<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:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NEW ENGLAND 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:
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Notes:
<PAGE>
501 Boylston Street
Boston, Massachusetts 02116-3700
617-578-2000
[LOGO OF NEW ENGLAND FINANCIAL(TM) APPEARS HERE]
March , 1998
TO OWNERS OF ZENITH ACCUMULATOR VARIABLE ANNUITY CONTRACTS:
A Special Meeting of Shareholders of the Salomon Brothers Strategic
Bond Opportunities Series and Salomon Brothers U.S. Government
Series (together the "Series"), each a 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 each 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 each 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 each
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>
501 Boylston Street
Boston, Massachusetts 02116-3700
617-578-2000
[LOGO OF NEW ENGLAND FINANCIAL(TM) APPEARS HERE]
March , 1998
TO OWNERS OF ZENITH ACCUMULATOR VARIABLE ANNUITY CONTRACTS:
A Special Meeting of Shareholders of the Salomon Brothers Strategic
Bond Opportunities Series and Salomon Brothers U.S. Government
Series (together the "Series"), each a 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 each 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 each 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 each 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>
501 Boylston Street
Boston, Massachusetts 02116-3700
617-579-2000
[LOGO OF NEW ENGLAND FINANCIAL(TM) APPEARS HERE]
March , 1998
TO OWNERS OF AMERICAN GROWTH SERIES VARIABLE ANNUITY CONTRACTS:
A Special Meeting of Shareholders of the Salomon Brothers Strategic
Bond Opportunities Series and Salomon Brothers U.S. Government
Series (together the "Series"), each a 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 each 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 each
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 each
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>
501 Boylston Street
Boston, Massachusetts 02116-3700
617-578-2000
[LOGO OF NEW ENGLAND FINANCIAL(TM) APPEARS HERE]
March , 1998
TO OWNERS OF AMERICAN GROWTH SERIES VARIABLE ANNUITY CONTRACTS:
A Special Meeting of Shareholders of the Salomon Brothers Strategic
Bond Opportunities Series and Salomon Brothers U.S. Government
Series (together the "Series"), each a 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 each 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 each
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 each Series deemed
attributable to your Contracts will be voted by NELICO in proportion
to the voting instructions received from all other American Growth
Series Variable Annuity 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>
501 Boylston Street
Boston, Massachusetts 02116-3700
617-578-2000
[LOGO OF THE NEW ENGLAND FINANCIAL(TM) APPEARS HERE]
March , 1998
TO OWNERS OF AMERICAN GATEWAY SERIES VARIABLE LIFE INSURANCE
POLICIES:
A Special Meeting of Shareholders of the Salomon Brothers Strategic
Bond Opportunities Series and Salomon Brothers U.S. Government
Series (together the "Series"), each a 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 each Series held in the New England Variable Life Separate
Account which are attributable to American Gateway Series Variable
Life Insurance Policies in accordance with instructions received
from Policy Owners. You are now being asked how shares of each
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 each
Series deemed attributable to your Policy will be voted by NELICO in
proportion to the voting instructions received from all other
American Gateway Series Variable Life Insurance Policy Owners.
<PAGE>
NEW ENGLAND ZENITH FUND
SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES
SALOMON BROTHERS U.S. GOVERNMENT 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 Salomon
Brothers Strategic Bond Opportunities Series (the "Strategic Bond Series") and
the Salomon Brothers U.S. Government Series (the "U.S. Government Series" and
together with the Strategic Bond Series, the "Series"), each 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 the Sub-Advisory Agreement dated November
28, 1997 relating to the Strategic Bond Series by and among TNE Advisers,
Inc. ("TNE Advisers"), Salomon Brothers Asset Management Inc ("SBAM") and
Salomon Brothers Asset Management Limited (to be voted on by shareholders
of the Strategic Bond Series only).
2. To approve or disapprove the Sub-Advisory Agreement dated November
28, 1997 relating to the U.S. Government Series between TNE Advisers and
SBAM (to be voted on by shareholders of the U.S. Government Series only).
3. To approve or disapprove a proposal with respect to the future
operations of each Series whereby each 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 (to be voted on separately by the shareholders of each Series).
4. To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
By order of the President,
Maura A. Murphy, Secretary
March , 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
SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES
SALOMON BROTHERS U.S. GOVERNMENT 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 Salomon
Brothers Strategic Bond Opportunities Series (the "Strategic Bond Series") and
the Salomon Brothers U.S. Government Series (the "U.S. Government Series" and
together with the Strategic Bond Series, the "Series"), each 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 four parts.
PART I contains general information relating to the Meeting.
PART II contains information relating to Proposals 1 and 2, the Sub-Advisory
Agreements for each Series.
PART III contains information relating to Proposal 3, whereby each 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 IV contains information about the Trust, TNE Advisers, Salomon Brothers
Asset Management Inc ("SBAM"), Salomon Brothers Asset Management Limited
("SBAM Ltd.") and certain 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 beneficial
2
<PAGE>
interest of the Series held as of that date. The number of shares of
beneficial interest of the Strategic Bond Series issued and outstanding as of
the Record Date was . The number of shares of beneficial interest of
the U.S. Government Series issued and outstanding as of the Record Date was
.
Each Proposal will be voted upon only by the shareholders of the Series to
which that Proposal relates, as follows:
<TABLE>
<CAPTION>
SERIES TO WHICH EACH
PROPOSALS PROPOSAL RELATES
--------- -------------------------
<C> <S> <C>
1. Approval of the Sub-Advisory Agreement for the Strategic Bond Series
Strategic Bond Series by and among TNE
Advisers, SBAM and SBAM Ltd.
2. Approval of the Sub-Advisory Agreement for the U.S. Government Series
U.S. Government Series by and between TNE
Advisers and SBAM.
3. Approval of a grant of authority to TNE Strategic Bond Series and
Advisers to enter into new sub-advisory U.S. Government Series
agreements without additional shareholder
approval.
</TABLE>
In the case of Proposal 3, the shareholders of each Series will vote
separately from the shareholders of the other Series.
Timely, properly executed proxies will be voted as you instruct. If no
choice is indicated, proxies will be voted in favor of Proposals 1, 2, and 3
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, to the extent that they relate to
Proposal 3, will be borne by the Series. To the extent that such costs relate
to Proposals 1 and 2, such costs will be borne by SBAM or its affiliates, and
not 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 SUB-ADVISORY AGREEMENTS WITH SBAM AND SBAM LTD.
THE TRANSACTION
On November 28, 1997, Salomon Inc ("Salomon"), the ultimate parent company
of SBAM and SBAM Ltd., merged with and into Smith Barney Holdings,
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<PAGE>
Inc., a subsidiary of Travelers Group Inc. ("Travelers"), to form a new
company called Salomon Smith Barney Holdings Inc. ("Salomon Smith Barney")
(the "Transaction"). As a result of the Transaction, Travelers became the
ultimate parent of SBAM and SBAM Ltd. Travelers is a diversified financial
services company engaged in investment services, asset management, consumer
finance and life and property and casualty insurance businesses.
Under certain interpretations of the Investment Company Act of 1940, as
amended (the "1940 Act"), the Transaction could be deemed to have resulted in
the automatic termination of the Sub-Advisory Agreement that was in effect at
the time of the Transaction by and among TNE Advisers, SBAM and SBAM Ltd. with
respect to the Strategic Bond Series, and the Sub-Advisory Agreement that was
in effect at the time of the Transaction between TNE Advisers and SBAM with
respect to the U.S. Government Series (each, a "Previous Sub-Advisory
Agreement"). Therefore, in advance of the Transaction, new Sub-Advisory
Agreements for each Series, identical in substance to the Previous Sub-
Advisory Agreements, were approved by the Board of Trustees of New England
Zenith Fund (the "New Sub-Advisory Agreements"). Pursuant to the New Sub-
Advisory Agreements, which took effect at the time of the Transaction, SBAM
and SBAM Ltd. continue to serve as investment sub-advisers to the Strategic
Bond Series and SBAM also continues to serve as investment sub-adviser to the
U.S. Government Series. The 1940 Act ordinarily would require that each
Series' shareholders approve the New Sub-Advisory Agreement relating to that
Series before that New Sub-Advisory Agreement could take effect. On November
26, 1997, however, the SEC issued an exemptive order relating to the
Transaction (the "SEC Exemption") allowing such agreements to take effect at
the time of the Transaction, without receiving prior shareholder approval, as
long as such approval is obtained within 150 days after the Transaction has
been completed (that is, by April 27, 1998).
Pursuant to the SEC Exemption, sub-advisory fees earned since the date of
the Transaction by SBAM and SBAM Ltd. in respect of the Strategic Bond Series
and by SBAM in respect of the U.S. Government Series under the respective New
Sub-Advisory Agreements currently are maintained with a bank unaffiliated with
either TNE Advisers or SBAM in an interest-bearing escrow account relating to
each Series. Upon approval of the New Sub-Advisory Agreements, the amounts in
the escrow account related to each Series (including interest earned on such
paid fees) will be paid (1) to SBAM and SBAM Ltd. in accordance with the New
Sub-Advisory Agreement for the Strategic Bond Series, and (2) to SBAM in
accordance with the New Sub-Advisory Agreement for the U.S. Government Series.
If either of the New Sub-Advisory Agreements is not approved by the respective
Series' shareholders within 150 days after the completion of the Transaction,
such New Sub-Advisory Agreement will terminate, the amounts in the escrow
account related to that Series will be released to the Series and the Trustees
will consider such actions as may be in the best interest of that Series'
shareholders.
4
<PAGE>
The Trustees have approved, and recommend that the shareholders of each
Series approve, the New Sub-Advisory Agreement for the Strategic Bond Series
(Proposal 1) and the New Sub-Advisory Agreement for the U.S. Government Series
(Proposal 2)). The New Sub-Advisory Agreements, the forms of which are
attached to this Proxy Statement as Appendix A and Appendix B, are identical,
except for the date, to the Previous Sub-Advisory Agreements.
If the Series' shareholders approve Proposal 1, SBAM and SBAM Ltd. will
continue to perform sub-advisory services for the Strategic Bond Series on the
same terms as were in effect immediately before the Transaction and as are
currently in effect. If the Series' shareholders approve Proposal 2, SBAM will
continue to perform sub-advisory services for the U.S. Government Series, on
the same terms as were in effect immediately before the Transaction and as are
currently in effect.
ADVISORY AGREEMENT
TNE Advisers has acted as each Series' adviser since the Series' inception
on October 31, 1994, and currently acts as each Series' adviser pursuant to an
Advisory Agreement between TNE Advisers and each Series dated August 30, 1996
(the "Advisory Agreements"). The Trustees approved the Advisory Agreements at
a meeting held on November 13, 1995, and each Series' shareholders approved
the Advisory Agreement relating to that Series at a meeting held on December
28, 1995. The purpose of the submission of the Advisory Agreements for
shareholder approval at such time was to approve their continuance following a
change in control of TNE Advisers resulting from the merger of TNE Advisers'
(and NELICO's) former parent company, New England Mutual Life Insurance
Company, with and into Metropolitan Life Insurance Company ("MetLife"), with
MetLife as the surviving company, which merger was consummated on August 30,
1996. The Advisory Agreements replaced substantially identical advisory
agreements that were in effect prior to the merger.
Under each Series' Advisory Agreement, TNE Advisers has overall advisory and
administrative responsibility with respect to that Series. Each Advisory
Agreement also provides that TNE Advisers will, subject to its rights to
delegate such responsibilities to other parties, provide to the relevant
Series both portfolio management services and administrative services. TNE
Advisers has subcontracted with its affiliate New England Funds, L.P. to
provide, at no extra cost to the Series, certain administrative services to
the Series. The address of New England Funds, L.P. is 399 Boylston Street,
Boston, Massachusetts 02116. Under the Advisory Agreement for the Strategic
Bond Series, the management fee payable by the Series to TNE Advisers is at
the annual rate of 0.65% of the Series' average daily net assets, and under
the Advisory Agreement for the U.S. Government Series, the management fee
payable by the Series to TNE Advisers is at the annual rate of 0.55% of the
Series' average daily net assets. For the fiscal year ended
5
<PAGE>
December 31, 1997, without taking into account the expense deferral
arrangements (described below), the aggregate management fees payable by the
Strategic Bond Series and the U.S. Government Series to TNE Advisers under the
relevant Advisory Agreements were $[ ] and $[ ], respectively. The
Proposals described in this Proxy Statement would not affect the Advisory
Agreements or the management fees payable by either Series to TNE Advisers.
EXPENSE DEFERRAL ARRANGEMENT
Pursuant to an expense deferral agreement in effect since the Series'
inception on October 31, 1994 between the Trust and TNE Advisers, which
agreement TNE Advisers may terminate at any time (the "Expense Deferral
Agreement"), TNE Advisers has agreed to pay the expenses of the Strategic Bond
Series (exclusive of any brokerage costs, interest, taxes or extraordinary
expenses) in excess of 0.85% annually of the Strategic Bond 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 0.85% 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 0.85% annually of such Series' assets; provided,
however, that the Series is not 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.
Similarly, TNE Advisers has agreed, pursuant to the Expense Deferral
Agreement, to pay the expenses of the U.S. Government Series (exclusive of any
brokerage costs, interest, taxes or extraordinary expenses) in excess of 0.70%
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 0.70% 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 0.70% of such Series' assets; provided,
however, that the Series is not 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.
Under the Expense Deferral Agreement, TNE Advisers paid $ of expenses
relating to the Strategic Bond Series and $ of expenses relating to the
U.S. Government Series for the fiscal year ended December 31, 1997. TNE
Advisers may at any time 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. It is
anticipated that this Expense Deferral Agreement will continue after approval
of the New Sub-Advisory Agreements by the Series' shareholders.
6
<PAGE>
PREVIOUS SUB-ADVISORY AGREEMENTS
TNE Advisers has delegated to SBAM and SBAM Ltd. its responsibility under
the Advisory Agreement for the Strategic Bond Series to provide portfolio
management services to the Strategic Bond Series, and to SBAM its
responsibility under the Advisory Agreement for the U.S. Government Series to
provide portfolio management services to the U.S. Government Series. SBAM and
SBAM Ltd. have acted as the Strategic Bond Series' Subadviser, and SBAM has
acted as the U.S. Government Series' sub-adviser, since the Series' inception
on October 31, 1994, and, due to the operation of the SEC Exemption, currently
acts as the Series' sub-advisers pursuant to the New Sub-Advisory Agreements,
which took effect as of November 28, 1997, and which will terminate unless
approved by vote of the Series' shareholders on or before April 27, 1998.
The Previous Sub-Advisory Agreements, which were replaced on November 28,
1997 with the New Sub-Advisory Agreements, required SBAM to manage the
investment and reinvestment of the assets of the Series, subject to the
supervision of TNE Advisers. SBAM was authorized to effect portfolio
transactions for the Series, using its own discretion and without prior
consultation with TNE Advisers. SBAM was also required to report periodically
to TNE Advisers, its agents and the Trustees of the Trust.
Under the Previous Sub-Advisory Agreement relating to the Strategic Bond
Series, the annual sub-advisory fee rate payable by TNE Advisers to SBAM, as
compensation for all services rendered, facilities furnished and expenses
borne by SBAM thereunder, was 0.35% of the first $50 million of the Series'
average daily net assets, 0.30% of the next $150 million of such assets, 0.25%
of the next $300 million of such assets and 0.10% of such assets in excess of
$500 million. Under the Previous Sub-Advisory Agreement relating to the
Strategic Bond Series, SBAM was authorized to delegate to SBAM Ltd. any or all
of the responsibilities of SBAM with respect to certain foreign currency
transactions and investments in non-dollar denominated debt securities related
to the Series. SBAM was required to compensate SBAM Ltd. at the rate of one-
third of the compensation payable to SBAM by TNE Advisers for such services.
The New Sub-Advisory Agreement for the Strategic Bond Series provides for the
same services to be performed by, and the same fees to be paid to SBAM and
SBAM Ltd. For the fiscal year ended December 31, 1997, the aggregate sub-
advisory fee paid by TNE Advisers to SBAM under the Previous Sub-Advisory
Agreement and the New Sub-Advisory Agreement for the Strategic Bond Series was
$ , and the aggregate sub-advisory fee paid by SBAM to SBAM Ltd. under such
agreements was $[ ].
Under the Previous Sub-Advisory Agreement relating to the U.S. Government
Series, the annual sub-advisory fee rate payable by TNE Advisers to SBAM, as
compensation for all services rendered, facilities furnished and expenses
borne by SBAM thereunder, was 0.225% of the first $200 million of the Series'
average
7
<PAGE>
daily net assets, 0.15% of the next $300 million of such assets and 0.10% of
such assets in excess of $500 million. The New Sub-Advisory Agreement for the
U.S. Government Series provides for the same services to be performed by, and
the same fees to be paid to SBAM. For the fiscal year ended December 31, 1997,
the aggregate sub-advisory fee paid by the TNE Advisers to SBAM under the
Previous Sub-Advisory Agreement and the New Sub-Advisory Agreement for the
U.S. Government Series was $ .
APPROVAL OF THE NEW SUB-ADVISORY AGREEMENTS BY THE TRUSTEES OF THE TRUST
Based on a review of the investment approach used by SBAM in managing the
Series' portfolios and the Series' performance record under the Previous Sub-
Advisory Agreement and investment practices, TNE Advisers recommended and the
Trustees determined that it would be appropriate for SBAM to remain
responsible for the day-to-day management of the Series' portfolios following
the Transaction. Thus, on October 22, 1997, the Trustees approved the New Sub-
Advisory Agreement by and among TNE Advisers, SBAM and SBAM Ltd. with respect
to the Strategic Bond Series and the New Sub-Advisory Agreement by and between
TNE Advisers and SBAM with respect to the U.S. Government Series. The Trustees
unanimously recommend that the shareholders approve the New Sub-Advisory
Agreements.
In recommending approval of the New Sub-Advisory Agreements, the Trustees
also considered extensive information about the Series, SBAM, SBAM Ltd. and
SBAM's proposed approach to managing each Series' portfolio, including
information about SBAM's and Salomon Smith Barney's organizational structure,
investment and legal and compliance personnel, compliance procedures and
financial condition. The Trustees also considered SBAM's policies for placing
portfolio transactions of the Series, including broker-dealers affiliated with
SBAM and broker-dealers that furnish brokerage and research services to SBAM
as described below under "Portfolio Transactions and Brokerage." The Trustees
also took into account SBAM's substantial experience and reputation as an
investment manager and the prominence of the Salomon Brothers 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 promote growth in the size of the Series, although such growth
cannot be assured.
The Trustees also considered the possible effects on the Series of SBAM's
affiliation with Salomon Smith Barney. Under the New Sub-Advisory Agreements,
the 1940 Act prohibits or imposes certain conditions on the ability of the
Series to engage in certain transactions with Salomon Smith Barney and its
affiliates. For example, the Series are prohibited from purchasing securities
from Salomon Smith Barney in transactions in which Salomon Smith Barney acts
as principal. The Series will also have to satisfy certain conditions in order
to engage in securities transactions in which Salomon Smith Barney is acting
as an underwriter. In this
8
<PAGE>
connection, the management of SBAM 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.
DESCRIPTION OF THE NEW SUB-ADVISORY AGREEMENTS
The forms of the New Sub-Advisory Agreements are attached to this Proxy
Statement as Appendix A and Appendix B. The following summary description of
the New Sub-Advisory Agreements is qualified in its entirety by reference to
the full text of the form of the Agreements.
Like the Previous Sub-Advisory Agreements, the New Sub-Advisory Agreements
require SBAM 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 Agreements, SBAM is authorized to effect portfolio transactions
for the Series in SBAM's discretion and without prior consultation with TNE
Advisers. SBAM Ltd. will continue to provide certain advisory services to SBAM
relating to currency transactions and investments in non-dollar-denominated
debt securities for the benefit of the Strategic Bond Series. SBAM is required
to report periodically to TNE Advisers, its agents and the Trustees of the
Trust. Under the New Sub-Advisory Agreements, the compensation arrangements
and fee rates are the same as under the Previous Sub-Advisory Agreements, as
described above under "Previous Sub-Advisory Agreements."
The New Sub-Advisory Agreements provide that they will continue in effect
for two years from their 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 relevant 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, SBAM and for the Strategic Bond Series,
SBAM Ltd., cast in person at a meeting called for the purpose of voting on
such approval. Any amendment to the New Sub-Advisory Agreements must be
approved by TNE Advisers and SBAM (and, for the Strategic Bond Series, by SBAM
Ltd.) and, if required by law, by vote of a majority of the Trustees who are
not interested persons of the Trust, TNE Advisers or SBAM (or, for the
Strategic Bond Series, of SBAM Ltd.), 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 Agreements
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 SBAM (or, for the Strategic Bond Series, of SBAM
Ltd.), or by vote of a majority of the outstanding voting securities of the
Series, upon sixty days' written notice to SBAM, by SBAM upon sixty days'
written notice to TNE Advisers and the Trust or, if approved by the Board of
Trustees of the Trust, by TNE Advisers upon sixty days' written notice to
SBAM,
9
<PAGE>
and terminate automatically in the event of its assignment or upon the
termination of the corresponding Advisory Agreement.
In addition, the New Sub-Advisory Agreements will automatically terminate if
SBAM requires a Series to change its name so as to eliminate all references to
the words "Salomon" or "Salomon Brothers" unless the continuance of the
succeeding 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, including
a majority of the Trustees who are not interested persons of the Trust, TNE
Advisers or SBAM (or, for the Strategic Bond Series, of SBAM Ltd.), cast in
person at a meeting called for the purpose of voting on such approval. The New
Sub-Advisory Agreements also require that each Series change its name so as to
delete any reference to "Salomon" or "Salomon Brothers" in the event that SBAM
or an affiliate thereof no longer serves as sub-adviser to such Series.
The New Sub-Advisory Agreements provide that SBAM and SBAM Ltd. shall not be
subject to any liability in connection with the performance of services
provided thereunder in the absence of willful misfeasance, bad faith or gross
negligence in the performance of such duties or by reason of reckless
disregard by SBAM or its affiliates thereunder.
COMPARISON OF THE PREVIOUS AND NEW SUB-ADVISORY AGREEMENTS
The proposed New Sub-Advisory Agreement for each Series is identical, except
for the date, to the Previous Sub-Advisory Agreement for each Series.
TRUSTEE RECOMMENDATION
THE TRUSTEES OF THE TRUST UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE
STRATEGIC BOND SERIES VOTE TO APPROVE THE PROPOSED NEW SUB-ADVISORY AGREEMENT
FOR THE STRATEGIC BOND SERIES, THAT SHAREHOLDERS OF THE U.S. GOVERNMENT SERIES
VOTE TO APPROVE THE PROPOSED NEW SUB-ADVISORY AGREEMENT FOR THE U.S.
GOVERNMENT SERIES.
Only the shareholders of the Strategic Bond Series will vote with respect to
the proposed approval of the New Sub-Advisory Agreement for the Strategic Bond
Series. Only the shareholders of the U.S. Government Series will vote with
respect to the proposed New Sub-Advisory Agreement for the U.S. Government
Series. In each case, approval requires the vote of the lesser of (1) 67% of
the shares of the Series represented at the Meeting, if more than 50% of the
shares of that Series are represented at the Meeting, or (2) more than 50% of
the outstanding shares of that Series.
10
<PAGE>
III. FUTURE SUB-ADVISORY AGREEMENTS WITHOUT SHAREHOLDER VOTE
Each 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 or amendments, and to permit such sub-
advisers to manage the assets of the Series pursuant to such sub-advisory
agreements (Proposal 3).
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 Securities and Exchange Commission an
exemption from the shareholder approval voting requirement in certain
circumstances (the "SEC Voting Exemption"). Under the SEC Voting Exemption,
TNE Advisers is permitted, under specified conditions, to enter into new and
amended sub-advisory agreements for the management of each 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 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 Voting 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, each 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 utilize 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-advisers act in a
capacity similar to that of the portfolio manager in a more traditional mutual
fund advisory structure that does not involve a sub-adviser. Specifically, the
Series' sub-advisers, like portfolio managers in a more traditional structure,
manage the Series under the oversight and supervision of the Series' adviser.
If a Series were to change sub-advisers, TNE
11
<PAGE>
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-advisers 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.
In the absence of an exemption, to obtain the shareholder approval required
by the 1940 Act for a sub-advisory agreement, a Series must convene a
shareholders' 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,
a 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), a 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.
TRUSTEE RECOMMENDATION
THE TRUSTEES OF THE TRUST UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF
EACH SERIES 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.
12
<PAGE>
Shareholders of each Series will vote, separately from the other Series,
regarding this proposed grant of authority to TNE Advisers to enter into new
sub-advisory agreements without additional Shareholder approval. In each case,
approval requires the vote of the lesser of (1) 67% of the shares of the
Series represented at the Meeting, if more than 50% of the shares of that
Series are represented at the Meeting, or (2) more than 50% of the outstanding
shares of that Series.
IV. INFORMATION ABOUT THE TRUST, THE ADVISER, THE SUB-ADVISERS AND AFFILIATES
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 are two 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 such 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.
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 and principal executive officer of TNE Advisers is
Frederick K. Zimmermann; Mr. Zimmermann and John F. Guthrie, Jr. are the
company's directors. 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.
INFORMATION ABOUT SBAM
SBAM is a corporation organized under the laws of Delaware on December 24,
1987 and is registered as an investment adviser pursuant to the Investment
Advisers Act of 1940 (the "Advisers Act"). As of December 31, 1997,
13
<PAGE>
SBAM and its worldwide investment advisory affiliates managed approximately
$25.9 billion of assets, of which SBAM managed approximately $19.3 billion.
SBAM is a wholly-owned subsidiary of Salomon Brothers Holding Company Inc.
("SBHC"), which in turn is a wholly-owned subsidiary of Salomon Smith Barney,
which in turn is a wholly-owned subsidiary of Travelers. The principal
business address of each of the foregoing entities, except Travelers and
Salomon Smith Barney entities, is 7 World Trade Center, New York, New York
10048. The principal business address of Travelers and Salomon Smith Barney is
388 Greenwich Street, New York, New York 10013.
The names, titles and principal occupations of the directors and executive
officers of SBAM are set forth in the following table.
<TABLE>
<CAPTION>
NAME TITLE AND PRINCIPAL OCCUPATION
---- ------------------------------------------------------------
<C> <S>
Thomas W. Brock Chairman, Chief Executive Officer and Managing Director of
SBAM and Managing Director and Member of the Management
Board of Salomon Brothers Inc (a wholly-owned subsidiary of
SBHC)
Michael S. Hyland President, Managing Director and Member of the Board of SBAM
and Managing Director of Salomon Brothers Inc
Rodney B. Berens Managing Director and Member of the Board of SBAM and
Managing Director and Member of the Management Board of
Salomon Brothers Inc
Vilas V. Gadkari Managing Director and Member of the Board of SBAM and
Managing Director of Salomon Brothers Inc
Zachary Snow Secretary of SBAM and Managing Director and Counsel of
Salomon Brothers Inc
</TABLE>
The business address of each person listed above other than Mr. Gadkari is 7
World Trade Center, New York, New York 10048, and the business address of Mr.
Gadkari is Victoria Plaza, 111 Buckingham Palace Road, London SW1W OSB,
England.
INFORMATION ABOUT SBAM LTD.
SBAM Ltd. is a company organized under the laws of England. SBAM Ltd.
provides certain advisory services to SBAM relating to currency transactions
and investments in non-dollar denominated debt securities for the benefit of
the Strategic Bond Series. SBAM Ltd. is a wholly-owned subsidiary of Salomon
Brothers Europe Limited, which in turn is a wholly-owned subsidiary of Salomon
(International) Finanz AG, which in turn is a wholly-owned subsidiary of SBHC.
The principal business address of SBAM Ltd. and Salomon Brothers Europe
Limited is Victoria Plaza, 111 Buckingham Palace Road, London SW1W OSB,
14
<PAGE>
England and the principal business address of Salomon (International) Finanz
AG is Schipfe 2, 8001 Zurich, Switzerland. SBAM Ltd. is a member of the
Investment Management Regulatory Organization Limited in the United Kingdom
and is registered as an investment adviser pursuant to the Advisers Act.
The names, titles and principal occupations of the directors and executive
officers of SBAM Ltd. are set forth in the following table.
<TABLE>
<CAPTION>
NAME TITLE AND PRINCIPAL OCCUPATION
---- ------------------------------
<C> <S>
Michael S. Hyland Director/Chairman of SBAM Ltd. and Managing Director of
Salomon Brothers Inc
Thomas W. Brock Director of SBAM Ltd. and Managing Director and Member of
the Management Board of Salomon Brothers Inc
Vilas V. Gadkari Chief Investment Officer and Director of SBAM Ltd. and
Managing Director of Salomon Brothers Inc
Susan H. Dean Finance Officer of SBAM Ltd.
Beatrice J. Doran Vice President and Counsel of SBAM Ltd.
</TABLE>
The business address of each person listed above except for Messrs. Hyland
and Brock is Victoria Plaza, 111 Buckingham Palace Road, London SW1W OSB,
England. The business address of Messrs. Hyland and Brock is 7 World Trade
Center, New York, New York 10048.
COMPARISON OF INVESTMENT OBJECTIVES
The following table sets forth certain information concerning other
investment companies registered under the 1940 Act that have investment
objectives similar to those of the Strategic Bond Series, for which SBAM or
SBAM Ltd. serve as investment adviser or sub-adviser:
<TABLE>
<CAPTION>
INVESTMENT ADVISORY OR APPROXIMATE
SUB-ADVISORY NET ASSETS
FEE (AS A PERCENTAGE OF AS OF
NAME OF FUND AVERAGE DAILY NET ASSETS) ,
------------ -------------------------- -----------
<S> <C> <C>
Salomon Brothers Strategic Bond 0.75% $
Fund(1)
Strategic Bond Trust, an investment 0.35% of first $50 million $
portfolio of NASL Series 0.30% of next $150 million
Trust(3)(4) 0.25% of next $300 million
0.20% of over $500 million
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT ADVISORY OR APPROXIMATE
SUB-ADVISORY NET ASSETS
FEE (AS A PERCENTAGE OF AS OF
NAME OF FUND AVERAGE DAILY NET ASSETS) ,
------------ -------------------------- -----------
<S> <C> <C>
Strategic Income Fund, an investment 0.35% of first $50 million $
portfolio of North American 0.30% of next $150 million
Funds(3)(4) 0.25% of next $300 million
0.20% of over $500 million
Nationwide Multi Sector Bond Fund(4) 0.35% of first $50 million $
0.30% of next $150 million
0.25% of next $300 million
0.20% of over $500 million
</TABLE>
The following table sets forth certain information concerning other
investment companies registered under the 1940 Act that have investment
objectives similar to those of the U.S. Government Series, for which SBAM
serves as investment adviser or sub-adviser:
<TABLE>
<CAPTION>
INVESTMENT ADVISORY OR
SUB-ADVISORY APPROXIMATE NET
FEE (AS A PERCENTAGE OF ASSETS AS OF
NAME OF FUND AVERAGE DAILY NET ASSETS) ,
------------ ---------------------------- ---------------
<S> <C> <C>
Salomon Brothers U.S. Government 0.60% $
Income Fund(1)(2)
Salomon Brothers/JNL U.S. 0.225% of first $150 million $
Government & Quality Bond 0.175% of next $150 million
Series, an investment portfolio 0.150% of next $200 million
of JNL Series Trust(3) 0.100% of over $500 million
U.S. Government Securities Trust, 0.225% of first $200 million $
an investment portfolio of NASL 0.150% of next $300 million
Series Trust(3) 0.100% of over $500 million
U.S. Government Securities Fund, 0.225% of first $200 million $
an investment portfolio of 0.15% of next $300 million
North American Funds(3) 0.10% of over $500 million
Salomon Brothers U.S. Government 0.225% $
Securities Portfolio, an investment
portfolio of WNL Series
Trust(3)
</TABLE>
- -----------
(1) For the last fiscal year SBAM waived certain management fees.
(2) For the last fiscal year SBAM voluntarily absorbed certain expenses.
(3) With respect to this fund SBAM serves as a sub-adviser and, accordingly,
the sponsoring investment adviser pays SBAM a sub-advisory fee at the
rates shown under "Investment Advisory or Management Fee."
(4) SBAM Ltd. acts as sub-adviser to this fund and is paid by SBAM out of its
management fee an amount equal to the fee payable under the management
contract between SBAM and the fund multiplied by the current value of net
assets of the fund that SBAM allocates to SBAM Ltd.
16
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
SBAM places orders with broker-dealers for securities to be purchased by the
Series. The primary objective of SBAM 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 SBAM and its affiliates). The Series may utilize
affiliates of SBAM in connection with the purchase or sale of securities in
accordance with rules or exemptive orders adopted by the SEC when SBAM
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 affiliates of SBAM 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 SBAM acting as principal.
SBAM on behalf of the Series may place brokerage transactions through
brokers who provide SBAM 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
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 SBAM is in addition to and not in lieu of the services
required to be performed by SBAM itself, and SBAM's fees will not be reduced
as a result of the receipt of such supplemental information. It is the opinion
of the management of SBAM that such information is only supplementary to
SBAM's own research efforts, since the information must still be analyzed,
weighed and reviewed by SBAM's staff. Such information may be useful to SBAM
in providing services to clients other than the Series, and not all such
information is necessarily used by SBAM in connection with the Series.
Conversely, information provided to SBAM by brokers and dealers through whom
other clients of SBAM effect securities transactions may prove useful to SBAM
in providing services to the Series.
17
<PAGE>
BROKERAGE TRANSACTIONS WITH AFFILIATES
SBAM may cause the Series to pay brokerage commissions to a broker
affiliated with SBAM (such as Salomon Brothers Inc) 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, SBAM or SBAM Ltd., but paid $ in commissions to Smith
Barney.
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 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 percentage of the Series held by
these entities are set forth below:
<TABLE>
<CAPTION>
U.S. GOVERNMENT
STRATEGIC BOND SERIES SERIES
--------------------- ---------------------
NUMBER % OF NUMBER % OF
SHAREHOLDER OF SHARES OUTSTANDING OF SHARES OUTSTANDING
----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C>
NEVL Separate Account % %
501 Boylston Street
Boston, MA 02116
The New England Variable
Account % %
One Madison Avenue
New York, NY 10010
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT
STRATEGIC BOND SERIES SERIES
--------------------- ---------------------
NUMBER % OF NUMBER % OF
SHAREHOLDER OF SHARES OUTSTANDING OF SHARES OUTSTANDING
----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C>
NEVA Separate Account % %
501 Boylston Street
Boston, MA 02116
MetLife Group Separate
Accounts % %
501 Boylston Street
Boston, MA 02116
NELICO Group Separate
Accounts % %
501 Boylston Street
Boston, MA 02116
--- ------ --- ------
Totals 100.00% 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 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 the Contractholder
19
<PAGE>
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. and Maura A. Murphy.
OTHER MATTERS
The holders of forty percent of the shares of a Series outstanding on the
Record Date, present in person or represented by proxy, constitute a quorum
for the transaction of business by the shareholders of that Series at the
Meeting, although it is necessary for at least a majority of the shares of a
Series to be represented at the Meeting in order for the New Sub-Advisory
Agreement and the proposed grant of authority to TNE Advisers to enter into
new sub-advisory agreements without additional shareholder approval to be
approved for that Series. 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 and "broker non-votes" (i.e., shares held by brokers or
nominees as to which instructions have not been received from the beneficial
owners or the persons entitled to vote) as present for purposes of determining
the presence of a quorum. Assuming the presence of a quorum, abstentions and
broker non-votes 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, 1998, the persons named as proxies may vote on those
matters for 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 that has not then
been adopted. They will vote against any such adjournment those proxies
required to be voted against each Proposal that has not then been adopted and
will not vote any proxies that direct them to abstain from voting on such
Proposals.
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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 and 3 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.
[ , 1998]
21
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APPENDIX A
SUB-ADVISORY AGREEMENT
SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES
This Sub-Advisory Agreement (this "Agreement") is entered into as of ,
19 by and among TNE Advisers, Inc., a Massachusetts corporation (the
"Manager"), Salomon Brothers Asset Management Inc, a Delaware corporation (the
"Sub-Adviser"), and Salomon Brothers Asset Management Limited ("SBAM Ltd.").
WHEREAS, the Manager has entered into an Advisory Agreement dated August 30,
1996 (the "Advisory Agreement") with New England Zenith Fund (the "Trust"),
pursuant to which the Manager provides portfolio management and administrative
services to the Salomon Brothers Strategic Bond Opportunities 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;
WHEREAS, the Manager and the Sub-Adviser desire to retain SBAM Ltd. to
render certain services as described herein.
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
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limitation all applicable provisions of the Investment Company Act of 1940
(the "1940 Act") and the rules and regulations thereunder. Subject to the
foregoing, the Sub-Adviser is authorized, in its discretion and without
prior consultation with the Manager, to buy, sell, lend and otherwise
trade in any stocks, bonds and other securities and investment instruments
on behalf of the Series, without regard to the length of time the
securities have been held and the resulting rate of portfolio turnover or
any tax considerations; and the majority or the whole of the Series may be
invested in such proportions of stocks, bonds, other securities or
investment instruments, or cash, as the Sub-Adviser shall determine.
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 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 to the Trustees of the Trust
pursuant to Section 15(c) of the 1940 Act.
c. The Sub-Adviser shall provide to the Manager a copy of the Sub-
Adviser's and SBAM Ltd.'s respective 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
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revisions or supplements thereto at, or, if practicable, before the time
the revisions or supplements become effective. The Manager agrees to
furnish the Sub-Adviser with minutes of meetings of the Trustees of the
Trust applicable to the Series to the extent they may affect the duties of
the Sub-Adviser, and with copies of any financial statements or reports
made by the Series to its shareholders, and any further materials or
information which the Sub-Adviser may reasonably request to enable it to
perform its functions under this Agreement.
3. CUSTODIAN. The Manager shall provide the Sub-Adviser with a copy of the
Series's agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Series shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions
of the Custodian, unless such act or omission is 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 names and marks "Salomon" and "Salomon
Brothers" and that all use of any designation consisting in whole or part of
such names or marks (a "Salomon 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 Salomon 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 Salomon 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 (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.
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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 brokers or dealers affiliated with the Sub-Adviser, provided
such orders comply with Rule 17e-1 under the 1940 Act in all respects. To the
extent consistent with applicable law, purchase or sell orders for the Series
may be aggregated with contemporaneous purchase or sell orders of other
clients of the Sub-Adviser. The Sub-Adviser shall use its best efforts to
obtain execution of transactions for the Series at prices which are
advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other
services or products to the Series and/or other accounts serviced by the Sub-
Adviser. To the extent consistent with applicable law, the Sub- Adviser may
pay a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission or dealer spread another
broker or dealer would have charged for effecting that transaction if the Sub-
Adviser determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research products and/or
services provided by such broker or dealer. This determination, with respect
to brokerage and research services or products, may be viewed in terms of
either that particular transaction or the overall responsibilities which the
Sub-Adviser and its affiliates have with respect to the Series or to accounts
over which they exercise investment discretion. Not all such services or
products need be used by the Sub-Adviser in managing the Series.
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 0.35% of the first $50 million of the average daily net assets of the
Series, 0.30% of the next $150 million of such assets, 0.25% of the next $300
million of such assets and 0.10% 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
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<PAGE>
the Sub-Adviser or any of its directors, officers, employees or agents from
buying, selling or trading any securities or other investment instruments for
its or their own account or for the account of others for whom it or they may
be acting, provided that such activities do not adversely affect or otherwise
impair the performance by the Sub-Adviser of its duties and obligations under
this Agreement. The Manager and the Series recognize and agree that the Sub-
Adviser may provide advice to or take action with respect to other clients,
which advice or action, including the timing and nature of such action, may
differ from or be identical to advice given or action taken with respect to
the Series. The Sub-Adviser shall for all purposes hereof be deemed to be an
independent contractor and shall, unless otherwise provided or authorized,
have no authority to act for or represent the 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,
directors, employees or agents (the "Indemnified Parties") shall be subject to
any liability to the Manager, the Trust, the Series or any shareholder of the
Series for any error of judgment, any mistake of law or any loss arising out
of any investment or other act or omission in the course of, connected with,
or arising out of any service to be rendered under this Agreement, except by
reason of willful misfeasance, bad faith or gross negligence in the
performance of the Sub-Adviser's duties or by reason of reckless disregard by
the Sub-Adviser of its obligations and duties. The Manager shall hold harmless
and indemnify the Sub-Adviser for any loss, liability, cost, damage or expense
(including reasonable attorneys fees and costs) arising from any claim or
demand by any past or present shareholder of the Series that is not based upon
the obligations of the Sub-Adviser with respect to the Series under this
Agreement. 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, the Sub-Adviser or SBAM Ltd., cast in person at a
meeting called for the purpose of voting on such approval;
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b. this Agreement may at any time be terminated on sixty days' written
notice to the Sub-Adviser either by vote of the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Series;
c. this Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Advisory Agreement;
d. this Agreement may be terminated by the Sub-Adviser on 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 "Salomon" or "Salomon Brothers,"
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.
11. AMENDMENT. This Agreement may be amended at any time by mutual consent
of the Manager, the Sub-Adviser and SBAM Ltd., 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, the Sub-Adviser or SBAM Ltd., 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. DELEGATION TO SBAM LTD. ETC.
a. The Sub-Adviser may from time to time delegate to SBAM Ltd. any or
all of the responsibilities of the Sub-Adviser hereunder with respect to
transactions of the Series in (1) foreign currencies and (2) debt
securities denominated in currencies other than the U.S. dollar (but shall
not delegate any of the rights of the Sub-Adviser hereunder); provided,
however, that the Sub-Adviser shall be liable under this Agreement for any
acts or omissions of SBAM Ltd. to the same extent as if such acts or
omissions were committed by the Sub-Adviser itself.
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b. The Sub-Adviser shall compensate SBAM Ltd. for its services hereunder
at the rate of one-third of the compensation payable hereunder to the Sub-
Adviser by the Manager. In no event shall SBAM Ltd. be entitled to any
compensation hereunder from any person other than the Sub-Adviser
(including without limitation the Manager, the Administrator or the
Trust).
14. GENERAL.
a. The Sub-Adviser and SBAM Ltd. may perform their services through any
of their employees, officers or agents, 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 or SBAM Ltd., 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 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.
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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
Salomon Brothers Asset Management Inc
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
Salomon Brothers Asset Management
Limited
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
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<PAGE>
APPENDIX B
SUB-ADVISORY AGREEMENT
SALOMON BROTHERS U.S. GOVERNMENT SERIES
This Sub-Advisory Agreement (this "Agreement") is entered into as of ,
19 by and between TNE Advisers, Inc., a Massachusetts corporation (the
"Manager") and Salomon Brothers Asset Management Inc., a Delaware corporation
(the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated August 30,
1996 (the "Advisory Agreement") with New England Zenith Fund (the "Trust"),
pursuant to which the Manager provides portfolio management and administrative
services to the Salomon Brothers U.S. Government 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:
15. 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. 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
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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 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 to the Trustees of the Trust
pursuant to Section 15(c) of the 1940 Act.
c. The Sub-Adviser shall provide to the Manager a copy of the Sub-
Adviser's Form ADV as filed with the Securities and Exchange Commission
and 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.
16. 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
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
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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.
17. 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.
18. PROPRIETARY RIGHTS. The Manager agrees and acknowledges that the Sub-
Adviser is the sole owner of the names and marks "Salomon" and "Salomon
Brothers" and that all use of any designation consisting in whole or part of
such names or marks (a "Salomon 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 Salomon 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 Salomon Mark(s) as soon as reasonably
practicable.
19. 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 (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.
20. 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
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securities for the Series with brokers or dealers selected by the Sub-Adviser,
which may include brokers or dealers affiliated with the Sub-Adviser, provided
such orders comply with Rule 17e-1 under the 1940 Act in all respects. To the
extent consistent with applicable law, purchase or sell orders for the Series
may be aggregated with contemporaneous purchase or sell orders of other
clients of the Sub-Adviser. The Sub-Adviser shall use its best efforts to
obtain execution of transactions for the Series at prices which are
advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser may select brokers
or dealers on the basis that they provide brokerage, research or other
services or products to the Series and/or other accounts serviced by the Sub-
Adviser. To the extent consistent with applicable law, the Sub- Adviser may
pay a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission or dealer spread another
broker or dealer would have charged for effecting that transaction if the Sub-
Adviser determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research products and/or
services provided by such broker or dealer. This determination, with respect
to brokerage and research services or products, may be viewed in terms of
either that particular transaction or the overall responsibilities which the
Sub-Adviser and its affiliates have with respect to the Series or to accounts
over which they exercise investment discretion. Not all such services or
products need be used by the Sub-Adviser in managing the Series.
21. 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 0.225% of the first $200 million of the average daily net assets of
the Series, 0.15% of the next $300 million of such assets and 0.10% 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.
22. 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
B-4
<PAGE>
that such activities do not adversely affect or otherwise impair the
performance by the Sub-Adviser of its duties and obligations under this
Agreement. The Manager and the Series recognize and agree that the Sub-Adviser
may provide advice to or take action with respect to other clients, which
advice or action, including the timing and nature of such action, may differ
from or be identical to advice given or action taken with respect to the
Series. The Sub-Adviser shall for all purposes hereof be deemed to be an
independent contractor and shall, unless otherwise provided or authorized,
have no authority to act for or represent the Trust or the Manager in any way
or otherwise be deemed an agent of the Trust or the Manager.
23. LIABILITY. Except as may otherwise be provided by the 1940 Act or other
federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, employees or agents (the "Indemnified Parties") shall be subject to
any liability to the Manager, the Trust, the Series or any shareholder of the
Series for any error of judgment, any mistake of law or any loss arising out
of any investment or other act or omission in the course of, connected with,
or arising out of any service to be rendered under this Agreement, except by
reason of willful misfeasance, bad faith or gross negligence in the
performance of the Sub-Adviser's duties or by reason of reckless disregard by
the Sub-Adviser of its obligations and duties. The Manager shall hold harmless
and indemnify the Sub-Adviser for any loss, liability, cost, damage or expense
(including reasonable attorneys fees and costs) arising from any claim or
demand by any past or present shareholder of the Series that is not based upon
the obligations of the Sub-Adviser with respect to the Series under this
Agreement. 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.
24. 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 "Salomon" or "Salomon Brothers,"
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.
25. 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.
26. 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.
27. 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 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.
B-6
<PAGE>
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
Salomon Brothers Asset Management Inc
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
B-7
<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 Salomon Brothers
Strategic Bond Opportunities Series and/or the Salomon Brothers U.S. Government
Series (each a "Series," and collectively, 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 Please mark [X]
ITEMS BELOW PERTAINING TO THE RELEVANT SERIES your votes as
indicated in
this example
1. With respect to the Salomon Brothers FOR AGAINST ABSTAIN
Strategic Bond Opportunities Series, to [_] [_] [_]
approve the Sub-Advisory Agreement dated
November 28, 1997 by and among TNE
Advisers, Inc., Salomon Brothers Asset
Management Inc and Salomon Brothers Asset
Management Limited.
2. With respect to the Salomon Brothers U.S. FOR AGAINST ABSTAIN
Government Series, to approve the Sub- [_] [_] [_]
Advisory Agreement dated November 28,
1997 by and between TNE Advisers, Inc.
and Salomon Brothers Asset Management
Inc.
3. To approve a grant of authority whereby
each Series may from time to time, to the
extent permitted by an 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.
3a.With respect to the Salomon Brothers FOR AGAINST ABSTAIN
Strategic Bond Opportunities Series [_] [_] [_]
3b.With respect to the Salomon Brothers U.S. FOR AGAINST ABSTAIN
Government Series [_] [_] [_]
If this form is signed and returned with no
choice indicated as to any relevant
proposal above, such shares shall be voted
FOR such proposal.
DATE / / 1998
-------------------------
-------------------------------------------
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 relevant
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
1-888-776-5660 - ANYTIME
There is NO CHARGE to you for this call. CONTROL NUMBER
======================
