<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NEW ENGLAND ZENITH FUND
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
[LETTERHEAD OF NEW ENGLAND FINANCIAL APPEARS HERE]
March 11, 1998
TO OWNERS OF NELICO VARIABLE LIFE INSURANCE POLICIES:
A Special Meeting of Shareholders of the Loomis Sayles Avanti Growth Series
(the "Series") of the New England Zenith Fund will be held on April 10, 1998.
At the Shareholders Meeting, New England Life Insurance Company ("NELICO") will
vote all shares of the Series held in the New England Variable Life Separate
Account which are attributable to NELICO Variable Life Insurance Policies in
accordance with instructions received from Policy Owners. You are now being
asked how shares of the Series deemed attributable to your Policy should be
voted at the Shareholders Meeting.
Enclosed you will find a copy of the Notice of Meeting and Proxy Statement
relating to the Shareholders Meeting. After reviewing this material, please
complete and execute the Instruction Form and return it in the enclosed,
postage-paid, self-addressed envelope. If you fail to return an executed
Instruction Form, shares of the Series deemed attributable to your Policy will
be voted by NELICO in proportion to the voting instructions received from all
other NELICO Variable Life Policy Owners.
- --------------------------------------------------------------------------------
<PAGE>
[LETTERHEAD OF NEW ENGLAND FINANCIAL APPEARS HERE]
March 11, 1998
TO OWNERS OF NELICO VARIABLE LIFE INSURANCE POLICIES:
A Special Meeting of Shareholders of the Loomis Sayles Avanti Growth Series
(the "Series") of the New England Zenith Fund will be held on April 10, 1998.
At the Shareholders Meeting, New England Life Insurance Company ("NELICO") will
vote all shares of the Series held in the New England Variable Life Separate
Account which are attributable to NELICO Variable Life Insurance Policies in
accordance with instructions received from Policy Owners. You are now being
asked how shares of the Series deemed attributable to your Policy should be
voted at the Shareholders Meeting. Under certain circumstances, however, plan
participants have the right to instruct Policy Owners as to how all or a
portion of the votes attributable to a Policy are to be cast, and Policy Owners
are required to cast such votes as instructed.
IN ORDER FOR THE VOTES UNDER YOUR POLICIES TO BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN BY YOU AND YOUR PLAN PARTICIPANTS, YOU MUST RETURN A
COMPLETED, EXECUTED INSTRUCTION FORM. If you fail to return an executed
Instruction Form, shares of the Series deemed attributable to your Policies
will be voted by NELICO in proportion to the voting instructions received from
all other NELICO Variable Life Insurance Policy Owners.
Enclosed you will find a copy of the Notice of Meeting and Proxy Statement
relating to the Shareholders Meeting, as well as voting instruction forms with
the names of the plan participants entitled to instruct the Policy Owner.
Please forward promptly (1) one Notice of Meeting and Proxy Statement and (2)
one Instruction Form to each person entitled to give voting instructions. One
Instruction Form is enclosed for each Policy under which votes are subject to
instruction.
The Instruction Form is to be used by each plan participant to convey
instructions to you as Policy Owner. INSTRUCTION FORMS COMPLETED BY YOUR PLAN
PARTICIPANTS SHOULD NOT BE RETURNED. AFTER YOU HAVE RECEIVED INSTRUCTIONS FROM
A PLAN PARTICIPANT, YOU SHOULD TRANSFER THESE INSTRUCTIONS TO THE PLAN
PARTICIPANT LISTING PROVIDED. RETURN ONLY THE SINGLE INSTRUCTION FORM IN YOUR
NAME, SIGNED BY YOU, ALONG WITH THE APPROPRIATELY CHECKED PLAN PARTICIPANT
LIST.
If no plan participants transmit voting instructions, or if the plan
participants do not have the right to instruct, cast all votes at your sole
discretion by completing and signing the Instruction Form.
In order to cast votes under the Policies, you must return an INSTRUCTION FORM
signed by you, the Policy Owner.
If you have any questions concerning these procedures, please call collect,
Peter Zucker, Consultant, New England Life Insurance Company (617) 578-3566.
- --------------------------------------------------------------------------------
<PAGE>
[LETTERHEAD OF NEW ENGLAND FINANCIAL APPEARS HERE]
March 11, 1998
TO OWNERS OF ZENITH ACCUMULATOR VARIABLE ANNUITY CONTRACTS:
A Special Meeting of Shareholders of the Loomis Sayles Avanti Growth Series
(the "Series") of the New England Zenith Fund will be held on April 10, 1998.
At the Shareholders Meeting, Metropolitan Life Insurance Company ("MetLife")
will vote all shares of the Series held in The New England Variable Account
which are attributable to Zenith Accumulator Variable Annuity Contracts in
accordance with instructions received from Contractholders. You are now being
asked how shares of the Series deemed attributable to your Contract should be
voted at the Shareholders Meeting.
Enclosed you will find a copy of the Notice of Meeting and Proxy Statement
relating to the Shareholders Meeting. After reviewing this material, please
complete and execute the Instruction Form and return it in the enclosed,
postage-paid, self-addressed envelope. If you fail to return an executed
Instruction Form, shares of the Series deemed attributable to your Contract
will be voted by MetLife in proportion to the voting instructions received from
all other Zenith Accumulator Contractholders.
- --------------------------------------------------------------------------------
<PAGE>
[LETTERHEAD OF NEW ENGLAND FINANCIAL APPEARS HERE]
March 11, 1998
TO OWNERS OF ZENITH ACCUMULATOR VARIABLE ANNUITY CONTRACTS:
A Special Meeting of Shareholders of the Loomis Sayles Avanti Growth Series
(the "Series") of the New England Zenith Fund will be held on April 10, 1998.
At the Shareholders Meeting, Metropolitan Life Insurance Company ("MetLife")
will vote all shares of the Series held in The New England Variable Account
which are attributable to Zenith Accumulator Variable Annuity Contracts in
accordance with instructions received from Contractholders. You are now being
asked how shares of the Series deemed attributable to your Contract should be
voted at the Shareholders Meeting. Under certain circumstances, however,
annuitants have the right to instruct Contractholders as to how all or a
portion of the votes attributable to a Contract are to be cast, and
Contractholders are required to cast such votes as instructed.
IN ORDER FOR THE VOTES UNDER YOUR CONTRACTS TO BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN BY YOU AND YOUR ANNUITANTS, YOU MUST RETURN A COMPLETED,
EXECUTED INSTRUCTION FORM. If you fail to return an executed Instruction Form,
shares of the Series deemed attributable to your Contracts will be voted by
MetLife in proportion to the voting instructions received from all other Zenith
Accumulator Contractholders.
Enclosed you will find a copy of the Notice of Meeting and Proxy Statement
relating to the Shareholders Meeting, as well as voting instruction forms with
the names of the annuitants entitled to instruct the Contractholder.
Please forward promptly (1) one Notice of Meeting and Proxy Statement and (2)
one Instruction Form to each person entitled to give voting instructions. One
Instruction Form is enclosed for each Contract under which votes are subject to
instruction.
The Instruction Form is to be used by each annuitant to convey instructions to
you as Contractholder. INSTRUCTION FORMS COMPLETED BY YOUR ANNUITANTS SHOULD
NOT BE RETURNED. AFTER YOU HAVE RECEIVED INSTRUCTIONS FROM AN ANNUITANT, YOU
SHOULD TRANSFER THESE INSTRUCTIONS TO THE ANNUITANT LISTING PROVIDED. RETURN
ONLY THE SINGLE INSTRUCTION FORM IN YOUR NAME, SIGNED BY YOU, ALONG WITH THE
APPROPRIATELY CHECKED ANNUITANT LIST.
If no annuitants transmit voting instructions, or if the annuitants do not have
the right to instruct, cast all votes at your sole discretion by completing and
signing the Instruction Form.
In order to cast votes under the Contracts, you must return an INSTRUCTION FORM
signed by you, the Contract Owner.
If you have any questions concerning these procedures, please call collect,
Peter Zucker, Consultant, New England Life Insurance Company (617) 578-3566.
- --------------------------------------------------------------------------------
<PAGE>
[LETTERHEAD OF NEW ENGLAND FINANCIAL APPEARS HERE]
March 11, 1998
TO OWNERS OF AMERICAN GROWTH SERIES VARIABLE ANNUITY CONTRACTS:
A Special Meeting of Shareholders of the Loomis Sayles Avanti Growth Series
(the "Series") of the New England Zenith Fund will be held on April 10, 1998.
At the Shareholders Meeting, New England Life Insurance Company ("NELICO") will
vote all shares of the Series held in the New England Variable Annuity Separate
Account which are attributable to American Growth Series Variable Annuity
Contracts in accordance with instructions received from Contractholders. You
are now being asked how shares of the Series deemed attributable to your
Contract should be voted at the Shareholders Meeting.
Enclosed you will find a copy of the Notice of Meeting and Proxy Statement
relating to the Shareholders Meeting. After reviewing this material, please
complete and execute the Instruction Form and return it in the enclosed,
postage-paid, self-addressed envelope. If you fail to return an executed
Instruction Form, shares of the Series deemed attributable to your Contract
will be voted by NELICO in proportion to the voting instructions received from
all other American Growth Series Variable Annuity Contractholders.
- --------------------------------------------------------------------------------
<PAGE>
NEW ENGLAND ZENITH FUND
LOOMIS SAYLES AVANTI GROWTH SERIES
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
APRIL 10, 1998
To the Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of the Loomis
Sayles Avanti Growth Series (the "Series"), a series of New England Zenith
Fund (the "Trust"), will be held at the offices of New England Life Insurance
Company, 501 Boylston Street, 9th Floor, Boston, Massachusetts 02116, on
Friday, April 10, 1998 at 10:00 a.m. Boston time, for the following purposes:
1. To approve or disapprove a new Advisory Agreement relating to the
Series by and between the Trust and TNE Advisers, Inc. ("TNE Advisers"),
which would increase the management fee payable by the Series.
2. To approve or disapprove a related new Sub-Advisory Agreement
relating to the Series by and between TNE Advisers and Goldman Sachs Asset
Management, a separate operating division of Goldman, Sachs & Co.
3. To approve or disapprove a change of the investment objective of the
Series from a fundamental policy of long-term capital growth to a non-
fundamental policy of long-term capital appreciation.
4. To approve or disapprove a proposal with respect to the future
operations of the Series whereby the Series may from time to time, to the
extent permitted by any exemption or exemptions granted by the Securities
and Exchange Commission, permit TNE Advisers to enter into new or amended
agreements with sub-advisers with respect to the Series without obtaining
shareholder approval of such agreements, and to permit such sub-advisers
to manage the assets of the Series pursuant to such sub-advisory
agreements.
5. To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
If Proposals 1, 2 and 3 set forth above are approved, the name of the Series
will change to "Goldman Sachs Midcap Value Series"
By order of the President,
Maura A. Murphy, Secretary
March 11, 1998
- -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
- -------------------------------------------------------------------------------
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED INSTRUCTION FORM PROMPTLY IN
THE ENCLOSED POSTAGE- PAID ENVELOPE WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE
MEETING. YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
1
<PAGE>
NEW ENGLAND ZENITH FUND
LOOMIS SAYLES AVANTI GROWTH SERIES
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees (the "Trustees") of New England Zenith Fund
(the "Trust") for use at the Special Meeting of Shareholders of the Loomis
Sayles Avanti Growth Series (the "Series"), a series of the Trust, to be held
at the offices of New England Life Insurance Company ("NELICO"), 501 Boylston
Street, 9th Floor, Boston, Massachusetts 02116, on Friday, April 10, 1998 at
10:00 a.m. Boston time, and at any adjournment or adjournments thereof (the
"Meeting"). This Proxy Statement and its enclosures are being mailed to
shareholders beginning on or about March 11, 1998. A copy of the Annual Report
of the Trust for the fiscal year ended December 31, 1997 may be obtained
without charge by writing to NELICO at the above address or by calling (800)
356-5015.
This Proxy Statement consists of five parts.
PART I contains general information relating to the Meeting.
PART II contains information relating to Proposals 1 and 2, the proposed new
Advisory Agreement and the proposed new Sub-Advisory Agreement for the Series,
respectively.
PART III contains information relating to Proposal 3, the proposed change to
the investment objective of the Series.
PART IV contains information relating to Proposal 4, whereby the Series may,
to the extent permitted by any exemption or exemptions granted by the
Securities and Exchange Commission (the "SEC"), permit TNE Advisers, Inc.
("TNE Advisers") to enter into new or amended agreements with sub-advisers
with respect to the Series without obtaining shareholder approval of such
agreements, and to permit such sub-advisers to manage the assets of the Series
pursuant to such sub-advisory agreements.
PART V contains information about the Trust, TNE Advisers, Goldman Sachs
Asset Management ("GSAM") and certain brokerage and other miscellaneous
matters.
I. GENERAL
All shareholders of record of the Series as of the close of business on
February 13, 1998, the record date for determining shareholders entitled to
vote at the Meeting (the "Record Date"), are entitled to one vote for each
share of
2
<PAGE>
beneficial interest of the Series held as of that date. The number of shares
of beneficial interest of the Series issued and outstanding as of the Record
Date was 672,715.928.
Timely, properly executed proxies will be voted as you instruct. If you
return a proxy and no choice is indicated, proxies will be voted in favor of
Proposals 1, 2, 3 and 4 set forth in the attached Notice of Meeting. At any
time before it has been voted, the enclosed proxy may be revoked by the signer
by a written revocation received by the Secretary of the Trust, by properly
executing a later-dated proxy or by attending the Meeting, requesting return
of any previously delivered proxy and voting in person.
The costs of solicitation of proxies will be borne by the Series.
Solicitation of proxies by personal interview, mail, telephone and telegraph
may be made by officers and Trustees of the Trust and employees of NELICO, TNE
Advisers and New England Securities Corporation.
II. NEW ADVISORY AND SUB-ADVISORY AGREEMENTS
CURRENT ADVISORY AND SUB-ADVISORY AGREEMENTS
TNE Advisers currently serves as investment adviser to the Series under an
advisory agreement dated August 30, 1996 (the "Current Advisory Agreement")
and has acted as the Series' adviser since May 1, 1995. Before TNE Advisers
became adviser to the Series, Loomis, Sayles & Company, L.P. ("Loomis Sayles")
acted as adviser to the Series under a previous advisory agreement. Under the
Current Advisory Agreement, TNE Advisers has overall advisory and
administrative responsibility with respect to the Series. The Current Advisory
Agreement also provides that TNE Advisers will, subject to its rights to
delegate such responsibilities to other parties, provide to the Series both
portfolio management services and administrative services. TNE Advisers has
subcontracted with its affiliate, New England Funds, L.P. ("NEF"), to provide,
at no extra cost to the Series, certain administrative services to the Series.
Under the Current Advisory Agreement, a management fee is payable by the
Series to TNE Advisers at the annual rate of 0.70% of the first $200 million
of the Series' average daily net assets, 0.65% of the next $300 million of
such assets and 0.60% of the excess over $500 million of such assets. For the
fiscal year ended December 31, 1997, the aggregate management fee payable by
the Series to TNE Advisers under the Current Advisory Agreement was $711,667.
TNE Advisers has delegated to Loomis Sayles its responsibility under the
Current Advisory Agreement to provide portfolio management services to the
Series. Loomis Sayles' address is One Financial Center, Boston, Massachusetts
02111. Loomis Sayles, which acted as the Series' adviser from its inception
on April 30, 1993 until May 1, 1995, and has acted as sub-adviser to the
Series since May 1, 1995, currently acts as the Series' sub-adviser pursuant
to a sub-
3
<PAGE>
advisory agreement dated August 30, 1996 (the "Current Sub-Advisory
Agreement," and together with the Current Advisory Agreement, the "Current
Agreements"). The Current Sub-Advisory Agreement requires Loomis Sayles to
manage the investment and reinvestment of the assets of the Series, subject to
the supervision of TNE Advisers and oversight by the Trustees. Loomis Sayles
is authorized to effect portfolio transactions for the Series, using its own
discretion and without prior consultation with TNE Advisers. Loomis Sayles is
required to report periodically to TNE Advisers, its agents and the Trustees
of the Trust. Under the Current Sub-Advisory Agreement, a sub-advisory fee is
payable by TNE Advisers to Loomis Sayles, as compensation for all services
rendered, facilities furnished and expenses borne by Loomis Sayles, at the
annual rate of 0.50% of the first $25 million of the Series' average net
assets, 0.40% of the next $75 million of such assets, 0.35% of the next $100
million of such assets and 0.30% of such assets in excess of $200 million. For
the fiscal year ended December 31, 1997, the aggregate sub-advisory fee paid
by TNE Advisers to Loomis Sayles under the Current Sub-Advisory Agreement was
$428,751.
The Trustees approved the continuation of the Current Agreements for a one-
year period at a meeting held on June 25, 1997. The Series' shareholders
approved the Current Agreements at a meeting held on December 28, 1995. The
purpose of the submission of the Current Agreements for shareholder approval
at such time was to approve their continuance following a change in control of
TNE Advisers and Loomis Sayles in connection with the merger of TNE Advisers'
(and NELICO's) former parent company, New England Mutual Life Insurance
Company (which also controlled Loomis Sayles' parent company), with and into
Metropolitan Life Insurance Company ("MetLife"), with MetLife as the surviving
company, which merger was consummated on August 30, 1996.
PROPOSED NEW ADVISORY AND SUB-ADVISORY AGREEMENTS
The Trustees have approved, and recommend that the shareholders of the
Series approve, a new Advisory Agreement for the Series (the "New Advisory
Agreement") by and between TNE Advisers and the Trust (Proposal 1) and a
related new Sub-Advisory Agreement for the Series (the "New Sub-Advisory
Agreement," and together with the New Advisory Agreement, the "New
Agreements") by and between TNE Advisers and GSAM (Proposal 2). The New
Advisory Agreement, the form of which is attached to this Proxy Statement as
Appendix A, is substantially similar to the Current Advisory Agreement,
except: (i) the New Advisory Agreement provides for a higher management fee
rate payable by the Series to TNE Advisers than is payable by the Series to
TNE Advisers under the Current Advisory Agreement, and (ii) certain other,
minor differences. The New Sub-Advisory Agreement, the form of which is
attached to this Proxy Statement as Appendix B, is substantially similar to
the Current Sub-Advisory Agreement, except that: (i) references to Loomis
Sayles in the Current
4
<PAGE>
Sub-Advisory Agreement have been changed to references to GSAM in the New Sub-
Advisory Agreement, (ii) the New Sub-Advisory Agreement provides for a
different sub-advisory fee rate payable by TNE Advisers to GSAM than is
payable by TNE Advisers to Loomis Sayles under the Current Sub-Advisory
Agreement, and (iii) certain other, minor differences.
As explained below, if the New Agreements are approved, GSAM will replace
Loomis Sayles as the sub-adviser of the Series, and will manage the Series'
portfolio using a substantially different investment style than Loomis Sayles
currently uses.
VOLUNTARY EXPENSE LIMITATIONS
Pursuant to a Voluntary Expense Agreement that commenced on May 1, 1995
between the Trust and TNE Advisers, which agreement TNE Advisers may terminate
at any time, TNE Advisers bears the expenses (exclusive of any management
fees, brokerage costs, interest, taxes or extraordinary expenses) of the
Series in excess of 0.15% annually of the Series' average daily net assets. It
is expected that the Trust and TNE Advisers will terminate the Voluntary
Expense Agreement and enter into an agreement to defer certain expenses (the
"Expense Deferral Agreement") upon entering the New Advisory Agreement. For
the fiscal year ended December 31, 1997, TNE Advisers bore $7,292 of the
Series' expenses pursuant to the Voluntary Expense Agreement.
Under the contemplated Expense Deferral Agreement, TNE Advisers would pay
the expenses of the Series (exclusive of any brokerage costs, interest, taxes
or extraordinary expenses) in excess of 0.90% annually of the Series' average
daily net assets, subject to the obligation of the Series to repay such
amounts to TNE Advisers in future years, if any, when the Series' expenses
fall below 0.90% annually of the Series' average daily net assets, such
repayment to be made to the extent that it does not cause the total expenses
in such year to exceed 0.90% annually of such assets; provided, however, that
the Series would not be obligated to repay any expense paid by TNE Advisers
more than two years after the end of the fiscal year in which such expense was
incurred. TNE Advisers would have the ability at any time to terminate its
obligations under the Expense Deferral Agreement to bear future expenses of
the Series, and any expenses that have been deferred while the Series' expense
limit was in place would never be payable by the Series unless the Series'
expenses fall below the limit.
DESCRIPTION OF THE NEW ADVISORY AGREEMENT
The form of the New Advisory Agreement is attached to this Proxy Statement
as Appendix A. The following summary description of the New Advisory Agreement
is qualified in its entirety by reference to the full text of the form of the
Agreement.
5
<PAGE>
Under the New Advisory Agreement, TNE Advisers has overall advisory and
administrative responsibility with respect to the Series. The New Advisory
Agreement also provides that TNE Advisers will, subject to it rights to
delegate such responsibilities to other parties, provide to the Series both
portfolio management services and administrative services. TNE Advisers plans
to continue to subcontract with its affiliate, NEF, to provide, at no extra
cost to the Series, certain administrative services to the Series. The address
of NEF is 399 Boylston Street, Boston, Massachusetts 02116. Under the New
Advisory Agreement, a management fee is payable by the Series to TNE Advisers
at the annual rate of 0.75% of the Series' average daily net assets.
The New Advisory Agreement provides that it will continue in effect for two
years from its date of execution, and from year to year thereafter so long as
such continuance is specifically approved at least annually (i) by the
Trustees or by vote of a majority of the outstanding voting securities of the
Series, and (ii) by vote of a majority of the Trustees who are not "interested
persons," as that term is defined in the Investment Company Act of 1940 (the
"1940 Act"), of the Trust or TNE Advisers, cast in person at a meeting called
for the purpose of voting on such approval. Any amendment to the New Advisory
Agreement must be approved by TNE Advisers and the Trust, by vote of a
majority of the outstanding voting securities of the Series and by vote of a
majority of the Trustees who are not interested persons of the Trust or TNE
Advisers, cast in person at a meeting called for the purpose of voting on such
approval. The New Advisory Agreement may be terminated without penalty by vote
of the Trustees or by vote of a majority of the outstanding voting securities
of the Series, upon sixty days' written notice to TNE Advisers, or by TNE
Advisers upon ninety days' written notice to the Trust, and it terminates
automatically in the event of its assignment. In addition, the New Advisory
Agreement will automatically terminate if New England Securities Corporation
requires the Series to change its name so as to eliminate all references to
the words "New England" or the letters "TNE" unless the continuance of the New
Advisory Agreement after such change shall have been specifically approved by
vote of a majority of the outstanding voting securities of the Series and by
vote of a majority of the Trustees, including a majority of the Trustees who
are not interested persons of the Trust or TNE Advisers, cast in person at a
meeting called for the purpose of voting on such approval. The New Advisory
Agreement provides that TNE Advisers shall not be subject to any liability in
connection with the performance of its services thereunder in the absence of
willful misfeasance, bad faith or gross negligence in the performance of TNE
Advisers' duties or by reason of reckless disregard by TNE Advisers of its
obligations and duties thereunder.
6
<PAGE>
COMPARISON OF CURRENT AND NEW ADVISORY AGREEMENTS
The proposed New Advisory Agreement for the Series is substantially similar
to the Current Advisory Agreement, except that, as the table below
demonstrates, there will be an increase in the fees paid to TNE Advisers by
the Series:
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL: (UNDER THE
ANNUAL FUND OPERATING EXPENSES UNDER CURRENT NEW ADVISORY
FOR FISCAL YEAR ENDED DECEMBER 31, 1997 ADVISORY AGREEMENT AGREEMENT)
- --------------------------------------- ------------------ ------------
(as a % of net assets)
<S> <C> <C>
Management Fees................................. 0.70% 0.75%
Other Expenses.................................. 0.15%* 0.15%*
Total Fund Operating Expenses................... 0.85%* 0.90%*
</TABLE>
- -----------
* After giving effect to the Voluntary Expense Agreement and the Expense
Deferral Agreement, as described above under "Voluntary Expense
Limitations," for actual and pro forma, respectively. Without giving effect
to such arrangements, actual and pro forma Other Expenses would each be
0.16%, and actual and pro forma Total Fund Operating Expenses would be 0.86%
and 0.91% respectively.
The foregoing table is based on expenses and asset levels for the fiscal
year ended December 31, 1997 and does not reflect expenses, including sales
loads, that may be imposed by the separate accounts to which the Series offers
its shares. The "Pro forma" fees and expenses set forth in the foregoing table
are calculated under the assumption that the New Advisory Agreement (and the
corresponding Expense Deferral Agreement) took effect on January 1, 1997.
EXAMPLE
A $1,000 investment in the Series would incur the following dollar amounts
of transaction costs and operating expenses, assuming a 5% annual return and,
unless otherwise noted, redemption at period end. The 5% return and expense
levels used in calculating this example (which give effect to the voluntary
expense limitations described in the footnote to the preceding table) should
not be regarded as predictions of future investment return or of Series'
expenses, both of which will vary:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Based on actual expenses under the Current
Advisory Agreement........................... $ 9 $27 $47 $105
You would pay the following expenses on the
same investment under the proposed New
Advisory Agreement........................... $ 9 $29 $50 $111
</TABLE>
As of December 31, 1997, the Series' net assets were approximately $115
million. As noted above under "Current Advisory Agreement," for the fiscal
year
7
<PAGE>
ended December 31, 1997, management fees payable by the Series to TNE Advisers
under the Current Advisory Agreement were $711,667. If the New Advisory
Agreement had been in effect during 1997, management fees payable by the
Series to TNE Advisers under such agreement would have been $762,500, or 7%
more than the management fees payable under the Current Advisory Agreement,
and, assuming the Expense Deferral Agreement (as described above under
"Voluntary Expense Limitations") was in effect during 1997, TNE Advisers would
have borne $7,292 of the Series' expenses for such year pursuant to such
Agreement.
DESCRIPTION OF THE NEW SUB-ADVISORY AGREEMENT
The form of the New Sub-Advisory Agreement is attached to this Proxy
Statement as Appendix B. The following summary description of the New Sub-
Advisory Agreement is qualified in its entirety by reference to the full text
of the form of the Agreement.
The proposed New Sub-Advisory Agreement requires GSAM to manage the
investment and reinvestment of the assets of the Series, subject to the
supervision of TNE Advisers. Under the terms of the New Sub-Advisory
Agreement, GSAM is authorized to effect portfolio transactions for the Series
in the discretion of GSAM and without prior consultation with TNE Advisers.
GSAM is required to report periodically to TNE Advisers, its agents and the
Trustees of the Trust. TNE Advisers compensates GSAM at an annual rate of
0.45% of the first $100 million of the Series' average daily net assets, 0.40%
of the next $400 million of such assets and 0.35% of such assets in excess of
$500 million.
The New Sub-Advisory Agreement provides that it will continue in effect for
two years from its date of execution, and from year to year thereafter so long
as such continuance is specifically approved at least annually (i) by the
Board of Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series, and (ii) by vote of a majority of the
Trustees who are not "interested persons," as that term is defined in the 1940
Act, of the Trust, TNE Advisers or GSAM, cast in person at a meeting called
for the purpose of voting on such approval. Any amendment to the New Sub-
Advisory Agreement must be approved by TNE Advisers and GSAM and, if required
by law, by vote of a majority of the Trustees who are not interested persons
of the Trust, TNE Advisers or GSAM, cast in person at a meeting called for the
purpose of voting on such approval, and/or by vote of a majority of the
outstanding voting securities of the Series. The New Sub-Advisory Agreement
may be terminated without penalty by vote of the Board of Trustees of the
Trust, including a majority of the Trustees who are not interested persons of
the Trust, TNE Advisers or GSAM, or by vote of a majority of the outstanding
voting securities of the Series, upon sixty days' written notice to GSAM, by
GSAM upon sixty days' written notice to TNE Advisers and the Trust
8
<PAGE>
or, if approved by the Board of Trustees of the Trust, by TNE Advisers upon
sixty days' written notice to GSAM, and it terminates automatically in the
event of its assignment or upon the termination of the New Advisory Agreement.
In addition, the New Sub-Advisory Agreement will automatically terminate if
GSAM requires the Series to change its name so as to eliminate all references
to "Goldman Sachs," unless the continuance of the New Sub-Advisory Agreement
after such change shall have been specifically approved by vote of a majority
of the outstanding voting securities of the Series and by vote of a majority
of the Trustees of the Trust, including a majority of the Trustees who are not
interested persons of the Trust, TNE Advisers or GSAM, cast in person at a
meeting called for the purpose of voting on such approval. The New Sub-
Advisory Agreement provides that GSAM shall not be subject to any liability in
connection with the performance of its services thereunder in the absence of
willful misfeasance, bad faith or gross negligence in the performance of
GSAM's duties or by reason of reckless disregard by GSAM of its obligations
and duties thereunder. The New Sub-Advisory Agreement requires that the Series
change its name so as to delete any reference to "Goldman Sachs" in the event
that GSAM or an affiliate thereof no longer serves as sub-adviser to the
Series.
As described below, although the terms of the Current and New Sub-Advisory
Agreements are substantially similar except as noted above, GSAM will follow a
substantially different approach to managing the Series' portfolio than that
currently being followed by Loomis Sayles, and it is proposed that the Series'
investment objective be correspondingly revised, as set forth in Part III of
this Proxy Statement.
APPOINTMENT OF GSAM AS SUB-ADVISER
Based on a review of the investment approach used by Loomis Sayles in
managing the Series' portfolio, the Series' performance record under Loomis
Sayles' management, the performance record of GSAM in managing equity accounts
and the performance of other equity funds, TNE Advisers recommended and the
Trustees determined that it would be appropriate for GSAM to assume
responsibility for the day-to-day management of the Series' portfolio. Thus,
on January 28, 1998, the Trustees approved the termination of the Current
Agreements and approved the New Agreements. The New Agreements are subject to
the approval of the Series' shareholders. Assuming that the New Agreements are
approved by the Series' shareholders, the Current Agreements will terminate,
and the New Agreements will take effect, on or about May 1, 1998, at which
time GSAM will begin acting as the Series' sub-adviser. The Trustees
unanimously recommend that shareholders approve the New Agreements.
In connection with the change of sub-adviser, the Series' name would be
changed to the "Goldman Sachs Midcap Value Series."
9
<PAGE>
In determining to approve the appointment of GSAM as sub-adviser to the
Series and to recommend the New Agreements for shareholder approval, the
Trustees considered the qualifications of GSAM and its personnel to provide
portfolio management services to the Series. The Trustees also considered
extensive information about the Series, GSAM and GSAM's proposed approach to
managing the Series' portfolio, including information about GSAM's
organizational structure, investment and legal and compliance personnel,
compliance procedures and financial condition. In addition, GSAM's affiliation
with Goldman, Sachs & Co. ("Goldman Sachs") was included in the Trustees'
analysis. Goldman Sachs is among the oldest and largest investment banking
firms in the United States, and a leader in developing strategies in many
fields of investing and financing. GSAM is able to draw on the substantial
research and market expertise of Goldman Sachs, whose investment research
effort is one of the largest in the country.
The Trustees also considered GSAM's policies for placing portfolio
transactions of the Series with Goldman Sachs and other broker-dealers
affiliated with GSAM and broker-dealers that furnish brokerage and research
services to GSAM, as described below under "Portfolio Transactions and
Brokerage." The Trustees also took into account GSAM's substantial experience
and reputation as a manager of national and international equity investments,
and the prominence of the Goldman Sachs name in the marketplace for financial
products and services, as possible factors which might enhance the
marketability of the insurance products that invest in the Series, and thus
lead to growth in the size of the Series, although such growth cannot be
assured. The Trustees also considered possible benefits to GSAM that may
result from the New Sub-Advisory Agreement, including the possible use by the
Series of Goldman Sachs or its affiliates, to the extent permitted by law, for
brokerage services.
The Trustees also considered other effects on the Series of GSAM's
affiliation with Goldman Sachs. After the New Sub-Advisory Agreement takes
effect, the 1940 Act will prohibit or impose certain conditions on the ability
of the Series to engage in certain transactions with Goldman Sachs and its
affiliates. For example, the Series will be prohibited from purchasing
securities from Goldman Sachs in transactions in which Goldman Sachs acts as
principal. The Series will also have to satisfy certain conditions in order to
engage in securities transactions in which Goldman Sachs is acting as an
underwriter. In this connection, management of GSAM represented to the
Trustees that they do not believe these prohibitions or conditions will have a
material effect on the management or performance of the Series.
CHANGES IN INVESTMENT STYLE
In managing the Series' portfolio, Loomis Sayles currently seeks long-term
growth of capital, and ordinarily invests substantially all of the Series'
assets in
10
<PAGE>
equity securities. Investments are selected based on their growth potential;
current income is not a consideration. The Series normally invests primarily
in equity securities of companies with medium and large capitalization
(capitalization of $1 billion to $5 billion and over $5 billion,
respectively), but also invests a portion of its assets in equity securities
of companies with relatively small market capitalization (under $1 billion).
If the New Agreements are approved, GSAM plans to manage the Series'
portfolio using a substantially different investment style than Loomis Sayles
currently uses. GSAM intends to evaluate securities using fundamental analysis
and to purchase equity securities that are, in its view, underpriced relative
to a combination of such companies' long-term earnings prospects, growth rate,
free cash flow and/or dividend paying ability. GSAM has informed the Trust
that, if the New Agreements are approved by the Series' shareholders, GSAM
would expect to restructure the Series' portfolio to reflect GSAM's judgments
as to valuation and appropriate stock selection for the Series. GSAM expects
that the transaction costs of this restructuring would not exceed 1% of the
Series' net asset value. Based on the Series' net asset value at February 28,
1998, these estimated costs would not be in excess of $1,249,500. There can be
no assurance that actual costs would not be significantly higher or lower than
this estimate. Restructuring costs will consist primarily of brokerage fees
and dealer spreads or markups related to purchasing and selling securities for
the Series' portfolio. These amounts are treated as capital items, rather than
operating expenses. They will thus reduce the Series' net asset value, rather
than increase its operating expenses. The costs of holding the Meeting,
estimated at $171,500, are in addition to these restructuring costs and will
be borne by the Series, as described above, regardless of whether the proposed
New Agreements are approved.
Assuming that the proposed change in the Series' investment objective
described in Part III of this Proxy Statement is approved by shareholders
(which is a condition to GSAM's becoming sub-adviser to the Series), GSAM will
seek long-term capital appreciation of the Series, primarily by investing,
under normal circumstances, substantially all of the Series' assets in equity
securities and at least 65% of its total assets in equity securities of
companies with public stock market capitalizations (based upon shares
available for trading on an unrestricted basis) within the range of the market
capitalization of the companies constituting the Russell Midcap Index at the
time of investment. Such range varies over time, and as of December 31, 1997
was approximately from $400 million to $16 billion. If the capitalization of
an issuer decreases below or increases above the range of the Russell Midcap
Index, the Series may, but is not required to, sell the securities of such
issuer. Dividend income, if any, will be an incidental consideration. GSAM may
invest up to 35% of the Series' total assets in fixed-income securities. In
addition, although GSAM will invest primarily in publicly traded U.S.
securities, it may invest up to 25% of the Series' total assets in foreign
securities and securities quoted in foreign
11
<PAGE>
currencies, including securities of issuers in emerging countries. The Series
is currently permitted to invest up to 20% of its assets in foreign
securities.
In order to advance the general principles set forth above with respect to
the Series, GSAM may cause the Series to invest in certain types of securities
or engage in certain investment techniques, in addition to those currently
permitted and disclosed by the Series in its current Prospectus, when GSAM has
determined that such investments or techniques might enhance the Series'
return. The additional types of securities in which the Series may invest
include: 1) structured securities; 2) real estate investment trusts; 3)
mortgage-backed and asset backed securities; and 4) lower-rated fixed income
securities. The additional investment techniques in which the Series may
engage include: 1) purchasing options on securities, securities indices,
futures contracts or foreign currencies; 2) entering futures contracts; 3)
purchasing when-issued securities or forward commitments; 4) lending portfolio
securities; 5) making short sales against-the-box; and 6) engaging in certain
other temporary and miscellaneous techniques. Each of these techniques is a
highly specialized activity which involves methods and risks different from
those associated with ordinary portfolio transactions. A detailed discussion
of these investments and investment techniques and their potential benefits
and risks is set forth in Appendix C.
Based on this review, the Trustees concluded that it is appropriate and
desirable for GSAM to assume responsibility for the management of the Series'
portfolio under the New Sub-Advisory Agreement. Therefore:
THE TRUSTEES OF THE TRUST UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE TO
APPROVE BOTH THE PROPOSED NEW ADVISORY AGREEMENT AND THE PROPOSED NEW SUB-
ADVISORY AGREEMENT.
The required vote for approval of each of the New Advisory Agreement and the
New Sub-Advisory Agreement is the lesser of (1) 67% of the shares of the
Series represented at the Meeting, if more than 50% of the outstanding shares
of the Series are represented at the Meeting, or (2) more than 50% of the
outstanding shares of the Series. Each of the New Agreements will take effect
only upon approval of both of the New Agreements and the proposed change in
the Series' investment objective discussed below. If the shareholders of the
Series do not approve each of Proposals 1, 2 and 3, the Trustees of the Trust
will consider such alternative actions as may be in the best interests of the
Series.
III. APPROVAL OF A CHANGE IN INVESTMENT OBJECTIVE
The investment objective that GSAM proposes to pursue with respect to the
Series' portfolio differs from the current investment objective of the Series.
The current investment objective, long-term growth of capital, is a
fundamental policy of the Series, which cannot be changed without shareholder
approval. In order for GSAM to manage the Series in a manner consistent with
its proposed investment style, the Trustees recommend, and seek shareholder
approval of, replacement of
12
<PAGE>
the existing fundamental objective with a new, non-fundamental objective of
long-term capital appreciation (Proposal 3). As a non-fundamental policy, the
new investment objective could be changed by the Trustees without shareholder
approval. The Trustees have no current intention of proposing further changes
to the investment objective, and the change from fundamental to non-
fundamental is being proposed simply to provide greater flexibility and avoid
the delay and expense of holding a shareholder meeting should the Trustees
determine at some future time that other changes in the investment objective
are desirable. Therefore, after review of the current and proposed investment
objectives of the Series:
THE TRUSTEES OF THE TRUST UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE TO
APPROVE A CHANGE IN THE INVESTMENT OBJECTIVE OF THE SERIES FROM A FUNDAMENTAL
POLICY OF LONG-TERM CAPITAL GROWTH TO A NON-FUNDAMENTAL POLICY OF LONG-TERM
CAPITAL APPRECIATION.
The required vote for approval of the change to the investment objective is
the lesser of (1) 67% of the shares of the Series represented at the Meeting,
if more than 50% of the outstanding shares of the Series are represented at
the Meeting, or (2) more than 50% of the outstanding shares of the Series. The
new investment objective will take effect only upon approval of both New
Agreements as well as Proposal 3. If the shareholders of the Series do not
approve each of Proposals 1, 2 and 3, the Trustees of the Trust will consider
such alternative actions as may be in the best interests of the Series.
IV. FUTURE SUB-ADVISORY AGREEMENTS WITHOUT SHAREHOLDER VOTE
The Series proposes, to the extent permitted by any exemption or exemptions
granted by the SEC, to permit TNE Advisers to enter into new or amended
agreements with any sub-adviser with respect to the Series without obtaining
shareholder approval of such agreements, and to permit such sub-advisers to
manage the assets of the Series pursuant to such sub-advisory agreements.
The 1940 Act generally provides that an investment adviser or sub-adviser to
a mutual fund may act as such only pursuant to a written agreement which has
been approved by a vote of the fund's shareholders, as well as by a vote of a
majority of the trustees of the fund who are not parties to such agreement or
interested persons of any party to such agreement. The Trust and TNE Advisers,
however, have received from the SEC an exemption from the shareholder approval
voting requirement in certain circumstances (the "SEC Exemption"). Under the
SEC Exemption, TNE Advisers is permitted, under specified conditions, to enter
into new and amended sub-advisory agreements for the management of the Series,
including agreements with new sub-advisers and agreements with existing sub-
advisers if there is a material change in the terms of the sub-advisory
agreement or
13
<PAGE>
if there is an "assignment," as defined in the 1940 Act, or other event
causing termination of the existing sub-advisory agreement, without obtaining
the approval of the Series' shareholders of such new or amended sub-advisory
agreement. Such agreements must nevertheless be approved by the Trustees, in
accordance with the requirements of the 1940 Act. One of the conditions of the
SEC Exemption is that within 90 days after entering into a new or amended sub-
advisory agreement without shareholder approval, the Series must provide to
shareholders an information statement setting forth substantially the
information that would be required to be contained in a proxy statement for a
meeting of shareholders to vote on the approval of the agreement. Furthermore,
the Series would still require shareholder approval to amend its Advisory
Agreement with TNE Advisers (including any amendment to raise the management
fee rate payable under such agreement) or to enter into a new Advisory
Agreement with TNE Advisers or any other adviser.
The Trust is requesting shareholder approval of this Proposal for several
reasons. As described under Proposals 1 and 2, the Series utilizes an
adviser/sub-adviser management structure, where TNE Advisers acts as the
Series' investment adviser, delegating the day-to-day portfolio management to
a sub-adviser. Under such a structure, the Series' sub-adviser acts in a
capacity similar to that of the portfolio manager in a more traditional
structure that does not involve a sub-adviser. Specifically, the Series' sub-
adviser, like a portfolio manager in a more traditional mutual fund advisory
structure, manages the Series under the oversight and supervision of the
Series' adviser. If the Series were to change sub-advisers, TNE Advisers would
continue in its role as adviser and would continue to exercise oversight and
supervision of the Series' investment affairs as conducted by the new sub-
adviser. Changing the Series' sub-adviser is, therefore, analogous to the
adviser's replacing the portfolio manager of a single-manager managed fund who
is employed by the adviser, which does not require shareholder approval under
the 1940 Act.
In addition, given the Series' management structure, the shareholder
approval requirement under the 1940 Act may cause the Series' shareholders to
incur unnecessary expenses and could hinder the prompt implementation of sub-
advisory changes that are in the best interest of the shareholders, such as
prompt removal of a sub-adviser if circumstances warrant such removal. The
Trustees believe that without the ability to employ promptly a new sub-adviser
or re-employ promptly the current sub-adviser upon a change of control, as the
case may be, investors' expectations may be frustrated and the Series and its
shareholders could be seriously disadvantaged under the following
circumstances: (a) where a sub-adviser has been terminated because its
performance was unsatisfactory or its retention was otherwise deemed
inadvisable, (b) where a sub-adviser has resigned and (c) where there has been
an "assignment" (i.e., a change in the actual control or management of a sub-
adviser) or other event causing the termination of a sub-advisory agreement.
14
<PAGE>
In the absence of an exemption, to obtain the shareholder approval required
by the 1940 Act for a sub-advisory agreement, the Series must convene a
shareholder's meeting, which invariably involves considerable delay and
expense. Where TNE Advisers, as adviser, has recommended replacement of a sub-
adviser, and the Trustees have determined that such replacement is necessary,
the Series could receive less than satisfactory sub-advisory services prior to
the time that an agreement with a new sub-adviser is approved by shareholders.
Also, in that situation or where there has been an unexpected resignation or
change in control of a sub-adviser (events which, in many cases, are beyond
the control of the Series), the Series may be forced to operate with a less
than satisfactory sub-adviser for some period of time. In such circumstances,
without the ability to engage a new sub-adviser promptly, TNE Advisers, as the
adviser, might have to assume direct responsibility on a temporary basis for
management of the assets previously assigned to a sub-adviser.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS VOTE TO APPROVE THE
PROPOSED GRANT OF AUTHORITY TO PERMIT TNE ADVISERS TO ENTER INTO NEW OR
AMENDED AGREEMENTS WITH SUB-ADVISERS WITH RESPECT TO THE SERIES WITHOUT
OBTAINING SHAREHOLDER APPROVAL OF SUCH AGREEMENTS, AND TO PERMIT SUCH SUB-
ADVISERS TO MANAGE THE ASSETS OF THE SERIES PURSUANT TO SUCH SUB-ADVISORY
AGREEMENTS.
The required vote for approval of the grant of authority to permit TNE
Advisers to enter into new and amended sub-advisory agreements without prior
shareholder approval is the lesser of (1) 67% of the shares of the Series
represented at the Meeting, if more than 50% of the outstanding shares of the
Series are represented at the Meeting, or (2) more than 50% of the outstanding
shares of the Series. If the shareholders of the Series do not approve this
Proposal 4, the Trustees of the Trust will consider such alternative actions
as may be in the best interests of the Series.
V. ADDITIONAL INFORMATION
The Trust is a diversified, open-end management investment company organized
in 1987 as a business trust under the laws of Massachusetts. The Trust is a
series type company with fourteen investment portfolios. The Series is one of
those portfolios. Shares in the Trust are not offered directly to the general
public, and currently are available only to separate accounts established by
NELICO, MetLife or subsidiaries of MetLife as an investment vehicle for
variable life insurance or variable annuity products, although not all of the
Trust's series may be available to all separate accounts. The address of the
Trust is 501 Boylston Street, Boston, Massachusetts 02116. New England
Securities Corporation, 399 Boylston Street, Boston, Massachusetts, 02116, is
the principal underwriter of the Trust.
15
<PAGE>
INFORMATION ABOUT TNE ADVISERS
TNE Advisers is a wholly-owned subsidiary of New England Life Holdings,
Inc., which is a wholly-owned subsidiary of NELICO, which in turn is a wholly-
owned subsidiary of MetLife New England Holdings, Inc. ("MetLife Holdings").
MetLife Holdings is wholly owned by MetLife, a mutual insurance company. TNE
Advisers acts as adviser to all of the series of the Trust except the Capital
Growth Series. The Chairman of the Board and President of TNE Advisers is
Frederick K. Zimmermann; Mr. Zimmermann and John F. Guthrie, Jr. are TNE
Advisers' directors. Mr. Zimmerman is also Chairman of the Board, Chief
Executive Officer and President and a Trustee of the Trust. Mr. Guthrie is
Senior Vice President of TNE Advisers. Mr. Zimmermann's principal occupation
is Executive Vice President and Chief Investment Officer of NELICO, and Mr.
Guthrie's principal occupation is Vice President of NELICO. The address of TNE
Advisers, New England Life Holdings, Inc., NELICO and Messrs. Zimmermann and
Guthrie is 501 Boylston Street, Boston, Massachusetts 02116. The address of
MetLife and MetLife Holdings is One Madison Avenue, New York, New York 10010.
TNE Advisers acts as investment adviser to the following other mutual funds
that have investment objectives and policies similar to those of the Series
(although the policies are somewhat different from those proposed to take
effect when GSAM becomes sub-adviser). The table below sets forth the annual
fee rate of compensation for the corresponding average net asset levels of
these funds, and the net assets of these other funds at December 31, 1997.
<TABLE>
<CAPTION>
NET ASSETS OF
OTHER FUND (IN
OTHER FUND WITH MILLIONS) ON
SIMILAR OBJECTIVE 12/31/97 ANNUAL FEE RATE
----------------- -------------- ---------------
<S> <C> <C>
Alger Equity Growth Series, an investment
portfolio of New England Zenith Fund...... $205 .75% of net assets
Davis Venture Value Series, an investment
portfolio of New England Zenith Fund...... $208 .75% of net assets
</TABLE>
INFORMATION ABOUT GSAM
GSAM is a separate operating division of Goldman Sachs and has its principal
business address at One New York Plaza, New York, New York 10004. Goldman
Sachs is a worldwide investment banking firm and has its principal business
address at 85 Broad Street, New York, New York 10004. The principal executive
officers of Goldman Sachs are Jon S. Corzine and Henry M. Paulson. The
principal occupation of Messrs. Corzine and Paulson is the management of
Goldman Sachs. The general partners of Goldman Sachs are The Goldman Sachs
Group, L.P. (a Delaware limited partnership) ("GSGLP") and The Goldman, Sachs
& Co. L.L.C. (a Delaware limited liability company) ("GSCLLC"). The Goldman
Sachs Corporation ("GSC") is the parent company of both GSGLP and GSCLLC.
16
<PAGE>
GSGLP is also a parent of GSCLLC. GSC is the sole general partner of GSGLP.
The principal business address of the executive officers and general partners
of Goldman Sachs, GSAM, GSGLP, GSCLLC and GSC is 85 Broad Street, New York,
New York 10004.
GSAM is investment adviser to the following other mutual fund that has an
investment objective similar to that of the Series, for compensation at the
annual fee rate of the corresponding average net asset levels of such fund set
forth in the table below. The table also sets forth the net assets of that
fund at December 31, 1997.
<TABLE>
<CAPTION>
NET ASSETS OF
OTHER FUND (IN
OTHER FUND WITH MILLIONS) ON
SIMILAR OBJECTIVE 12/31/97 ANNUAL FEE RATE
----------------- -------------- ---------------
<S> <C> <C>
Goldman Sachs Mid Cap Equity Fund............ $335 0.75% of net assets
</TABLE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
If the New Sub-Advisory Agreement is approved, GSAM would expect to follow
the practices described below with respect to the portfolio transactions of
the Series.
GSAM places orders with broker-dealers for securities to be purchased by the
Series. The primary objective of GSAM in choosing brokers for the purchase and
sale of securities for the Series' portfolio is to obtain the most favorable
net results, taking into account such factors as price, commission, size of
order, difficulty of execution and the degree of skill required of the broker-
dealer. The capability and financial condition of the broker may also be
criteria for the choice of that broker. The placing and execution of orders
for the Series is also subject to restrictions under U.S. securities laws,
including certain prohibitions against trading among the Series and its
affiliates (including GSAM and its affiliates). The Series may utilize Goldman
Sachs and other affiliates of GSAM in connection with the purchase or sale of
securities in accordance with rules or exemptive orders adopted by the SEC
when GSAM believes that the charge for the transaction does not exceed usual
and customary levels. In addition, the Series may purchase securities in a
placement for which Goldman Sachs and other affiliates of GSAM have acted as
agent to or for issuers, consistent with applicable rules adopted by the SEC
or regulatory authorization, if necessary. The Series will not purchase
securities from or sell securities to any affiliate of GSAM acting as
principal.
GSAM on behalf of the Series may place brokerage transactions through
brokers who provide GSAM with investment research services, including market
and statistical information and quotations for portfolio valuation purposes.
The terms "investment research" and "market and statistical information and
quotations" include advice as to the value of securities, the advisability of
17
<PAGE>
investing in, purchasing or selling securities and the availability of
securities and potential buyers or sellers of securities, as well as the
furnishing of analyses and reports concerning issuers, industries, securities,
economic factors and trends and portfolio strategy, each and all as consistent
with those services mentioned in Section 28(e) of the Securities Exchange Act
of 1934, as amended.
Research provided to GSAM in advising the Series is in addition to and not
in lieu of the services required to be performed by GSAM itself, and GSAM's
fees will not be reduced as a result of the receipt of such supplemental
information. It is the opinion of the management of GSAM that such information
is only supplementary to GSAM's own research efforts, since the information
must still be analyzed, weighed and reviewed by GSAM's staff. Such information
may be useful to GSAM in providing services to clients other than the Series,
and not all such information is necessarily used by GSAM in connection with
the Series. Conversely, information provided to GSAM by brokers and dealers
through whom other clients of GSAM effect securities transactions may prove
useful to GSAM in providing services to the Series.
BROKERAGE TRANSACTIONS WITH AFFILIATES
GSAM may, if the New Sub-Advisory Agreement is approved, cause the Series to
pay brokerage commissions to an affiliated broker for acting as agent on
purchases and sales of securities for the portfolio of the Series. SEC rules
require that commissions paid to an affiliated broker of an adviser or sub-
adviser to a mutual fund for portfolio transactions not exceed "usual and
customary" brokerage commissions. The rules define "usual and customary"
commissions to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a
comparable period of time." The Trustees, including those who are not
"interested persons" of the Trust, have adopted procedures for evaluating the
reasonableness of commissions paid to affiliated brokers and will review these
procedures periodically. During the fiscal year ended December 31, 1997, the
Series did not pay any brokerage commissions to any broker then affiliated
with TNE Advisers or Loomis Sayles, the Series' adviser and sub-adviser, but
paid $900 in commissions to Goldman Sachs.
OWNERSHIP OF SHARES AND VOTING INFORMATION
As of the Record Date, all of the shares of the Series were owned by either:
(1) New England Variable Life Separate Account ("NEVL Separate Account"), a
separate account of NELICO, which is an indirect wholly-owned life insurance
subsidiary of MetLife; (2) The New England Variable Account, a separate
account of MetLife; (3) New England Variable Annuity Separate Account ("NEVA
Separate Account"), a separate account of NELICO; (4) certain separate
accounts
18
<PAGE>
of MetLife established for the pooling of contributions under certain tax-
qualified group annuity contracts ("MetLife Group Separate Accounts"); or (5)
certain separate accounts of NELICO established for the pooling of
contributions under certain tax-qualified group annuity contracts ("NELICO
Group Separate Accounts"). The shares and percentages of the Series held by
these entities are set forth below:
<TABLE>
<CAPTION>
NUMBER % OF
SHAREHOLDER OF SHARES OUTSTANDING
----------- ----------- -----------
<S> <C> <C>
NEVL Separate Account................................... 211,600.160 31.45%
501 Boylston Street
Boston, MA 02116
The New England Variable Account........................ 267,484.670 39.76%
One Madison Avenue
New York, NY 10010
NEVA Separate Account................................... 189,029.174 28.10%
501 Boylston Street
Boston, MA 02116
MetLife Group Separate Accounts......................... 1,180.128 0.18%
One Madison Avenue
New York, NY 10010
NELICO Group Separate Accounts.......................... 3,421.796 .51%
501 Boylston Street
Boston, MA 02116
----------- ------
Totals................................................ 672,715.928 100.00%
</TABLE>
As of the Record Date, the officers and Trustees of the Trust as a group
owned beneficially less than 1% of the outstanding shares of the Series.
The Trust is subject to special voting provisions. As of the Record Date,
the Trust served as an investment vehicle for use only in connection with (1)
variable life insurance contracts offered by NELICO and (2) certain variable
annuity contracts, including group annuity contracts, of MetLife and NELICO.
All shares of the Series owned by NEVL Separate Account and NEVA Separate
Account are attributable to variable life insurance policies and variable
annuity contracts issued by NELICO or to charges assessed by NELICO against
those policies and contracts. NELICO has agreed that each owner of such a
policy or contract (an "Owner") will be permitted to instruct NELICO as to how
shares of the Trust attributable to the policies or contracts owned by such
Owner should be voted at meetings of Trust shareholders. With respect to each
of these separate accounts, all shares of the Series attributable to such
policies and contracts for which no Owner instructions have been received by
NELICO and all shares of the Series attributable
19
<PAGE>
to charges assessed by NELICO against such policies and contracts will be
voted for, voted against or withheld from voting on any proposal in the same
proportions as are the shares for which Owner instructions have been received
by NELICO with respect to policies or contracts issued by such separate
account. All shares of the Series held by The New England Variable Account are
attributable to variable annuity contracts of MetLife or to charges assessed
by MetLife against such contracts. The holder of each such contract (a
"Contractholder") has the right to instruct MetLife as to how to vote the
shares of the Trust attributable to such contract. All shares of the Series
held by The New England Variable Account for which no Contractholder
instructions have been received by MetLife and any shares of the Series
attributable to charges assessed by MetLife against variable annuity contracts
will be voted for, voted against or withheld from voting on any proposal in
the same proportions as are the shares for which Contractholder instructions
have been received by MetLife. All shares of the Series held by NELICO Group
Separate Accounts or MetLife Group Separate Accounts will be voted for, voted
against or withheld from voting on any proposal in the same proportion as the
aggregate of (i) the shares for which voting instructions are received and
(ii) the shares that are voted in proportion to such voting instructions.
CERTAIN TRUSTEES AND OFFICERS OF THE TRUST
The following persons are both officers or Trustees of the Trust and
officers or directors of TNE Advisers: Frederick K. Zimmermann, John F.
Guthrie, Jr., Alan C. Leland, Jr., Maura A. Murphy and Thomas C. McDevitt.
OTHER MATTERS
The holders of forty percent of the shares of the Series outstanding on the
Record Date, present in person or represented by proxy, constitute a quorum
for the transaction of business at the Meeting, although it is necessary for
at least a majority of the shares of the Series to be represented at the
Meeting in order for any of the Proposals to be approved. Votes cast by proxy
or in person at the Meeting will be counted by persons appointed by the Trust
as tellers for the Meeting. The tellers will count the total number of votes
cast "for" approval of each Proposal for purposes of determining whether
sufficient affirmative votes have been cast. The tellers will count all shares
represented by proxies that reflect abstentions for purposes of determining
the presence of a quorum. Assuming the presence of a quorum, abstentions have
the effect of a negative vote on each Proposal.
In the event that a quorum is not present for purposes of acting on each
Proposal, or if sufficient votes in favor of each Proposal are not received by
the time of the Meeting, the persons named as proxies may vote on those
matters for
20
<PAGE>
which a quorum is present and as to which sufficient affirmative votes have
been received, and may propose one or more adjournments of the Meeting to
permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of the shares present in person or represented
by proxy at the session of the Meeting to be adjourned. The persons named as
proxies will vote in favor of such adjournment those proxies which they are
entitled to vote in favor of any Proposal as to which sufficient affirmative
votes have been received. They will vote against any such adjournment those
proxies required to be voted against each Proposal as to which sufficient
affirmative votes have been received and will not vote any proxies that direct
them to abstain from voting on such Proposals.
Although the Meeting is called to transact any other business that may
properly come before it, the only business that management intends to present
or knows that others will present is Proposals 1, 2, 3 and 4 mentioned in the
Notice of Special Meeting. However, you are being asked on the enclosed proxy
to authorize the persons named therein to vote in accordance with their
judgment with respect to any additional matters which properly come before the
Meeting, and on all matters incidental to the conduct of the Meeting.
SHAREHOLDER PROPOSALS AT FUTURE MEETINGS
The Trust does not hold annual or other regular meetings of shareholders.
Shareholder proposals to be presented at any future meeting of shareholders of
the Trust must be received by the Trust at a reasonable time before the
Trust's solicitation of proxies for that meeting in order for such proposals
to be considered for inclusion in the proxy materials relating to that
meeting.
March 11, 1998
21
<PAGE>
APPENDIX A
ADVISORY AGREEMENT
GOLDMAN SACHS MIDCAP VALUE SERIES
AGREEMENT made this th day of , 1998 by and between NEW ENGLAND ZENITH
FUND, a Massachusetts business trust (the "Fund") with respect to its Goldman
Sachs Midcap Value Series (the "Series"), and TNE ADVISERS, INC., a
Massachusetts corporation (the "Manager").
WITNESSETH:
WHEREAS, the Fund and the Manager wish to enter into an agreement setting
forth the terms upon which the Manager (or certain other parties acting
pursuant to delegation from the Manager) will perform certain services for the
Series;
NOW THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties agree as follows:
1. (a) The Fund hereby employs the Manager to furnish the Fund with
Portfolio Management Services (as defined in Section 2 hereof) and
Administrative Services (as defined in Section 3 hereof), subject to the
authority of the Manager to delegate any or all of its responsibilities
hereunder to other parties as provided in Sections 1(b) and (c) hereof. The
Manager hereby accepts such employment and agrees, at its own expense, to
furnish such services (either directly or pursuant to delegation to other
parties as permitted by Sections 1(b) and (c) hereof) and to assume the
obligations herein set forth, for the compensation herein provided. The
Manager shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be deemed
an agent of the Fund.
(b) The Manager may delegate any or all of its responsibilities hereunder
with respect to the provision of Portfolio Management Services (and assumption
of related expenses) to one or more other parties (each such party, a "Sub-
Adviser"), pursuant in each case to a written agreement with such Sub-Adviser
that meets the requirements of Section 15 of the Investment Company Act of
1940 and the rules thereunder (the "1940 Act") applicable to contracts for
service as investment adviser of a registered investment company (including
without limitation the requirements for approval by the trustees of the Fund
and the shareholders of the Series), subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission. Any Sub-Adviser may
(but need not) be affiliated with the Manager. If different Sub-Advisers are
engaged to provide Portfolio Management Services with respect to different
segments of the portfolio of the Series, the Manager shall determine, in the
manner described in the prospectus of
A-1
<PAGE>
the Series from time to time in effect, what portion of the assets belonging
to the Series shall be managed by each Sub-Adviser.
(c) The Manager may delegate any or all of its responsibilities hereunder
with respect to the provision of Administrative Services to one or more other
parties (each such party, an "Administrator") selected by the Manager. Any
Administrator may (but need not) be affiliated with the Manager.
2. As used in this Agreement, "Portfolio Management Services" means
management of the investment and reinvestment of the assets belonging to the
Series, consisting specifically of the following:
(a) obtaining and evaluating such economic, statistical and financial
data and information and undertaking such additional investment research
as shall be necessary or advisable for the management of the investment
and reinvestment of the assets belonging to the Series in accordance with
the Series' investment objectives and policies;
(b) taking such steps as are necessary to implement the investment
policies of the Series by purchasing and selling of securities, including
the placing of orders for such purchase and sale; and
(c) regularly reporting to the Board of Trustees of the Fund with
respect to the implementation of the investment policies of the Series.
3. As used in this Agreement, "Administrative Services" means the provision
to the Fund, by or at the expense of the Manager, of the following:
(a) office space in such place or places as may be agreed upon from time
to time by the Fund and the Manager, and all necessary office supplies,
facilities and equipment;
(b) necessary executive and other personnel for managing the affairs of
the Series, including personnel to perform clerical, bookkeeping,
accounting, stenographic and other office functions (exclusive of those
related to and to be performed under contract for custodial, transfer,
dividend and plan agency services by the entity or entities selected to
perform such services;
(c) compensation, if any, of trustees of the Fund who are directors,
officers or employees of the Adviser, any Sub-Adviser or any Administrator
or of any affiliated person (other than a registered investment company)
of the Manager, any Sub-Adviser or any Administrator;
(d) all services, other than services of counsel, required in connection
with the preparation of registration statements and prospectuses,
including amendments and revisions thereto, all annual, semiannual and
periodic reports, and notices and proxy solicitation material furnished to
shareholders of the Fund or regulatory authorities, to the extent that any
such materials relate to the business of the Series, to the shareholders
thereof or otherwise to
A-2
<PAGE>
the Series, the Series to be treated for these purposes as a separate
legal entity and fund; and
(e) supervision and oversight of the Portfolio Management Services
provided by each Sub-Adviser, and oversight of all matters relating to
compliance by the Fund with applicable laws and with the Fund's investment
policies, restrictions and guidelines, if the Manager has delegated to one
or more Sub-Advisers any or all of its responsibilities hereunder with
respect to the provision of Portfolio Management Services.
4. Nothing in section 4 hereof shall require the Manager to bear, or to
reimburse the Fund for:
(a) any of the costs of printing and mailing the items referred to in
sub-section (d) of this section 4;
(b) any of the costs of preparing, printing and distributing sales
literature;
(c) compensation of trustees of the Fund who are not directors, officers
or employees of the Manager, any Sub-Adviser or any Administrator or of
any affiliated person (other than a registered investment company) of the
Manager, any Sub-Adviser or any Administrator;
(d) registration, filing and other fees in connection with requirements
or regulatory authorities;
(e) the charges and expenses of any entity appointed by the Fund for
custodial, paying agent, shareholder servicing and plan agent services;
(f) charges and expenses of independent accountants retained by the
Fund;
(g) charges and expenses of any transfer agents and registrars appointed
by the Fund;
(h) brokers' commissions and issue and transfer taxes chargeable to the
Fund in connection with securities transactions to which the Fund is a
party;
(i) taxes and fees payable by Fund to federal, state or other
governmental agencies;
(j) any cost of certificates representing shares of the Fund;
(k) legal fees and expenses in connection with the affairs of the Fund
including registering and qualifying its shares with Federal and State
regulatory authorities;
(l) expenses of meetings of shareholders and trustees of the Fund; and
(m) interest, including interest on borrowings by the Fund.
5. All activities undertaken by the Manager or any Sub-Adviser or
Administrator pursuant to this Agreement shall at all times be subject to the
A-3
<PAGE>
supervision and control of the Board of Trustees of the Fund, any duly
constituted committee thereof or any officer of the Fund acting pursuant to
like authority.
6. The services to be provided by the Manager and any Sub-Adviser or
Administrator hereunder are not to be deemed exclusive and the Manager and any
Sub-Adviser or Administrator shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished and
expenses borne by the Manager hereunder, the Fund shall pay the Manager
compensation at the annual rate of .70% of the first $200 million in average
daily net assets, .65% of the next $300 million in average net assets and .60%
of the excess over $500 million in average net assets. Such compensation shall
be payable monthly in arrears or at such other intervals, not less frequently
than quarterly, as the Board of Trustees of the Fund may from time to time
determine and specify in writing to the Manager. The Manager hereby
acknowledges that the Fund's obligation to pay such compensation is binding
only on the assets and property belonging to the Series.
8. If the total of all ordinary business expenses of the Fund as a whole
(including investment advisory fees but excluding taxes and portfolio
brokerage commissions) for any fiscal year exceeds the lowest applicable
percentage of average net assets or income limitations prescribed by any state
in which shares of the Series are qualified for sale, the Manager shall pay
such excess. Solely for purposes of applying such limitations in accordance
with the foregoing sentence, the Series and the Fund shall each be deemed to
be a separate fund subject to such limitations. Should the applicable state
limitation provisions fail to specify how the average net assets of the Fund
or belonging to the Series are to be calculated, that figure shall be
calculated by reference to the average daily net assets of the Fund or the
Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Fund may be a shareholder, director, officer,
employee or agent of, or be otherwise interested in, the Manager, any
affiliated person of the Manager, any organization in which the Manager may
have an interest or any organization which may have an interest in the
Manager; that the Manager, any such affiliated person or any such organization
may have an interest in the Fund; and that the existence of any such dual
interest shall not affect the validity hereof or of any transactions hereunder
except as otherwise provided in the agreement and declaration of trust of the
Fund, the articles of organization of the Manager or specific provisions of
applicable law.
10. This Agreement shall become effective as of the date of its execution,
and
(a) unless otherwise terminated, this Agreement shall continue in effect
for two years from the date of execution, and from year to year thereafter
so
A-4
<PAGE>
long as such continuance is specifically approved at least annually (i) by
the Board of Trustees of the Fund or by vote of a majority of the
outstanding voting securities of the Series, and (ii) by vote of a
majority of the trustees of the Fund who are not interested persons of the
Fund or the Manager, cast in person at a meeting called for the purpose of
voting on, such approval;
(b) this Agreement may at any time be terminated on sixty days' written
notice to the Manager either by vote of the Board of Trustees of the Fund
or by vote of a majority of the outstanding voting securities of the
Series;
(c) this Agreement shall automatically terminate in the event of its
assignment;
(d) this Agreement may be terminated by the Manager on ninety days'
written notice to the Fund;
(e) if New England Securities Corporation, the Fund's principal
underwriter, requires the Fund or the Series to change its name so as to
eliminate all references to the words "New England" or the letters "TNE"
pursuant to the provisions of the Fund's Distribution Agreement relating
to the Series with said principal underwriter, this Agreement shall
automatically terminate at the time of such change unless the continuance
of this Agreement after such change shall have been specifically approved
by vote of a majority of the outstanding voting securities of the Series
and by vote of a majority of the trustees of the Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
Termination of this Agreement pursuant to this section 10 shall be without
the payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the trustees of the Fund who are not
interested persons of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval.
12. For the purpose of this Agreement, the terms "vote of a majority of the
outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the 1940 Act,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under the 1940 Act. References in this Agreement to any
assets, property or liabilities "belonging to" the Series shall have the
meaning defined in the Fund's agreement and declaration of trust as amended
from time to time.
A-5
<PAGE>
13. In the absence of willful misfeasance, bad faith or gross negligence on
the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Fund, to
any shareholder of the Fund or to any other person, firm or organization, for
any act or omission in the course of, or connected with, rendering services
hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
New England Zenith Fund, on behalf TNE Advisers, Inc.
of its Goldman Sachs Midcap Value
Series
By By
---------------------------------- ----------------------------------
John F. Guthrie, Jr. John F. Guthrie, Jr.
Senior Vice President Senior Vice President
A-6
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust establishing New England
Zenith Fund (the "Fund") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Fund's Goldman Sachs Midcap Value Series (the "Series") on
behalf of the Fund by officers of the Fund as officers and not individually
and that the obligations of or arising out of this Agreement are not binding
upon any of the trustees, officers or shareholders individually but are
binding only upon the assets and property belonging to the Series.
A-7
<PAGE>
APPENDIX B
SUB-ADVISORY AGREEMENT
(GOLDMAN SACHS MIDCAP VALUE SERIES)
This Sub-Advisory Agreement (this "Agreement") is entered into as of ,
1998 by and between TNE Advisers, Inc., a Massachusetts corporation (the
"Manager"), and Goldman Sachs Asset Management, a separate operating division
of Goldman, Sachs & Co. (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated ,
1998 (the "Advisory Agreement") with New England Zenith Fund (the "Trust"),
pursuant to which the Manager provides portfolio management and administrative
services to the Goldman Sachs Midcap Value Series of the Trust (the "Series");
WHEREAS, the Advisory Agreement provides that the Manager may delegate any
or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager desires to retain the Sub-Adviser to render portfolio
management services in the manner and on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. SUB-ADVISORY SERVICES.
a. The Sub-Adviser shall, subject to the supervision of the Manager and
in cooperation with any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets of
the Series. The Sub-Adviser shall manage the Series in conformity with
(1) the investment objective, policies and restrictions of the Series set
forth in the Trust's prospectus and statement of additional information
relating to the Series, (2) any additional policies or guidelines
established by the Manager or by the Trust's trustees that have been
furnished in writing to the Sub-Adviser and (3) the provisions of the
Internal Revenue Code (the "Code") applicable to "regulated investment
companies" (as defined in Section 851 of the Code) and Section 817 of the
Code, all as from time to time in effect (collectively, the "Policies"),
and with all applicable provisions of law, including without limitation
all applicable provisions of the Investment Company Act of 1940 (the "1940
Act") and the rules and regulations thereunder; provided, however, that
the Manager agrees to inform the Sub-Adviser of any and all applicable
state insurance law restrictions that operate to limit or restrict the
investments the Series might otherwise make ("Insurance Restrictions"),
and
B-1
<PAGE>
to inform the Sub-Adviser promptly of any changes in such Insurance
Restrictions. Subject to the foregoing, the Sub-Adviser is authorized, in
its discretion and without prior consultation with the Manager, to buy,
sell, lend and otherwise trade in any stocks, bonds and other securities
and investment instruments on behalf of the Series, without regard to the
length of time the securities have been held and the resulting rate of
portfolio turnover or any tax considerations; and the majority or the
whole of the Series may be invested in such proportions of stocks, bonds,
other securities or investment instruments, or cash, as the Sub-Adviser
shall determine. Notwithstanding the foregoing provisions of this Section
1.a, however, the Sub-Adviser shall, upon written instructions from the
Manager, effect such portfolio transactions for the Series as the Manager
shall determine are necessary in order for the Series to comply with the
Policies.
b. The Sub-Adviser shall furnish the Manager and the Administrator
monthly, quarterly and annual reports concerning portfolio transactions
and performance of the Series in such form as may be mutually agreed upon,
and agrees to review the Series and discuss the management of the Series
with representatives or agents of the Manager, the Administrator or the
Trust at their reasonable request. The Sub-Adviser shall permit all books
and records with respect to the Series to be inspected and audited by the
Manager and the Administrator at all reasonable times during normal
business hours, upon reasonable notice. The Sub-Adviser shall also provide
the Manager, the Administrator or the Trust with such other information
and reports as may reasonably be requested by the Manager, the
Administrator or the Trust from time to time, including without limitation
all material as reasonably may be requested by the Trustees of the Trust
pursuant to Section 15(c) of the 1940 Act.
c. The Sub-Adviser shall provide to the Manager a copy of the Sub-
Adviser's Form ADV as filed with the Securities and Exchange Commission
and as amended from time to time and a list of the persons whom the Sub-
Adviser wishes to have authorized to give written and/or oral instructions
to custodians of assets of the Series.
2. OBLIGATIONS OF THE MANAGER.
a. The Manager shall provide (or cause the Trust's custodian to provide)
timely information to the Sub-Adviser regarding such matters as the
composition of assets in the Series, cash requirements and cash available
for investment in the Series, and all other information as may be
reasonably necessary for the Sub-Adviser to perform its responsibilities
hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the prospectus
and statement of additional information of the Series and agrees during
the continuance of this Agreement to furnish the Sub-Adviser copies of any
B-2
<PAGE>
revisions or supplements thereto at, or, if practicable, before the time
the revisions or supplements become effective. The Manager agrees to
furnish the Sub-Adviser with minutes of meetings of the Trustees of the
Trust applicable to the Series to the extent they may affect the duties of
the Sub-Adviser, and with copies of any financial statements or reports
made by the Series to its shareholders, and any further materials or
information which the Sub-Adviser may reasonably request to enable it to
perform its functions under this Agreement, including, but not limited to,
timely information relating to any Insurance Restrictions.
3. CUSTODIAN. The Manager shall provide the Sub-Adviser with a copy of the
Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions
of the Custodian, unless such act or omission is required by and taken in
reliance upon instruction given to the Custodian by a representative of the
Sub-Adviser properly authorized to give such instruction under the Custody
Agreement. Any assets added to the Series shall be delivered directly to the
Custodian.
4. PROPRIETARY RIGHTS. The Manager agrees and acknowledges that the Sub-
Adviser is the sole owner of the name and mark "Goldman Sachs" and that all
use of any designation consisting in whole or part of "Goldman Sachs" (a
"Goldman Sachs Mark") under this Agreement shall inure to the benefit of the
Sub-Adviser. The Manager on its own behalf and on behalf of the Series agrees
not to use any Goldman Sachs Mark in any advertisement or sales literature or
other materials promoting the Series, except with the prior written consent of
the Sub-Adviser. Without the prior written consent of the Sub-Adviser, the
Manager shall not, and the Manager shall use its best efforts to cause the
Trust not to, make representations regarding the Sub-Adviser in any disclosure
document, advertisement or sales literature or other materials relating to the
Series. Upon termination of this Agreement for any reason, the Manager shall
cease, and the Manager shall use its best efforts to cause the Series to
cease, all use of any Goldman Sachs Mark(s) as soon as reasonably practicable.
5. EXPENSES. Except for expenses specifically assumed or agreed to be paid
by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for
any expenses of the Manager or the Trust including, without limitation, (a)
interest and taxes, (b) brokerage commissions and other costs in connection
with the purchase or sale of securities or other investment instruments with
respect to the Series, and
B-3
<PAGE>
(c) custodian fees and expenses. The Sub-Adviser will pay its own expenses
incurred in furnishing the services to be provided by it pursuant to this
Agreement.
6. PURCHASE AND SALE OF ASSETS. Absent instructions from the Manager to the
contrary, the Sub-Adviser shall place all orders for the purchase and sale of
securities for the Series with brokers or dealers selected by the Sub-Adviser,
which may include the Sub-Adviser or brokers or dealers affiliated with the
Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940 Act in
all respects. To the extent consistent with applicable law, purchase or sell
orders for the Series may be aggregated with contemporaneous purchase or sell
orders of other clients of the Sub-Adviser. The Sub-Adviser shall use its best
efforts to obtain execution of transactions for the Series at prices which are
advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other
services or products to the Series and/or other accounts serviced by the Sub-
Adviser. Not all such services or products need to be used by the Sub-Adviser
in managing the Series.
7. COMPENSATION OF THE SUB-ADVISER. As full compensation for all services
rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-Adviser compensation at the annual
rate of 0.45% of the first $100 million of the average daily net assets of the
Series, 0.40% of the next $400 million of such assets and 0.35% of such assets
in excess of $500 million. Such compensation shall be payable monthly in
arrears or at such other intervals, not less frequently than quarterly, as the
Manager is paid by the Series pursuant to the Advisory Agreement. The Manager
may from time to time waive the compensation it is entitled to receive from
the Trust; however, any such waiver will have no effect on the Manager's
obligation to pay the Sub-Adviser the compensation provided for herein.
8. NON-EXCLUSIVITY. The Manager and the Series agree that the services of
the Sub-Adviser are not to be deemed exclusive and that the Sub-Adviser and
its affiliates are free to act as investment manager and provide other
services to various investment companies and other managed accounts, except as
the Sub-Adviser and the Manager or the Administrator may otherwise agree from
time to time in writing before or after the date hereof. This Agreement shall
not in any way limit or restrict the Sub-Adviser or any of its directors,
officers, employees or agents from buying, selling or trading any securities
or other investment instruments for its or their own account or for the
account of others for whom it or they may be acting, provided that such
activities do not adversely affect or otherwise impair the performance by the
Sub-Adviser of its duties and obligations under this Agreement. The Manager
and the Series recognize and agree that the Sub-Adviser may provide advice to
or take action with respect to other clients, which advice or action,
including the timing and nature of such action, may differ from or be
identical to advice given or
B-4
<PAGE>
action taken with respect to the Series. The Sub-Adviser shall for all
purposes hereof be deemed to be an independent contractor and shall, unless
otherwise provided or authorized, have no authority to act for or represent
the Trust or the Manager in any way or otherwise be deemed an agent of the
Trust or the Manager.
9. LIABILITY. Except as may otherwise be provided by the 1940 Act or other
federal securities laws, neither the Sub-Adviser nor any of its officers,
partners, managing directors, employees, affiliates or agents (the
"Indemnified Parties") shall be subject to any liability to the Manager, the
Trust, the Series or any shareholder of the Series for any error of judgment,
any mistake of law or any loss arising out of any investment or other act or
omission in the course of, connected with, or arising out of any service to be
rendered under this Agreement, except by reason of willful misfeasance, bad
faith or gross negligence in the performance of any Indemnified Party's duties
or by reason of reckless disregard by any Indemnified Party of its obligations
and duties. The Manager shall hold harmless and indemnify the Sub-Adviser for
any loss, liability, cost, damage or expense (including reasonable attorneys
fees and costs) arising (i) from any claim or demand by any past or present
shareholder of the Series that is not based upon the obligations of the Sub-
Adviser with respect to the Series under this Agreement or (ii) resulting from
the failure of the Manager to inform the Sub-Adviser of any applicable
Insurance Restrictions or any changes therein. The Manager acknowledges and
agrees that the Sub-Adviser makes no representation or warranty, express or
implied, that any level of performance or investment results will be achieved
by the Series or that the Series will perform comparably with any standard or
index, including other clients of the Sub-Adviser, whether public or private.
10. EFFECTIVE DATE AND TERMINATION. This Agreement shall become effective as
of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue in effect
for two years from the date of execution, and from year to year thereafter
so long as such continuance is specifically approved at least annually (i)
by the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Series, and (ii) by vote of a
majority of the trustees of the Trust who are not interested persons of
the Trust, the Manager or the Sub-Adviser, cast in person at a meeting
called for the purpose of voting on such approval;
b. this Agreement may at any time be terminated on sixty days' written
notice to the Sub-Adviser either by vote of the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Series;
c. this Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Advisory Agreement;
B-5
<PAGE>
d. this Agreement may be terminated by the Sub-Adviser on sixty days'
written notice to the Manager and the Trust, or, if approved by the Board
of Trustees of the Trust, by the Manager on sixty days' written notice to
the Sub-Adviser; and
e. if the Sub-Adviser requires the Series to change its name so as to
eliminate all references to the words "Goldman Sachs," then this Agreement
shall automatically terminate at the time of such change unless the
continuance of this Agreement after such change shall have been
specifically approved by vote of a majority of the outstanding voting
securities of the Series and by vote of a majority of the Trustees of the
Trust who are not interested persons of the Trust or the Sub-Adviser, cast
in person at a meeting called for the purpose of voting on such approval.
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty. In the event of termination of this Agreement, all
compensation due to the Sub-Adviser through the date of termination will be
calculated on a pro rata basis through the date of termination and paid on the
first business day after the next succeeding month end.
11. AMENDMENT. This Agreement may be amended at any time by mutual consent
of the Manager and the Sub-Adviser, provided that, if required by law, such
amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of
voting on such approval.
12. CERTAIN DEFINITIONS. For the purpose of this Agreement, the terms "vote
of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under the 1940 Act.
13. GENERAL.
a. The Sub-Adviser may perform its services through any employee,
officer or agent of the Sub-Adviser, and the Manager shall not be entitled
to the advice, recommendation or judgment of any specific person;
provided, however, that the persons identified in the prospectus of the
Series shall perform the portfolio management duties described therein
until the Sub-Adviser notifies the Manager that one or more other
employees, officers or agents of the Sub-Adviser, identified in such
notice, shall assume such duties as of a specific date.
b. If any term or provision of this Agreement or the application thereof
to any person or circumstances is held to be invalid or unenforceable to
any
B-6
<PAGE>
extent, the remainder of this Agreement or the application of such
provision to other persons or circumstances shall not be affected thereby
and shall be enforced to the fullest extent permitted by law.
c. This Agreement shall be governed by and interpreted in accordance
with the laws of the Commonwealth of Massachusetts.
TNE Advisers, Inc.
By:
-----------------------------------
John F. Guthrie, Jr.
Senior Vice President
Goldman Sachs Asset Management,
a separate operating division of
Goldman, Sachs & Co.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
B-7
<PAGE>
APPENDIX C
POTENTIAL INVESTMENTS AND INVESTMENT TECHNIQUES
FOR THE GOLDMAN SACHS MIDCAP VALUE SERIES
GSAM may, from time to time, invest in any or all of the following types of
securities:
STRUCTURED SECURITIES. The value of the principal of and/or interest on such
securities is determined by reference to changes in the value of specific
currencies, interest rates, commodities, indices or other financial indicators
(the "Reference") or the relative change in two or more References. The
interest rate or the principal amount payable upon maturity or redemption may
be increased or decreased depending upon changes in the applicable Reference.
The terms of the structured securities may provide that in certain
circumstances no principal is due at maturity and, therefore, result in the
loss of the Series' investment. Structured securities may be positively or
negatively indexed, so that appreciation of the Reference may produce an
increase or decrease in the interest rate or value of the security at
maturity. In addition, changes in the interest rates or the value of the
security at maturity may be a multiple of changes in the value of the
Reference. Consequently, structured securities may entail a greater degree of
market risk than other types of fixed-income securities. Structured securities
may also be more volatile, less liquid and more difficult to accurately price
than less complex securities.
REAL ESTATE INVESTMENT TRUSTS ("REITS"). REITs are pooled investment
vehicles that invest primarily in either real estate or real estate related
loans. The value of a REIT is affected by changes in the value of the
properties owned by the REIT or securing mortgage loans held by the REIT.
REITs are dependent upon cash flow from their investments to repay financing
costs and the ability of the REITs' manager. REITs are also subject to risks
generally associated with investments in real estate. The Series will
indirectly bear its proportionate share of any expenses, including management
fees, paid by a REIT in which it invests.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. Mortgage-backed securities
represent direct or indirect participation in, or are collateralized by and
payable from, mortgage loans secured by real property. The principal and
interest payments on asset-backed securities are collateralized by pools of
assets such as auto loans, credit card receivables, leases, installment
contracts and personal property. Such asset pools are securitized through the
use of special purpose trusts or corporations. Principal and interest payments
may be credit enhanced by a letter of credit, a pool insurance policy or a
senior/subordinated structure.
The Series may also invest in stripped mortgaged-backed securities ("SMBS")
(including interest only and principal only securities), which are
C-1
<PAGE>
derivative multiple class mortgage-backed securities. SMBS are usually
structured with two different classes; one that receives 100% of the interest
payments and the other that receives 100% of the principal payments from a
pool of mortgage loans. If the underlying mortgage loans experience different
than anticipated prepayments of principal, the Series may fail to fully recoup
its initial investment in these securities. The market value of the class
consisting entirely of principal payments generally is unusually volatile in
response to changes in interest rates. The yields on a class of SMBS that
receives all or most of the interest from mortgage loans are generally higher
than prevailing market yields on other mortgage-backed securities because
their cash flow patterns are more volatile and there is a greater risk that
the initial investment will not be fully recouped.
LOWER-RATED DEBT SECURITIES. The Series may invest in debt securities rated
at least investment grade at the time of investment. Investment grade debt
securities are securities rated BBB or higher by Standard & Poor's Ratings
Group ("Standard & Poor's") or Baa or higher by Moody's Investors Service,
Inc. ("Moody's"). A security will be deemed to have met a rating requirement
if it receives the minimum required rating from at least one such rating
organization even though it has been rated below the minimum rating by one or
more other rating organization, or if unrated by such rating organizations,
determined by GSAM to be of comparable credit quality. The Series may invest
up to 10% of its total assets in below investment grade debt securities rated
B or higher by Standard & Poor's or B or higher by Moody's. Fixed income
securities rated BBB or Baa are considered medium-grade obligations with
speculative characteristics, and adverse economic conditions or changing
circumstances may weaken their issuers' capacity to pay interest and repay
principal. Fixed-income securities rated BB or Ba or below (or comparable
unrated securities) are commonly referred to as "junk bonds" and are
considered predominantly speculative and may be questionable as to principal
and interest payments. In some cases, such bonds may be highly speculative,
have poor prospects for reaching investment grade standing and be in default.
As a result, investment in such bonds will entail greater speculative risks
than those associated with investment in investment grade bonds. Also, to the
extent that the rating assigned to a security in the Series' portfolio is
downgraded by a rating organization, the market price and liquidity of such
security may be adversely affected.
INVESTMENT TECHNIQUES OF THE SERIES
GSAM may, from time to time, engage in any or all of the following
investment techniques:
OPTIONS ON SECURITIES AND SECURITIES INDICES. The Series may write (sell)
covered call and put options and purchase call and put options on any
securities in which it may invest or on any securities index composed of
securities in which it
C-2
<PAGE>
may invest. The writing and purchase of options is a highly specialized
activity which involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. The use of options
to seek to increase total return involves the risk of loss if GSAM is
incorrect in its expectation of fluctuations in securities prices or interest
rates. The successful use of options for hedging purposes also depends in part
on the ability of GSAM to manage future price fluctuations and the degree of
correlation between the options and securities markets. If GSAM is incorrect
in its expectation of changes in securities prices or determination of the
correlation between the securities indices on which options are written and
purchased and the securities in the Series' investment portfolio, the
investment performance of the Series will be less favorable than it would have
been in the absence of such options transactions. The writing of options could
significantly increase the Series' portfolio turnover rate and, therefore,
associated brokerage commissions or spreads.
OPTIONS ON FOREIGN CURRENCIES. The Series may, to the extent it invests in
foreign securities, purchase and sell (write) call and put options on foreign
currencies for the purpose of protecting against declines in the U.S. dollar
value of foreign portfolio securities and anticipated dividends on such
securities and against increases in the U.S. dollar cost of foreign securities
to be acquired. As with other kinds of option transactions, however, the
writing of an option on foreign currency will constitute only a partial hedge,
up to the amount of the premium received. If an option that the Series has
written is exercised, the Series could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on foreign currency may constitute an effective hedge
against exchange rate fluctuations; however, in the event of exchange rate
movements adverse to the Series' position, the Series may forfeit the entire
amount of the premium plus related transaction costs.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. To seek to increase
total return or to hedge against changes in interest rates, securities prices
or currency exchange rates, the Series may purchase and sell various kinds of
futures contracts, and purchase and write call and put options on any of such
futures contracts. The Series may also enter into closing purchase and sale
transactions with respect to any such contracts and options. The futures
contracts may be based on various securities (such as U.S. Government
securities), foreign currencies, securities indices and other financial
instruments and indices. The Series will engage in futures and related options
transactions for bona fide hedging purposes as defined in regulations of the
Commodity Futures Trading Commission or to seek to increase total return to
the extent permitted by such regulations. The Series will not purchase or sell
futures contracts or purchase or sell related options to seek to increase
total return, except for closing purchase or sale transactions, if immediately
thereafter the sum of the amount of initial margin deposits and premiums paid
on the Series' outstanding positions in futures and related options
C-3
<PAGE>
entered into for the purpose of seeking to increase total return would exceed
5% of the market value of the Series' net assets. These transactions involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating the Series to purchase securities or currencies, require
the Series to segregate and maintain cash or liquid assets with a value equal
to the amount of the Series' obligations.
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
while the Series may benefit from the use of futures and options on futures,
unanticipated changes in interest rates, securities prices or currency
exchange rates may result in poorer overall performance than if the Series had
not entered into any futures contracts or options transactions. Because
perfect correlation between a futures position and portfolio position that is
intended to be protected is impossible to achieve, the desired protection may
not be obtained and the Series may be exposed to risk of loss. The loss
incurred by the Series in entering into futures contracts and in writing call
options on futures is potentially unlimited and may exceed the amount of the
premium received. Futures markets are highly volatile and the use of futures
may increase the volatility of the Series' net asset value. The profitability
of the Series' trading in futures to seek to increase total return depends
upon the ability of GSAM to correctly analyze the futures markets. In
addition, because of the low margin deposits normally required in futures
trading, a relatively small price movement in a futures contract may result in
substantial losses to the Series. Further, futures contracts and options on
futures may be illiquid, and exchanges may limit fluctuations in futures
contract prices during a single day.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. When-issued transactions
arise when securities are purchased by the Series with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous price and yield to the Series at the time of entering into the
transaction. The Series may also purchase securities on a forward commitment
basis; that is, make contracts to purchase securities for a fixed price at a
future date beyond the customary three-day settlement period. The Series is
required to hold and maintain in a segregated account with the Series'
custodian until three days prior to the settlement date, cash or liquid assets
in an amount sufficient to meet the purchase price. Alternatively, the Series
may enter into offsetting contracts for the forward sale of other securities
that it owns. The purchase of securities on a when-issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date. Although the Series would
generally purchase securities on a when-issued or forward commitment basis
with the intention of acquiring securities for its portfolio, the Series may
dispose of when-issued securities or forward commitments prior to settlement
if GSAM deems it appropriate to do so.
C-4
<PAGE>
LENDING OF PORTFOLIO SECURITIES. the Series may seek to increase its income
by lending portfolio securities. Under present regulatory policies, such loans
may be made to institutions, such as certain broker-dealers, and are required
to be secured continuously by collateral in cash, cash equivalents, or U.S.
Government securities maintained on a current basis in an amount at least
equal to the market value of the securities loaned. Cash collateral may be
invested in cash equivalents. If GSAM determines to make securities loans, the
value of the securities loaned may not exceed 33 1/3% of the value of the
total assets of the Series. The Series may experience a loss or delay in the
recovery of its securities if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with the Series.
SHORT SALES AGAINST-THE-BOX. The Series may make short sales of securities
or maintain a short position, provided that at all times when a short position
is open the Series owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further
consideration, for an equal amount of the securities of the same issuer as the
securities sold short (a short sale against-the-box). Not more than 25% of the
Series' net assets (determined at the time of the short sale) may be subject
to such short sales. Short sales will be made primarily to defer realization
of gain or loss for federal tax purposes; a gain or loss in a Series' long
position will be offset by a gain or loss in its short position.
TEMPORARY INVESTMENTS AND MISCELLANEOUS TECHNIQUES. The Series may, for
temporary defensive purposes, invest 100% of its total assets in U.S.
Government securities, repurchase agreements collateralized by U.S. Government
securities, commercial paper rated at least A-2 by Standard & Poor's or P-2 by
Moody's, certificates of deposit, bankers' acceptances, repurchase agreements,
non-convertible preferred stocks, non-convertible corporate bonds with a
remaining maturity of less than one year or, subject to certain tax
restrictions, foreign currencies. When the Series' assets are invested in such
instruments, the Series may not be achieving its investment objective.
In addition to the techniques and investments described above, the Series
may, with respect to no more than 5% of its net assets, engage in the
following techniques and investments (i) warrants and stock purchase rights,
(ii) other investment companies, (iii) unseasoned companies, (iv) custodial
receipts and (v) inverse floating rate obligations. In addition, the Series
may borrow up to 10% of its total assets from banks for temporary or emergency
purposes.
C-5
<PAGE>
- --------------------------------------------------------------------------------
INSTRUCTION FORM
THE PROXY TO WHICH THESE INSTRUCTIONS RELATE IS SOLICITED ON
BEHALF OF THE TRUSTEES OF NEW ENGLAND ZENITH FUND
The undersigned hereby instructs that all shares of the Loomis Sayles Avanti
Growth Series (the "Series") of New England Zenith Fund deemed attributable to
the undersigned's contracts with the issuing insurance company be voted at the
Special Meeting of Shareholders of the Series on April 10, 1998 (the Notice and
Proxy Statement with respect to which have been received by the undersigned),
and at all adjournments thereof, on each proposal described in said Notice as
set forth on the reverse side hereof.
The issuing insurance company is authorized to vote in its discretion on any
other matters which may properly come before the meeting.
YOUR VOTE IS IMPORTANT. PLEASE VOTE AS SOON AS POSSIBLE
* * * * * * PLEASE SEE REVERSE SIDE * * * * * *
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR THE ITEMS BELOW
Please mark
your votes as [X]
indicated in
the example
1. To approve a new Advisory Agreement relating to the Series by and between
New England Zenith Fund and TNE Advisers, Inc. which would increase the
management fee payable by the Series.
FOR AGAINST ABSTAIN
[_] [_] [_]
2. To approve a related new Sub-Advisory Agreement by and between TNE Advisers,
Inc. and Goldman Sachs Asset Management, a separate operating division of
Goldman, Sachs & Co.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. To approve a change of the investment objective of the Series from a
fundamental policy of long-term capital growth to a non-fundamental policy of
long-term capital appreciation.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. To approve a grant of authority whereby the Series may from time to time, to
the extent permitted by any exemption or exemptions granted by the Securities
and Exchange Commission, permit TNE Advisers, Inc. to enter into new or
amended agreements with sub-advisers with respect to the Series without
obtaining shareholder approval of such agreements, and to permit such sub-
advisers to manage the assets of the Series pursuant to such sub-advisory
agreements.
FOR AGAINST ABSTAIN
[_] [_] [_]
If this form is signed and returned with no
choice indicated as to any proposal above,
such shares shall be voted FOR such
proposal.
-------------------------------------------
Signature
-------------------------------------------
Signature, If Jointly Held
IF ACTING AS ATTORNEY, EXECUTOR, TRUSTEE
OR IN OTHER REPRESENTATIVE CAPACITY,
PLEASE SIGN NAME AND TITLE.
<PAGE>
- --------------------------------------------------------------------------------
PLEASE FOLD AND DETACH HERE AND READ THE REVERSE SIDE
VOTE BY TELEPHONE
QUICK *** EASY *** IMMEDIATE
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your instruction form.
. You will be asked to enter a Control Number, which is located in the box in
the lower right hand corner of this form.
- --------------------------------------------------------------------------------
OPTION #1: To vote as the Board of Trustees recommends on ALL proposals, Press 1
- --------------------------------------------------------------------------------
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
- --------------------------------------------------------------------------------
OPTION #2: If you choose to vote on each proposal separately, press 0. You will
hear these Instructions.
- --------------------------------------------------------------------------------
Proposal 1: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
The instructions are the same for all remaining proposals.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
- --------------------------------------------------------------------------------
PLEASE DO NOT RETURN THE ABOVE INSTRUCTION FORM IF VOTED BY PHONE.
- --------------------------------------------------------------------------------
CALL ** TOLL FREE ** ON A TOUCH TONE TELEPHONE
1-888-457-2958 - ANYTIME
There is NO CHARGE to you for this call.
===================
CONTROL NUMBER
===================
- --------------------------------------------------------------------------------
