss on securities sold, the cost of securities is determined on the
identified cost basis.
D. DELAYED DELIVERY SECURITIES. Delivery and payment for securities purchased on
a when-issued or delayed delivery basis can take place one month or more after
the date of the transaction. The securities so purchased are subject to market
fluctuation during this period. At June 30, 1999, the cost of delayed delivery
purchase commitments for the Tax Exempt Money Market Trust amounted to $511,459
E. FEDERAL INCOME TAXES. The Cash Management Trust Money Market Series and the
Tax Exempt Money Market Trust intend to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies, and to distribute to
their shareholders all of their taxable and tax exempt income. Accordingly, no
provision for federal income tax has been made.
The Tax Exempt Money Market Trust has designated 100% of dividends paid from net
investment income during the fiscal year as tax exempt for federal income tax
purposes.
F. DIVIDENDS TO SHAREHOLDERS. Dividends are declared daily to shareholders of
record at the time and are paid monthly. Long term gain distributions, if any,
will be made annually.
G. OTHER. Each of the Trusts invests primarily in a portfolio of money market
instruments maturing in 397 days or less whose ratings are within the two
highest ratings categories of a nationally recognized rating agency or, if not
rated, are believed to be of comparable quality. The ability of the issuers of
the securities held by the Trusts to meet their obligations may be affected by
foreign economic, political and legal developments in the case of foreign banks
or foreign branches or subsidiaries of U.S. banks, or domestic economic
developments in a specific industry, state or region.
2. INVESTMENT TRANSACTIONS. For the year ended June 30, 1999:
NEW ENGLAND CASH MANAGEMENT TRUST MONEY MARKET SERIES -- Purchases and sales or
maturities of short-term obligations, including securities purchased subject to
repurchase agreements, aggregated $5,599,662,097 and $5,513,284,725,
respectively.
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST -- Purchases and sales or maturities
of short-term obligations aggregated $200,255,475 and $193,245,000,
respectively.
3. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. During the year ended
June 30, 1999, the Trusts incurred management fees payable to the Trusts'
investment adviser, New England Funds Management L.P. ("NEFM") and subadviser,
Back Bay Advisors L.P. ("Back Bay"). Certain officers and directors of NEFM are
also officers and trustees of the Trusts. NEFM and Back Bay are wholly-owned
subsidiaries of Nvest Companies, L.P. ("Nvest"), which is a subsidiary of
Metropolitan Life Insurance Company ("MetLife").
NEW ENGLAND CASH MANAGEMENT TRUST MONEY MARKET SERIES -- Under the management
agreement, NEFM pays to its investment adviser, NEFM, a monthly fee based on the
annual percentage rates of its corresponding average daily net asset values set
forth below. The management fee is reduced by the amount of subadvisory fees
paid by the Trust directly to the subadviser as described below.
Under the same management agreement, the Trust pays to its investment
subadviser, Back Bay, a monthly fee based on the annual percentage rates of its
corresponding average daily net asset values set forth below:
ANNUAL PERCENTAGE ANNUAL PERCENTAGE
RATE OF RATE OF ADVISORY FEES
ADVISORY FEES PAID BY NEFM TO THE
PAID TO NEFM SUBADVISER, BACK BAY
---------------- --------------------
the first $500 million 0.425% 0.205%
the next $500 million 0.400% 0.180%
the next $500 million 0.350% 0.160%
the next $500 million 0.300% 0.140%
amounts in excess of $2 billion 0.250% 0.120%
Fees Earned
-----------
NEFM $ 1,713,918
Back Bay 1,527,291
The effective annualized management fee for the year ended June 30, 1999 was
0.42%.
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST -- The Trust pays management fees to
its investment adviser, NEFM, at the annual rate of 0.40% of the first $100
million of the Trust's average daily net assets and 0.30% of such assets in
excess of $100 million. NEFM pays management fees to its investment subadviser,
Back Bay, at the rate of 0.20% of the first $100 million of the Trust's average
daily net assets and 0.15% of such assets in excess of $100 million. Fees earned
by NEFM and Back Bay under the management agreements in effect during the year
ended June 30, 1999 are as follows:
Fees Earned (a)
---------------
NEFM $ 155,497
Back Bay 155,496
(a) Before reduction pursuant to voluntary expense limitations.
The effective annualized management fee for the year ended June 30, 1999 was
0.40%.
Effective January 1, 1998 NEFM and Back Bay voluntarily agreed, until further
notice, to reduce the management fee and, if necessary, to assume Trust expenses
in order to limit the expenses to 0.65 of 1% of average daily net assets. As a
result of Trust expenses exceeding the expense limitation, for the year ended
June 30, 1999 NEFM and Back Bay reduced their fees by $59,391 and $ 59,391,
respectively.
B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. Nvest Services Company, Inc. ("NSC")
is a wholly owned subsidiary of Nvest and performs certain accounting and
administrative services for the Trusts. Each Trust reimburses NSC for all or
part of NSC's expenses of providing these services which include the following
(i) expenses for personnel performing bookkeeping, accounting, and financial
reporting functions and clerical functions relating to the Trusts, and (ii)
expenses for services required in connection with the preparation of
registration statements and prospectuses, registration of shares in various
states, shareholder reports and notices, proxy solicitation material furnished
to shareholders of the Trusts or regulatory authorities and reports and
questionnaires for SEC compliance. For the year ended June 30, 1999, these
expenses amounted to $191,303 for the Cash Management Trust Money Market Series
and $32,738 for the Tax Exempt Money Market Trust.
C. TRANSFER AGENT FEES. NSC is the transfer and shareholder servicing agent for
the Trusts and Boston Financial Data Services serves as the sub-transfer agent
for the Trusts. For the year ended June 30, 1999, the New England Cash
Management Trust Money Market Series and Tax Exempt Money Market Trust paid
$1,672,122 and $ 69,140, respectively, to NSC as compensation for its services
in that capacity. Class Y shares of Cash Management Trust, Money Market Series
bear a sub-transfer agent fee of 0.10% of average daily net assets charged by
National Financial Services Corporation. For the year ended June 30, 1999, the
Cash Management Trust Money Market Series and Tax Exempt Money Market Trust
received $6,825 and $710, respectively, in transfer agent credits. The transfer
agent expense in the Statement of Operations is net of these credits.
D. SERVICE FEE. The Cash Management Trust Money Market Series Class Y shares
bear a service charge of 0.25% annually of the Class Y average daily net assets
which will be paid by the Fund to such investment advisers, financial planners
and broker-dealers, including New England Securities Corporation, for services
provided by them to service accounts on behalf of Class Y shares of the Fund
under a service agreement. For the year ended June 30, 1999 the Fund paid
$338,400 in service fees.
E. TRUSTEES FEES AND EXPENSES. The Trusts do not pay any compensation directly
to its officers or trustees who are directors, officers or employees of NEFM,
New England Funds, L.P., Nvest, NSC or their affiliates, other than registered
investment companies. Each other Trustee receives a retainer fee at the annual
rate of $40,000 and meeting attendance fees of $3,500 for each meeting of the
Board of Trustees attended. Each committee member receives an additional
retainer fee at the annual rate of $6,000 while each committee chairman receives
a retainer fee (beyond the $6,000 fee) at the annual rate of $4,000. These fees
are allocated to the various New England Funds based on a formula that takes
into account, among other factors, the relative net assets of each Trust.
A deferred compensation plan is available to members of the Boards of Trustees.
A Trustee's participation in the plan is voluntary. Each participating Trustee
will receive an amount equal to the value that such deferred compensation would
have been, had it been invested in the Trusts on the normal payment date.
4. CONCENTRATION OF CREDIT. The Tax Exempt Money Market Trust had the following
industry concentrations in excess of 10% on June 30, 1999 as a percentage of the
Trust's total net assets: General Obligations (16.7%) and Hospitals (32.6%). The
Trust also had more than 10% of its total net assets invested in Louisiana
(13.7%) and had more than 10% of its net assets backed by letters of credit with
MBIA (16.1%) and AMBAC (12.1%).
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and the Shareholders of
New England Cash Management Trust Money Market Series
New England Tax Exempt Money Market Trust
In our opinion, the accompanying statements of assets and liabilities, including
the portfolio compositions, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the New England Cash Management
Trust Money Market Series and New England Tax Exempt Money Market Trust
(hereafter referred to as the "Trusts") at June 30, 1999, and the results of
their operations, the changes in each of their net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Trusts' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 11, 1999
<PAGE>
- --------------------------------------------------------------------------------
NEW ENGLAND FUNDS
- --------------------------------------------------------------------------------
LARGE-CAP EQUITY FUNDS GOVERNMENT INCOME FUNDS
Capital Growth Fund Limited Term U.S. Government Fund
Growth Fund Government Securities Fund
Growth and Income Fund
(formerly Growth Opportunities Fund) TAX-FREE INCOME FUNDS
Balanced Fund Municipal Income Fund
Value Fund Intermediate Term Tax Free
Fund of California
ALL-CAP EQUITY FUNDS Massachusetts Tax Free Income Fund
Star Advisers Fund
Star Worldwide Fund MONEY MARKET FUNDS
International Equity Fund Cash Management Trust - Money
Bullseye Fund Market Series
Equity Income Fund Tax Exempt Money Market Trust
SMALL-CAP EQUITY FUNDS
Star Small Cap Fund
CORPORATE INCOME FUNDS
Short Term Corporate Income Fund
(formerly Adjustable Rate U.S.
Government Fund)
Bond Income Fund
High Income Fund
Strategic Income Fund
To learn more, and for a free prospectus, contact your financial representative.
VISIT OUR WORLD WIDE WEB SITE AT WWW.MUTUALFUNDS.COM
New England Funds, L.P., Distributor
399 Boylston Street
Boston, MA 02116
Toll Free 800-225-5478
This material is authorized for distribution to prospective investors
when it is preceded or accompanied by the Fund's current prospectus,
which contains information about distribution charges, management and
other items of interest. Investors are advised to read the prospectus
carefully before investing.
New England Funds, L.P., and other firms selling shares of New England
Funds are members of the National Association of Securities Dealers,
Inc. (NASD). As a service to investors, the NASD has asked that we
inform you of the availability of a brochure on its Public Disclosure
Program. The program provides access to information about securities
firms and their representatives. Investors may obtain a copy by
contacting the NASD at 800-289-9999 or by visiting their web site at
www.NASDR.com.
- --------------------------------------------------------------------------------
Y2K Readiness Report: New England Funds is pleased to report that
preparation efforts for the Year 2000 are proceeding according to schedule,
and we are satisfied with progress to date. For more information about
Year 2000 readiness at New England Funds, visit our Web site at
www.mutualfunds.com.
This material represents Year 2000 Readiness Disclosure pursuant to the
Year 2000 Information and Readiness Disclosure Act.
- --------------------------------------------------------------------------------
<PAGE>
------------------
[LOGO](R) Bulk Rate
NEW ENGLAND FUNDS(R) U.S. Postage
Where The Best Minds Meet(R) Paid
Brockton, MA
Permit No. 770
------------------
---------------------
399 Boylston Street
Boston, Massachusetts
02116
---------------------
MM58-0699
[Recycle Logo] Printed on Recycled Paper
<PAGE>
Registration Nos. 2-81614
811-3658
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
PART C. OTHER INFORMATION
Item 23. Exhibits
(a) Articles of Incorporation
Second Amended and Restated Agreement and Declaration of Trust
dated September 10, 1993 and Amendment No. 2 thereto dated January
28, 1996 is incorporated herein by reference to Post-Effective
Amendment No. 22 to the Registrant's Registration Statement on
Form N-1A (File No. 2-81614), filed on August 23, 1996.
(b) By-Laws
Amended By-Laws dated May 8, 1985 are incorporated herein by
reference to Post-Effective Amendment No. 22 to the Registrant's
Registration Statement on Form N-1A (File No. 2-81614), filed on
August 23, 1996.
(c) Instruments Defining Rights of Security Holders
Rights of shareholders are described in Article III, Section 6 of
the Second Amended and Restated Agreement and Declaration of Trust
incorporated by reference as Exhibit 1 to this Registration
Statement.
(d) Investment Advisory Contracts
(1) Advisory Agreement between Registrant and New England Funds
Management, L.P. ("NEFM") dated May 1, 1998, is incorporated
herein by reference to Post-Effective Amendment No. 25 to the
Registrant's Registration Statement on Form N-1A (File No.
2-81614), filed on August 28, 1998.
(2) Subadvisory Agreement with the Registrant, NEFM and Back Bay
Advisors, L.P. ("Back Bay Advisors") dated May 1, 1998, is
incorporated herein by reference to Post-Effective Amendment No.
25 to the Registrant's Registration Statement on Form N-1A (File
No. 2-81614), filed on August 28, 1998.
(e) Underwriting Contracts
Distribution Agreement between the Registrant and New England
Funds, L.P. dated May 1, 1991 is incorporated herein by reference
to Post-Effective Amendment No. 22 to the Registrant's
Registration Statement on Form N-1A (File No. 2-81614), filed on
August 23, 1996.
(f) Bonus or Profit Sharing Contracts
Not applicable
(g) Custodian Agreements
Custodian Agreement between Registrant and State Street Bank and
Trust Company dated April 21, 1983 and Amendment thereto dated
September 12, 1991 is incorporated herein by reference to
Post-Effective Amendment No. 22 to the Registrant's Registration
Statement on Form N-1A (File No. 2-81614), filed on August 23,
1996.
(h) Other Material Contracts
(1) Shareholder Servicing and Transfer Agency Agreement between
Registrant and New England Funds Service Corp. dated January 2,
1998 is incorporated herein by reference to Post-Effective
Amendment No. 27 to the Registrant's Statement on Form N-1A (File
No. 2-81614), filed on June 15, 1999.
(2) Sub-Transfer Agency and Service Agreement between TNE
Investment Services Corporation and State Street Bank and Trust
Company dated September 1, 1993 is incorporated herein by
reference to Post-Effective Amendment No. 22 to the Registrant's
Registration Statement on Form N-1A (File No. 2-81614), filed on
August 23, 1996.
(3) Form of New England Funds, L.P. Dealer Agreement is
incorporated herein by reference to Post-Effective Amendment No.
27 to the Registrant's Statement on Form N-1A (File No. 2-81614),
filed on June 15, 1999.
(4) Powers of Attorney designating Edward P. Lawrence, John M.
Loder, Bruce R. Speca and John E. Pelletier as attorneys to sign
for Kenneth J. Cowan, Peter S. Voss, Graham T. Allison, Jr.,
Pendleton P. White, John A. Shane, Sandra O. Moose, Daniel M. Cain
and Richard Darman is incorporated herein by reference to
Post-Effective Amendment No. 27 to the Registrant's Statement on
Form N-1A (File No. 2-81614), filed on June 15, 1999.
(i) Legal Opinion
None.
(j) Other Opinions
Consent of PricewaterhouseCoopers LLP is filed herewith.
(k) Omitted Finanical Statements
None.
(l) Initial Capital Agreements
Not applicable.
(m) Rule 12b-1 Plans
Not applicable.
(n) Rule 18f-3 Plan
Plan pursuant to Rule 18f-3(d) under the Investment Company Act of
1940, as amended, with respect to New England Cash Management
Trust and New England Tax Exempt Money Market Trust is
incorporated herein by reference to Post-Effective Amendment No.
27 to the Registrant's Statement on Form N-1A (File No. 2-81614),
filed on June 15, 1999.
Item 24. Persons Controlled by or Under Common Control with Registrant
None.
Item 25. Indemnification
See Article 4 of the Registrant's Amended By-Laws filed as Exhibit
2 incorporated herein by reference.
In addition, Nvest, L.P., the parent company of the Trust's
adviser and distributor, maintains a directors and officers
liability insurance policy with maximum coverage of $100 million,
under which the trustees and officers of the Trust are named as
insureds.
Item 26: Business and Other Connections of Investment Adviser
(a) Back Bay Advisors, which serves as subadviser to the
Registrant, serves as investment adviser to a number of other
registered investment companies.
The list required by this Item 26 regarding any other business,
profession, vocation or employment of a substantial nature engaged
in by officers and directors of Back Bay Advisors during the past
two years is incorporated herein by reference to Schedules A and D
of Form ADV filed by Back Bay Advisers pursuant to the Investment
Advisers Act of 1940, as amended (the "Advisers Act") (File No.
801-4749).
(b) NEFM a wholly-owned subsidiary of Nvest, L.P., serves as
investment adviser to the Registrant. NEFM was organized in 1995.
The list required by this Item 26 regarding any other business,
profession, vocation or employment of a substantial nature engaged
in by officers and directors of NEFM during the past two years is
incorporated herein by reference to Schedules A and D of Form ADV
filed by NEFM pursuant to the Advisers Act (File No. 801-48408).
Item 27. Principal Underwriters
(a) New England Funds, L.P., the Registrant's principal underwriter, also serves
as principal underwriter for:
New England Funds Trust I
New England Funds Trust II
New England Funds Trust III
New England Cash Management Trust
(b) The general partner and officers of the Registrant's principal underwriter,
New England Funds, L.P., and their addresses are as follows:
<TABLE>
<CAPTION>
Positions and Offices with Positions and Offices
Name Principal Underwriter with Registrant
---- --------------------- ---------------
<S> <C> <C>
NEF Corporation General Partner None
Bruce R. Speca Managing Director, President and Chief President
Executive Officer
John E. Pelletier Senior Vice President, General Counsel, Secretary and Clerk
Secretary and Clerk
John Hailer Managing Director and Executive Vice None
President
Scott Wennerholm Managing Director, Senior Vice President, None
Chief Financial Officer and Treasurer
Caren I. Leedom Managing Director and Senior Vice President None
Diane Whelan Managing Director and Senior Vice President None
Raymond K. Girouard Senior Vice President, Assistant Treasurer None
and Comptroller
Frank S. Maselli Managing Director and Senior Vice President None
Martin G. Dyer Vice President and Assistant Secretary None
Philip J. Graham Jr. Vice President None
Ralph M. Greggs Senior Vice President None
Beatriz A. Pina-Smith Vice President None
Sharon M. Wratchford Vice President None
</TABLE>
The principal business address of all the above persons or entities is
399 Boylston Street, Boston, MA 02116.
(c) Not applicable.
Item 28. Location of Accounts and Records
The following companies maintain possession of the documents required
by the specified rules:
(a) Registrant
Rule 31a-1(b) (4)
Rule 31a-2(a)
(b) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Rule 31a-1(a)
Rule 31a-1(b) (1), (2), (3), (5), (6), (7), (8)
Rule 31a-2(a)
(c) Back Bay Advisors, L.P. 399 Boylston Street Boston,
Massachusetts 02116 Rule 31a-1(a) (9), (10), (11); (f) Rule
31a-2(a); (e)
(d) New England Funds, L.P. 399 Boylston Street Boston,
Massachusetts 02116 Rule 31a - 1(d) Rule 31a - 2(c)
Item 29. Management Services
Not applicable.
Item 30. Undertakings
The Registrant undertakes to provide its annual report to any
person who receives the prospectus and who requests the annual
report.
<PAGE>
NEW ENGLAND TAX EXEMPT MONEY MARKET TRUST
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment No. 27 to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 27 to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston, in the Commonwealth of Massachusetts on the
16th day of August, 1999.
NEW ENGLAND TAX EXEMPT
MONEY MARKET TRUST
By: PETER S. VOSS*
---------------------
Peter S. Voss
Chief Executive Officer
*By: /s/ JOHN E. PELLETIER
---------------------
John E. Pelletier
Attorney-in-Fact
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 27 to Registration Statement No. 2-81614 has been
signed below by the following persons in the capacities and on the date
indicated.
Signature Title Date
Chairman of the Board;
Chief Executive
Officer; Principal
PETER S. VOSS* Executive Officer; August 16, 1999
- -------------------------- Trustee
Peter S. Voss
/s/ THOMAS P. CUNNINGHAM Treasurer August 16, 1999
- --------------------------
Thomas P. Cunningham
GRAHAM T. ALLISON, JR.* Trustee August 16, 1999
- --------------------------
Graham T. Allison, Jr.
DANIEL M. CAIN* Trustee August 16, 1999
- --------------------------
Daniel M. Cain
KENNETH J. COWAN* Trustee August 16, 1999
- --------------------------
Kenneth J. Cowan
RICHARD DARMAN* Trustee August 16, 1999
- --------------------------
Richard Darman
SANDRA O. MOOSE* Trustee August 16, 1999
- --------------------------
Sandra O. Moose
JOHN A. SHANE* Trustee August 16, 1999
- --------------------------
John A. Shane
PENDLETON P. WHITE* Trustee
August 16, 1999
- --------------------------
Pendleton P. White
*By: /s/ JOHN E. PELLETIER
---------------------
John E. Pelletier
Attorney-in-Fact
August 16, 1999
<PAGE>
N-1A EXHIBITS ITEM 24(B)
EXHIBIT NUMBER EXHIBIT
-------------- -------
j Consent of Auditors
<PAGE>
Exhibit 99.j
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference into the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 27 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated August 11, 1999, relating to the financial
statements and the financial highlights appearing in the June 30, 1999 Annual
Report to Shareholders of New England Tax Exempt Money Market Trust, which are
also incorporated by reference into the Registration Statement. We also consent
to the references to us under the heading "Fund Performance" in the Prospectus
and under the heading "Independent Accountants" in the Statement of Additional
Information.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 11, 1999
